Money Traps, Part 2: Comparing Dollars to Doughnuts

by Jessica Sommerfield · 8 comments


The phrase “dollars to doughnuts” first appeared in the mid-19th century as a catchy way to describe something considered a safe bet. Dollars obviously hold value, whereas doughnuts are essentially worthless (unless you’re a big fan of doughnuts, maybe). So, what does this mean to you, as a consumer, and how can it become a money trap? The answer is best illustrated by setting up an analogy.

Imagine that you’ve had your eye on an item that’s $100, and it’s suddenly being advertised as 50% off. Would you be willing to go out of your way to purchase this item at $50 (and save $50 in the process)? Probably. Pit this against another scenario where you’re considering a more expensive purchase — for instance, a household appliance. Let’s say it retails for $3,000 but it’s marked down to $2,950. Regardless of your budget, would you feel like you got a better deal on the $100 item marked down to $50 versus the $3,000 item marked down to $2950? Probably.

The reality is that both these deals represent a savings of $50, but the first is a saving of 50% while the second is a saving of something like 1%. If you’re like most people, it feels like saving 50% off is way better than saving 1%, regardless of the dollar amount.

Comparing dollars to doughnuts can be a trap that reduces your savings potential in everyday situations. If you’re willing to spend a little extra effort to save $10 on groceries, shouldn’t you be willing to make the effort of saving $10 on your utility bill or investing $10 more into your retirement account?

Remember: A Dollar is a Dollar, No Matter How Small

A dollar is a dollar, wherever it shows up in your budget. Saving a dollar of interest on your loan payment is just as impactful as saving a dollar on your grocery bill. This is especially important to keep in mind with areas of your finances that aren’t in front of your eyes or in your pocket.

David’s Note: I used to feel bad when I ask for a discount on a seemingly small item, but not anymore. Nowadays, I overcome my fear of the other person looking at me funny by imagining to ask him to give me that savings out of his own pocket. After all, it’s not rational for someone to think a savings is negligible if he isn’t willing to just give me cash from his own wallet.

Picture Your Savings as Cash in Your Pocket

Another reason it’s easier to feel like we saved more on one purchase over another or a bill, loan, or investment is that we don’t picture them in terms of cash value. A common suggestion is to imagine that someone a few blocks down is handing out $50 bills with no strings attached. Would you be willing to drive a few miles for it? Of course! $50 in cash is tangible; it’s money in your pocket. Think this same way about every dollar you save in other areas of your budget, your mortgage, or your retirement savings, and you’ll be less likely to limit your ability to save money and get ahead.

David’s Note: I am guilty of this money trap. I’ve walked to different parts of the shopping center just to comparison shop $3 worth of Tylenol, but I can be impatient and make hasty deals on a car that can mean potentially losing out on hundreds of dollars. One way I’ve found that helps me combat this is to not rush into a buying decision, as having a bit of time to think about the savings can make all the difference.

Do you compare dollars to doughnuts when it comes to spending or investing decisions? How do you help yourself make your actual savings feel more tangible?

Like this article? Check out the other parts of the money trap series below:

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{ read the comments below or add one }

  • Arminius Aurelius says:

    ” HOW I EARNED $ 20,000.00 IN 1 1/2 HOURS ” …….. The last car that I bought was a used 2008 Lincoln Town Car in March 2009 . It had 13,900 miles on it. New , 10 months earlier it would have cost me about $45,000.00 . I paid $ 22,900.00 and therefore saved about $ 20,000.00 . I used to put about 20,000 miles a year on a car when I was working and would trade it in at 100,000 miles . Have been retired since 2004 and now put on about 5000 miles a year . Now have 54,800 miles on it , like new . Every car I bought starting in college [ about 10 cars ] were low mileage used cars . I am sure I saved well over $ 100,000.00 and over the years I cautiously invested in the stock market and again made more money at no costto myself. ……….Arminius

  • lyn says:

    I always see in dollar terms and think if the time and hassle I need to go thru to save the dollar is worth it. I guess it makes things simple.

  • You do have to be careful with this mindset. Ten dollars is the same regardless of what your buying, but not all saving is worth the time you spend to get the discount. Ie saving ten cents haggling for a doughnut or a car might not be worth your time.

    • Really good point! Driving 2 miles out of the way to save $.02 on ten gallons of gas is a great example. The government says each mile is worth 23-57 cents, so driving 4 miles round trip and spending 10 min extra to save $.20 is a losing prospect!

  • Comparing Dollars to Doughnuts Good article

  • I agree that a saving is a saving. I am even aghast that people refuse to pick up low denomination coins they may pass on the sidewalk. Even if it is 5 cents each one you pick up adds up over time. I think emotion plays an important role as well when we purchase. Falling in love with a particular model car, or house, or piece of furniture, tends to make us willing to spend whatever it takes to get it. Whereas not many of us fall in love with bottles of Tylenol. Nice reading your post
    Regards, Adrian

  • Durga says:

    Dollars and the doughnuts seems similar in pronunciation and shape they appear, and the important thing you mentioned is that, they also can be compared in their nature. Both are hidden in nature and what we see is not always the only thing. 🙂

  • That’s a good point about the money trap. $50 is saved from the $100 item or $3000 appliance. I am guilty of going for the 50% off 🙁

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