“Keep it simple, stupid.” It’s familiar—and good!—advice, whether you’re designing a rocket or just fixing dinner. But when it comes to money, we often try to outsmart the system. Our most basic mistake: signing up for endless discount emails, “points” programs, and frequent-buying plans.
The psychology of a “sale.”
Research shows that when we think we’re getting a good deal, we’re actually likely to spend more than we intended to, so that “sale” turns into an unexpected expense. One new survey found that 66% of shoppers who bought items that weren’t on their list were driven by a sale or promotion. Another study found that shoppers at outlet malls spend 79% more per visit than people at regular malls. Some deal!
Racking up points or debt?
I’m not immune to that tendency, even though I should know better. Recently, my daughter won an award at school and needed an appropriate dress to wear on the big occasion. Shopping is not one of my talents, but we headed out to a nearby department store, an hour before closing time. We made some good selections, including a dress she could wear for years to come. But the experience at the cash register—I should say “check-out counter” since no one uses cash anymore!—stopped me cold.
“Would you like to sign up for our no-fee, no-obligation points club?” the saleswoman purred. “Just fill out this form, and you’ll get points toward spending.” It did sound appealing. I had to quickly remind myself it was just one more way to spend on stuff I didn’t need. And those deals are never as good as they seem. They’re always accompanied by ridiculous fine print: “After 50 million points you get a $5 gift certificate that you can use only to buy men’s cologne.” Or whatever.
Thanks, but no thanks.
That moment of temptation got me thinking. I hate the punch-card from my local coffee shop because every time I get coffee and forget the card, I feel guilty. I hate frequent flier miles because most of the time when you want to fly, you can’t fully redeem them—and I’ve never been able to figure out how to use the extra mileage to upgrade to business class.
And leave me alone about the 10% discount I’d get if I signed up for the store credit card. I don’t want another card! I’ll just forget about it about it and it will end up hurting my credit report. Or worse, I’ll use it, forget to pay the bill one time, and watch my credit score plummet. (Yes, a single late payment can do that kind of damage!) Then I’ll end up being charged a much higher interest rate on any other loan I need.
So I say “no thanks” to the pharmacy binge-buying club, the department store discount card, and the buy-100-get-1-free coffee card. I hardly can get my child to swim practice on time, remember to buy a birthday present for the next kiddie party, and make sure my daughter has sneakers for gym class. I’ve hit mileage malaise, frequent flier fatigue, and plan ol’ discount overload. I’m going to keep it simple, stupid. At least until the next big sale!
Tips for keeping shopping simple and smart.
Want to give it a whirl? Here are my tips for keeping it simple:
- Skip those deal-of-the-day discount emails. Groupon and other sites like it only tempt you to buy stuff you don’t need.
- Have just two credit cards. It’s easy to sign up for appealing new cards (miles! discounts!), but you simply don’t need any more than two. If you’re shopping for a new card, do so purposefully; you can compare low-interest rate credit cards and balance transfers at Mint.com.
- Resist store cards. Even if the discounts are tempting, department store credit cards often carry interest rates of 25% or more, according to Consumer Reports—much higher than the average 17% rate (and you can often find one that’s even lower).
- Make a list and stick with it. The surest way to avoid being sucked in by sales? Figure out exactly what you need before you leave the house. Half off a $20 tank-top you don’t need is still $10 gone from your wallet.
What are your tricks for keeping it simple?
© 2012 Beth Kobliner, All Rights Reserved
Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller “Get a Financial Life: Personal Finance in Your Twenties and Thirties,” and a member of the President’s Advisory Council on Financial Capability. Visit her at bethkobliner.com, follow her on Twitter, and like her on Facebook.