Personal finance Q&A: Is couponing worth the trouble?

John Perry is an assistant professor of economics at Centre College in Danville.
John Perry is an assistant professor of economics at Centre College in Danville.

Question: My friends are crazy about couponing, and I mean crazy. They keep trying to persuade me to join them in cutting out every little coupon to get a free tube of toothpaste or something similar. I don't know if it's worth my time, though.

They seem to spend too much time sifting through coupons, then driving on certain days to certain stores where they normally wouldn't shop.

I like saving money, of course (I have three kids), but I would think the cost of gas for frequent trips would outweigh any savings. Do you have any advice on what level of couponing is appropriate?

Answer: I am one of six kids, and our mom is a couponaholic. Some of my earliest memories involve her couponing. To this day, she mails coupons to her grown, married, professional kids for things she thinks would be useful. And we love her for it. We also can't help but wonder if she is half-crazy.

So couponing strikes a chord with me. To an economist, coupons are a form of "price discrimination."

Don't let the negative connotation of the word discrimination bother you. Price discrimination is the act of businesses charging some people more or less for the same product. Think airline tickets. On every flight, nearly every passenger paid a different price than the person sitting next to him or her. Some bought the day before (and paid a high price), some bought four weeks before (low price) and some probably bought on Priceline or similar online service and paid the least — or at least think they did. But the point is, different prices were charged, but everyone on the plane is getting the same "service." You will find price discrimination all around you.

Companies love it because it tends to increase profits. It can do so not only by charging some people more, but by selectively charging some people less and bringing them into the market. That is what coupons do. People who are willing to deal with the inconvenience of coupons get to pay less for a product.

But the question of how much is too much couponing remains. If a person uses coupons strategically, it can lower a grocery bill significantly. To my mom, couponing was a sport to see how much she could save. She was good at it, often saving 50 percent or more.

But it takes time and energy to use coupons. Just organizing and keeping them current takes work. And to be effective with them, a person would scour grocery ads and match purchases to those things that are on sale and for which he has a coupon. This does not even get to driving to different stores.

If someone tried, I am sure they could keep track of the time spent, extra mileage driven and other costs associated with couponing, and come up with a dollar figure. But I am not aware of any such attempt.

At the end of the day, it comes down to a person's individual tastes and needs. Personally, I choose to use coupons rarely. That means I normally will pay more for goods than I have to, but I am alright with that.

You should choose how much you want to coupon given your budget and taste for couponing. If your budget is tight, coupons can be a godsend. If you have more budget flexibility, you can choose to pay more so you do not have to deal with coupons.

That might mean your friends go get free toothpaste without you, but it seems you are alright with that.