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.
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.
- “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?
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?
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.