Groupon and Living Social Get a Yellow Light

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A few months ago, I mentioned one of the ways that I save money is by subscribing to Groupon.  Around the same time, I also subscribed to Living Social.

On the one hand, I think these coupon based website are really neat and offer you some great discounts. I also think they may provide a serious roadblock and temptation in regards to your finances.

Here’s how:

John and Sally are currently working on the debt snowball and doing everything they can to get out of credit card debt.  They’ve recently set up a budget and started tracking their spending using personal finance software.

Their friend, Steve, suggested they check out a couple of online coupon sites called Groupon and Living Social. It’s a great way to save money, Steve suggests.

Like good people who are doing their best to get out of debt, John and Sally sign up for Groupon.

They are now six months into their debt snowball, and saying “no” is just plain hard.  They cut the cable and they minimize how often the eat out.

Then, March 17th, 3:07 p.m. John gets an email from Groupon.  Get a $50 gift certificate at The Best Restaurant in Town for $25.

John thinks:

  • “Surely we’ve sacrificed enough.”
  • “Look how much we’d be saving.”
  • “We deserve a pay off for all our hard work.”

By 3:30 p.m., John now has a $50 gift certificate that he paid $25 to buy.

The question is – how much did John save?

Look How Much I Saved Temptation of Groupon and Living Social

Had he not received the email, he would have spent $0.  (This assumes that he would have resisted the temptation to go out to eat.)

While John is going to justify his actions by saying he saved $25, the case can just as easily be made that he spent an extra $25.

I’ve noticed that most of the Groupon related notifications I get are entertainment related, such as restaurants, shows, sports, etc.  I’ve yet to see anything that saves me $25 on Huggies, Green Beans, or auto parts.  Perhaps I just haven’t been part of Groupon for long enough.

My point is this: sites like Groupon encourage you to spend money on items you probably wouldn’t otherwise be buying.

Does this make joining Groupon or Living Social a bad financial decision?

No.

One of the things I always used to enjoy when I lived in the States was reading the Sunday newspaper.  One of the first things I did was look at the ads.  However, I can almost guarantee something.  I’d be more likely to want to buy or spend money after reading the ads than I was before.

Anyone who joins one of these site just needs to know that they might actually spend more that if they didn’t join.

So, am I going to cancel my Groupon subscription?

Nope.

But, if I were in debt, I would give it serious consideration.  There are enough temptations to spend money already, and I think the last thing a person in debt needs is to voluntarily subject themselves to more spending opportunities.

What about you?  Do you think sites like Groupon and Living Social save you money or cost you money?

Comments

  1. says

    I agree 100% on this. Because of the impulse nature of Groupon, I’ve spent more than I’ve saved and have since stopped opening the emails unless it has something I was already going to do (like buying coffee).

    There was one that came up in November for a Spanish restaurant here. A couple guys at the office had previously talked about going for lunch one day, so when the Groupon came up I bought two – one for my coworkers and I, and one for my wife and I. I thought it would be nice for her, being from Paraguay, to be able to speak her language. When my coworkers and I finally went, we found out they don’t open at lunch, and it was going to be very difficult to get together for dinner.

    Eventually I got to dinner there with a friend, and it worked out OK. However, the other one expired because my wife couldn’t come from Paraguay in time. So essentially I still ended up paying full price.

    Incidentally, today’s Groupon for my area is for an oil change and tire rotation. :) Probably the first one I’ve seen that *everyone* has to do at some point.

    -j

  2. Marie says

    I definitely agree. Another thing to keep in mind with these sites is that you need to read the fine print. Sometimes you can get a restaurant deal for $25, but the coupon specifies that your order has to total at least $50 (sometimes without alcohol). You are also supposed to tip based off of what the price of your meal *would have been* without the gift certificate. So, the costs can add up in ways that aren’t immediately apparent when you buy the gift certificate.

  3. says

    I personally love Groupon. I cannot tell you how much I’m thankful for the site. It has been a winning strategy to save on dates. For example, if I’m looking to mini-golf, I actively look for deals for that. If not, I just sit and wait. Groupon cycles through pretty quick, so finding what you;re looking for just takes time…

  4. says

    I belong to Groupon but have only made one purchase. It was a smart one. We had some guests coming into two who wanted to do a tour of our city (we live in Savannah, GA so this is a common request). We were able to snag some tickets for a tour that are normally $16 a piece (pretty standard price) for $4.50 a piece. Even the cheapest tour in town is $10 a ticket. And this isn’t a tour we could have given them ourselves, because it was a special topic tour that we were not knowledgable.

    So that was a wise purchase.

    However, as a person trying to get out of debt myself, I can totally see how this would be appealing. We are luckily out of the need to go out to eat or to some entertainment venue, but if we were just starting out, I can see how tempting this would be!

    Thanks for the post!

    • says

      @Kaye and Jon
      I see what both of you are saying and I do agree. However, in the sea of support for Groupon I figured that I should at least mention that there are possible down sides. Hence the yellow light and not a red light.

      It sounds like both of you got some great deals and there will probably be a time that I brag on this blog about a great deal I got via Groupon :).

  5. Tim says

    I agree that Groupon could totally hose a regular budget, but I have have a few instances where budgeted items (plants for the garden, shuttle service for a planned bike trip, membership in a local garden club) come up and I’m happy to get the savings. If saying “no” is a problem for you, Groupon could be an unnecessary tempter…

    Great post with things to consider.

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