Recently, I received a lengthy email from a reader who had a ton of basic personal finance questions contained within. I thought it might be interesting to start an irregular “personal finance 101″ series to answer and explain some of her questions.
This question isn’t from the long email, but it is a great question concerning personal finance fundamentals that some of my readers might be interested in.
You keep talking about taking a calculator to the grocery store but I don’t know what to do with it or why it is useful. Shouldn’t I just buy the biggest one?
There are a lot of uses for a calculator in the grocery store. Here are three examples that shows how a calculator can be useful. Most of these examples are very basic math, but they show clearly how to use a calculator in a store to save a bit of money.
Calculating price per unit. Let’s say you want to buy Tide, but you want to get the best deal on it. One of the containers promises 52 loads for $5.99 and another one promises 96 loads for $10.99. Which one is cheaper?
This is a great time to break out your calculator. Type in 5.99, hit the divide button, type in 52, and hit the equal button. You’ll get a number that looks like 0.115192. That’s how many dollars you have to pay per load. In other words, with the 52 load container, it will cost you eleven and a half cents per load. Now, type in 10.99, hit the divide button, type in 96, and hit the equal button. You’ll get 0.114479. What does it mean? The larger one only saves you about a half a cent per load.
You’ll be surprised to find that sometimes the bulk offering is a great deal, other times it’s not much of a deal at all, and on occasion the smaller size is actually cheaper per unit.
Converting incompatible sizes. You’re checking out the toilet paper. One offers 9 rolls of paper with 150 sheets on each. The other one offers 16 rolls of paper with 88 sheets on each. Which one gives you more sheets?
Whip out the calculator and see how many sheets you get in the first package: enter 9, hit the multiply button, enter 150, and hit the equal button. You’ll see that that package gives you 1,350 sheets. How about the second one? Enter 16, hit the multiply button, enter 88, and hit the equal button. 1,408 sheets! The one with 16 rolls, even though the rolls are much smaller, gives you more sheets. You might want to compare the price per sheet to see which one is really the better deal, using the tip above.
Coupon math. I have a coupon for $1 off any package of Pampers Cruisers. There’s a 108 count box for $26 and a 144 count box for $34.50. I see that the larger box is cheaper without the coupon, and I can get another coupon for no problem. Which one is the better deal with a coupon?
Let’s figure up the first one. Enter 26, hit the minus button, enter 1, and hit the equal button. It costs $25 after the coupon. Divide that by 108 to see the cost per diaper: $0.231481. How about the other box? Enter 34.50, hit the minus button, enter 1, and hit the equal button. It costs $33.50 after the coupon. Divide that by 144 to see the cost per diaper: $0.232639. It’s actually cheaper to get the smaller package with the coupon!