Do You Really Save Money Using Groupon?

Much has been written about whether companies should offer Groupon or Living Social deals but what about whether you (as a consumer) should buy the deals as a way to save money. Is it financially worth it for the purchasers of all these discounted online coupon deals?

The answer really lies in a discussion on spending habits and self discipline. There is no doubt a 50 percent off coupon saves money on that particular purchase. But, when we step back and look at the psychology of spending, we may not be saving much money at all. A loss to the consumer obviously occurs if the deal goes unused. The bigger concern is when the deal is used but a consumer goes over the actual “budgeted deal.” I am defining “budgeted deal” as the amount of the purchased coupon. (for example a $20 Groupon that gives you $40 to spend at a store has a $40 budgeted deal). If you end up at a store or establishment and spend well over the budgeted deal then you may not have really saved money.

Personal Example

I bought a Groupon to Nordstrom Rack on Shady Grove Road for $25 that gave me $50 to spend. I figured I could use a pair of shoes. I ended up buying $120 worth of stuff at Nordstrom Rack...some shoes, shirts and a belt. Did I need all of this? I sort of needed a new pair of shoes that were $40 but that still left $10 of my Groupon to spend so I bought a second pair of shoes for $50. Now, I was well over the $50 I had to spend but I FELT like I had such a great deal going that I bought a couple of shirts and a belt as well. Only after the emotional spending did I realize that I had bought four things that I certainly didn’t need and had not intended on buying.

While at the store, I felt like I had a coupon for $50 when I actually only had one for $25 ($50 - $25 that I paid Groupon). The $25 I paid for the Groupon had been weeks earlier so I really didn’t “feel” that $25 when I was shopping. What I had ended up doing was spending $95 for $120 worth of stuff when I really only needed the one pair of already discounted shoes. Did I save money? If you look at the total purchase, yes. But, if you look at the economics of it, I did not.

This type of psychological spending occurs even without coupons. But, when deals are involved it’s much easier to justify it with ourselves.

When buying a Groupon or similar deal ask yourself...

• Do I typically use this service or product on a regular basis anyway?
• Is it something you have really been wanting to try but didn’t because of the cost?
• Is there a holiday or special occasion coming up that this would help you save money for?
• What exact product or service am I going to buy with this coupon?

If you can exercise some restraint when using these coupons, then you can make sure you are actually getting the real value and savings from them. Avoid the add on purchases.

This post originally appeared here.

Matthew B. Brock, CFP®
Senior Partner, Owner
Divergent Planning, LLC

Securities and Investment Advisory Services Offered through H. Beck, Inc., Member FINRA, SIPC.

H. Beck Inc. and Divergent Planning are not affiliated.