Coupon Investing - How to Make $100K in a Decade

This piece is part of a package on coupons. Read the counter argument by my colleague Farnoosh Torabi - Extreme Couponing: 5 Reasons to Steer Clear.
I love coupons. The ability to purchase something I was going to buy anyway - for less - is simply a little slice of heaven for me. And these days coupons are more valuable than ever. Now I'm not talking about the sort of discount that buys me a warehouse-size quantity of cereal that I'll never eat, or puts me with the extreme couponing crowd. I'm talking about how easy it is to save a hundred thousand dollars in ten years combining store sales and manufacturer coupons for things you would be buying anyways.

An example - dinner at Macaroni Grill
Last weekend, my wife said she wanted to go to Macaroni Grill for dinner. I knew my Entertainment Book didn't have a coupon so I Googled "Macaroni Grill coupon" and, lo and behold, up popped a $5.00 coupon. I printed it out on my HP printer using non-OEM ink on recycled paper. The whole thing took about one minute and the printing cost me well under a penny. It was like finding a part-time job that paid $300 an hour.

Coupons today
Coupons are becoming more and more popular due to a combination of the recession and the advent of the internet. I spoke to Stephanie Nelson, the Coupon Mom, about these money savers. Nelson explained that shoppers saved $3.7 billion dollars last year with coupons averaging $1.46 each. And that's just on consumer packaged goods. Many of the coupons I use are for restaurants, services, travel, or activities. Whether my family is planning a trip to the museum, a sporting event, or the water park, I'll always take a minute and search the web for a coupon.

Nelson observed that the real savings come from combining store sales with manufacturer coupons. The CouponMom.com lists a database of local store sales and coupons that can be found both in local newspapers and the internet. Before the internet, it would have taken countless hours to match sales with coupons.

Send a kid to College with Coupons
Nelson explained that a family of four can reasonably expect to save about $100 a week on packaged goods purchased from supermarkets and drug stores. These savings come from both coupons and sale items on products that would be used. An additional $50 a week could come from activities, services, restaurants and travel. That $150 a week amounts to $7,800 a year in savings.

Assuming the coupon values go up at a three percent annual inflation rate and that you can earn six percent by investing your savings, here's what the power of compounding can do.

Okay, so maybe $300K won't buy a college education in 18 years, or maybe a million dollars won't fund a retirement in 32 years, but you have to admit that this is far more than chump change.

A dollar earned is a $1.50 saved
Because the IRS hasn't yet figured out a way to tax us on what we can save on our purchases, saving a buck is like earning a buck and a half. It's a beautiful thing.

Yet there is certain stigma attached to coupons, just like there is on driving an older car when you are affluent. I, for one, am not willing to define myself by how much money I spend. If someone wants to give me a deal, I'll take it and gladly live with that stigma of pulling out the coupon.

Never pay retail!
I've come out of the closet before by admitting I drive an old inexpensive car. Well, I'm doing it again by proudly admitting that I like great deals, including those that can be had with coupons. I try very hard to resist buying something I don't want or need because it's a great deal, and instead find what I do want and then get the great deal. Some people like spending time solving crossword puzzles or Sudoku. I happen to get enjoyment out of saving money.

Here are some of my favorite places to locate those great deals:

The internet (Google search)
Local Newspaper
Coupon Mom
Priceline and Hotwire
Woot
Groupon
Living Social

I very much appreciate those people who think couponing is embarrassing and uncool. Much like indexing, it wouldn't work very well if everyone did it.

Note: Graphic from CouponMom.com
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Allan Roth

Allan S. Roth is the founder of Wealth Logic, an hourly based financial planning and investment advisory firm that advises clients with portfolios ranging from $10,000 to over $50 million. The author of How a Second Grader Beats Wall Street, Roth teaches investments and behavioral finance at the University of Denver and is a frequent speaker. He is required by law to note that his columns are not meant as specific investment advice, since any advice of that sort would need to take into account such things as each reader's willingness and need to take risk. His columns will specifically avoid the foolishness of predicting the next hot stock or what the stock market will do next month.

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