Q: When is a bargain not a bargain?

A: When you are buying something you don’t need just because it’s on sale.

We all know this. Just like we all know that advertising, sales, and “bargains” are designed to make us forget this simple fact. And, boy, do we forget it.

I am (distantly, thankfully) related to someone who genuinely believes that if something is on sale for $1 off, and she buys 10 of them, that she has actually come out $10 ahead. She is a disciple of “the more you shop, the more you save” advertising campaigns. If you don’t see why this is funny, you really need to keep reading.

A bargain involves getting something at a good price. Simple enough. But, when you break it down a bit, there are some conditions that aren’t explicit in that statement. First, strictly speaking, the “something” that you get would have to be something that you need, as opposed to something that you want. You can absolutely get a good deal on an unnecessary purchase, on a “want.”  But, it will never be a bargain, because it wasn’t money that you had to spend. You could have chosen to spend $0, so no bargain. This, of course, is not to minimize the satisfaction of being able to meet a want at a reduced price. Just don’t call it a bargain.

Second, and this should be a no-brainer for the truly frugal among us: a “good price” requires taking into consideration the entire cost of the purchase. Many of us know people who have driven all over town to save $0.25 here, $1.00 or $5.00 there. At some point, the cost of chasing sales exceeds the amount saved. Choosing not to have a car has been extremely instructive for my family on this point. Because our transportation is almost exclusively feet, bikes, or public transit, the monetary cost of our transportation decisions are very small. The result is not that we travel all over town chasing sales, however; the result is that our analysis of the true cost of a particular sale is tied to the time it takes us to partake. If we consider the “true cost” of a purchase in terms of how many hours of work it “costs” us (for example, a new X-box bundle on sale for Christmas was $450 before taxes. If you make $15/hour, you’re looking at 30 hours of work (almost 4 full 8-hour shifts, without accounting for income taxes, etc.) to pay for the console. Factor in the fact that the 3 stores in your town are sold out, so you have to drive to the next town (25 km/30 minutes) to purchase it. Suddenly, you’ve also incurred the cost of driving (say, $0.40/km times 50km), and at least an hour of your life (not counting the mileage and time spent visiting the first three stores)… so now we’ve added an additional 2.25 hours to our actual cost, bring us up just over 4 full workdays for our purchase.  Is it worth it? I don’t know. That’s up to you.

The point is that the sticker price is only the beginning. A low number doesn’t necessarily make a sale into a bargain. Here are some other ways that bargain beliefs are misused to make us feel good about spending.

Buying something you don’t currently use, just because it’s on sale is NOT saving you money. If that over-priced pasta sauce that you’ve “always” wanted to try is finally on sale, and you want to buy a jar, go ahead. Just don’t kid yourself that you actually saved anything by doing so, unless the sale price is actually cheaper than the brand you’d normally buy.

Stockpiling is only good to a point. I’m guilty of this myself, especially where fresh produce is concerned. A good price on something is only a good price if you buy what you use and use what you buy. Intending to use it doesn’t count. So when you (as I did recently), buy extra lettuce, because “it’s such a good price;” only to throw half of it into the green bin when it’s turned into slimy mush in your produce drawer, you have saved nothing. In fact, since you’ve just effectively doubled the cost of what you did use, you probably spent more than you would have without the “bargain” price. This doesn’t just apply to perishables. Buying 20 hand towels, because they’re on sale doesn’t make sense, unless you use an abnormal number of them between laundry days, or you’re planning on selling or gifting them.

Buying something that you might use… someday… As with most things, this really depends on what you’re buying, and under what circumstances you might use it. Buying a dress that is 4 sizes too small that is more formal than any occasion you are likely to attend as an incentive to lose 15 pounds is not a bargain, even if it’s on sale for 95% off. Buying an extra first aid kid because Canadian Tire has them for a good price might be smart; unless you already have more of these than you can use, in which case, see the point above.

The bottom line is that, like everything else about your personal finances, whether something is really a bargain is a judgement call. But, when you’re making that judgment call, don’t pretend that something you want is actually a necessity; and don’t kid yourself about the future utility of something you’re buying so you don’t miss out on the sale.

Money, capitalism, and advertising agents are often demonized as the “roots of all evil.” That’s probably an unfair characterization. Like debt, spending money, and being wooed by advertising are not inherently bad things. The challenge is doing it in ways that are conscious, and intelligent. Don’t spend money because Wall Street tells you to. Choose to take advantage of an opportunity to maximize your spending power on an unnecessary item, instead. As long as you’re driving your financial bus, you should be able to feel good about your purchasing decisions – bargains or not.