By Steve Kautz, former Maine mathematics teacher and personal finance expert.
I mentioned in my last entry the idea of choosing how we live (from a financial point of view) in our economic system. In the American version of capitalism, personal finance isn’t all about managing your money so that you squeeze every possible dollar out of every situation. It’s also about keeping your sanity and living without always thinking about money. When I was writing about staying away from department store credit cards, that was mostly about money. Perhaps a bigger idea is that we shouldn’t necessarily try to track down every “bargain” that comes our way. There are opportunity costs out there for every decision. Some are obvious and some are sneaky little fellas. There is no one definition of financial success, or financial freedom, or whatever you want to call it. On one extreme it may mean being worth a million dollars, and on the other, it may mean just having a place to live and food to eat. Most of us are somewhere in the middle, and while I’ll admit having more money today would be nice, I’ll also say that for me, part of becoming financially literate is learning what it means to “not worry about money.”
Which brings me to El Tema del Dia (hope you don’t mind if I work on my Spanish) – customer loyalty cards. They can be a huge waste of your time, and although you might save a buck or two, the opportunity costs include, at the least, a little bit of your sanity and/or your financial peace, and at the most they can distract us from real issues with our finances.
I’m not really talking about the local sandwich shop you frequent. Their buy 9, get the 10th free can be a nice reward for being a regular customer. I’m more focused on the overwhelming slew of big business loyalty cards that are out there. Drugstores, supermarkets, bookstores, gas stations, clothing stores… AHHH! It seems that every time I buy something I am asked if I have a loyalty card. Where would you put all of these things!?! So I ask, “What do I need to do? What do I get?” Oh, just provide an address, or email, and a phone number and you can accumulate points which can add up to … blah, blah, blah… snooze.
Choose these carefully. First of all there are a slew of privacy issues. Although none of us appear to be completely safe from identity theft, it is clear that the more times you put private information out there in conjunction with a purchase, the more risk you are taking. Maybe less obvious, but to me just as important, are the psychological/peace of mind issues.
Peace in My Mind
This may sound like a major contradiction in a personal finance blog, but here goes. As I started getting my finances in order, living on a budget, and getting educated about the topic, I gradually stopped coupon hunting and using loyalty cards. For me, part of financial success, or peace, is about not worrying about “discounts” that might add up to $5o/year in exchange for giving up privacy and for worrying that I might be missing out on a free Coke.
I know that some folks don’t mind having a wallet, purse, or man purse full of cards from Lowes, Shaws, CVS, Rite Aid, Bill’s Burritos, Jimmy’s Java, etc. But ask yourself if you are really saving anything. Are you spending more than you would if you didn’t have the card? Are you driving out of your way to use the card? Are you moving the stress needle up a bit fretting that you paid an extra 60 cents for Nyquil because you didn’t have “the card”?
I return to a common theme. If you are living on a budget, spending less than you make, and generally making solid decisions, then free yourself from these consumer traps. I prefer to spend my energy looking for and supporting businesses which do not require a card for me to get the best price. Let’s face it, when we run into Rite Aid to grab some Advil and we think we just saved 70 cents with our “loyalty card,” odds are we gave it right back because we also grabbed a pint of Cherry Garcia for nearly double the price it would cost at Hannaford. Remember, companies are not in the business of giving stuff away.
Find the Stars ***
Back to a point from the second paragraph: “…they (loyalty/discount cards) can distract us from real issues with our finances.” I was eluding to the idea that we might pat ourselves on the back for being savvy for taking advantage of these apparent benefits, while at the same time we overspend on the big ticket items which will really mean the difference in our long-term financial health. Come on, you know what I mean. Been there, guilty of that myself. I remember cutting coupons to save $7.25/week on groceries while making payments on a car that was $10,000 too expensive for me. Ugggghhhhh!
Invoke a healthy dose of common sense. I repeat, if it’s a local establishment that you go to regularly, then you might be getting a small, but real benefit from their customer reward policy. But for many of these programs, ask yourself-challenge yourself (use some math here) – to find any actual savings over the course of the year. You can extend this analysis to clubs like BJ’s and Sam’s. Sure, you save money when you buy a pallet of toilet paper, but I’ll bet you over-consume every time you go in there. What a glorious business model! Getting people to pay you a fee so that they can go into your store and spend more than they would have in the first place.
An Assignment for You
As soon as you are done analyzing the ideas discussed above, think about whether the money you spend on $2 coffees (or $4 lattes) really makes a difference in your overall financial life. Some say it’s a huge factor and others say it doesn’t really matter. We’ll talk about it in a future article.
“Costco immediately wraps me in a heady blend of frugality and excess, a proprietary mixture that’s pure genius.”
– Scott Alexander, Family Circle online edition
The views, information, or opinions expressed in this blog are solely those of the author and do not necessarily represent or reflect those of the Maine Jumpstart Coalition for Personal Financial Literacy.