Is a penny saved a penny earned? Your obsession with shopping discounts can hurt your money

I’m so tired of searching, she declared. The goal was to find new rose plants for the garden. A simple online order would have delivered the best bare roots to her doorstep. But she wanted to get the best deal and the best discount. After driving around town and sorting colors and specimens, she was left tired but somewhat triumphant at getting them for half price. No one had the courage to ask him if it had all been worth it.

There is a big lure in getting a good deal. It makes you feel like you’ve accomplished something uniquely clever. It was mine because I pursued it with determination, we tell ourselves. If a good product is available at a discount, we should make the most of it, we believe. And so the discount and bargain market thrives, primarily allowing dealers to get rid of stock they can’t sell, replenishing store shelves at the customer’s expense.

But it’s a win-win declare my friends. What I want to have is too expensive; I don’t mind waiting for it to go on sale. It is a brand that I want to have anyway; it’s a bargain at that price. Who can say that I bought at a discount, and so on. In our mind, what is a deal for us is a loss for the seller. We are the smart ones who get great value at great prices. There is no point in trying to argue that good things don’t come cheap: we dismiss that claim with pity reserved for an uninformed shopper.

Those who seek discounts and offers are not among those who cannot afford the finer things in life. Your relationship with money is finely tuned for optimization. They cannot spend unless they can ensure that they have maximized profits. Bargaining with vendors gives the joy of having snatched the last rupee from an unwilling opponent, who he thought was smarter. From rug vendors in Middle Eastern countries to coriander vendors on the streets, all vendors understand this need to make the customer feel victorious.

I remember the first pizzeria in India that opened in Ahmedabad many years ago. It was a test after the popular brand sent representatives to watch as Law Garden street vendors lavishly grate blocks of Amul cheese on everything from sandwiches to dosa. The menu remained completely vegetarian; the ingredients were carefully selected for local tastes, and it was hoped that the proven magic of the crust and melted cheese would win. But hardly any sales occurred in the first week. And then it turned out that the Amdawadis don’t just pay a list price. If there is no room to discuss the bhav (price), there was no deal!

Opportunity cost is a big driver of money decisions. People like to believe that a penny saved is a penny earned. That money could be used for something else; they will argue. The money saved on airline tickets can be used to finance a nice gourmet meal and maybe a theater ticket, travelers will say. Is there a general value for money, is the question that is rarely asked. Do smart individual decisions add up to become an overall optimizer of household wealth and well-being? Should this strategy be applied as a primary tool to improve happiness quotient? The answers are mixed.

Our behavioral quirks get in the way. What we have too cheap we do not value too much. Mainly. If that rosebush fails, my friend will have forgotten her journey, the push, the search and the effort. She would only remember the price. She would believe that she luckily didn’t pay so much for the plant that she couldn’t survive. We do not rationally relate the results to the effort when the satisfaction of the decision has been achieved at the very beginning with the discounted price. Thus, we have discounted garments that we do not like very much and that are at the bottom of the closet.

We also end up with more than we may need. We buy because the price is convincing; not because we need it. The maddening hustle and bustle of the days when online stores advertise heavy discounts fill homes with electronics, equipment, durables, decor, art, tableware, clothing, and every possible item that can become a story. A topic of conversation about how smart the buyer had been and how the best deal had been struck for something.

But we had planned it, we would protest. We waited all year with that list and clicked as soon as we knew we got the best discount. That could apply to some things. What about the long list of other things that had also been bought? Would each of them also qualify similarly? Maybe not. Sellers know the power of the hook, the display, and the price. Nobody walks into a big department store with a shopping list. Even if they did, they rarely stick to it.

Thus we ended up with a cart full of things that we had no intention of buying, but could not resist the offer in the store. Our needs take a backseat and greed for the best price takes over. In that process, there is also the trial of a new product, a new flavor, a new variant, and our cart overflows. We have seen people standing on a corner taking things out of their cart before they can check it out. And sometimes begrudgingly put it back. We decided not to do this next time. But by then everything is forgotten.

Our money suffers when our spending is driven by the seller and not by us. But psychological satisfaction makes us victims again and again. The ease of online shopping and the painless swipe of electronic payments allows for even faster momentum. Many have gotten into the habit of buying first and coming back later after trying the products. They see themselves as ruthless customers who will only settle for the best and make the most of their buying privileges.

Our attitude towards money is pretty much ingrained in our heads. If we feel that we have enough, we will meet without wanting too much. We may or may not get there, even after a long journey full of unnecessary things bought because we liked the price.

(The author is president of the Center for Investment Education and Learning.)