My least favorite part of shopping is going to the cash register. I hate the sinking feeling in my gut that I get when my items are totaled and tax is applied.
Did I really spend that much? Yes, the numbers don’t lie.
As I’m shopping, I have a rough idea of what I’m spending, but somehow it always becomes much more when it’s accurately totaled. This is partially the fault of my falling for retail pricing tactics.
For instance, an item’s sale price is $19.98. When you estimate your total while shopping, it’s easy to drop off the change and think of it as $19, which is exactly what retailers want you to do! In actuality, $19.98 is much closer to $20 than $19.
By advertising a price as a penny or two less than the next dollar amount, retailers trick many shoppers into thinking they’re spending less.
This is a tactic I became familiar with at a young age, thanks to my penny-pinching parent. She would ask me how much an item was, and at first, I would answer something like “$19.98.” She would correct me, saying that the item was actually more like $20.
As an obsessive-compulsive person, I didn’t really like rounding up when I was actually spending less, but I soon discovered why she did this. When she got to the register, there were no surprises. She usually had her money ready to go before her items were totaled, and she hardly ever had to dig in her purse for more.
My grandmother had perfected the art of rounding.
Round ‘Em Up
Since hardly anything is priced in even dollar amounts (other than at the dollar store), it’s necessary to round dollar amounts to get a more accurate idea of what you’re spending before you get to the register.
Rounding isn’t just a technique you learned in school to help you determine answers given in decimal points; it’s a valuable skill for shopping smart. By rounding amounts to the nearest whole dollar, you can quickly determine if you’re staying within your budget.
For instance, if you purchase items that are priced $15.97, $5.88, and $2.47, you can round the first amount up to $16, the second amount to $6, and the third amount to $2.50. Your estimated cost is then $24.50. If you calculate the actual cost, it’s $24.32. That’s very close! Of course, if you have a calculator on your phone, you can always plug the actual amounts in to get this total. But if you don’t want to stop what you’re doing, rounding is an easy way to calculate an accurate total in your head.
Don’t Forget Tax
In case you were wondering, no, I didn’t forget about sales tax. This is something that should be rounded into your estimated total, as well. In my state, for instance, the sales tax is 6%. This is closest to 10%, which is an easier percentage to calculate in your head.
In the case of the previous purchase, I would determine 10% of $24.50, which is $2.45. If you wanted to round this again, it would be $2.50. So the total will be under $27. To test the math, 6% of the actual total, $24.32, is $1.46. The total with tax becomes $25.78. The estimate of $27 is very close, and as always, higher than what was actually spent.
Math Isn’t Always Evil
The practice of rounding dollar amounts to get a more accurate picture of what you’re spending can be applied in many areas of personal finance — beyond a simple trip the grocery store or the mall. By utilizing this oft-forgotten mathematical technique, you can avoid register shock and be more aware of your spending.
Do you round up numbers in your head while shopping? Why or why not?
{ read the comments below or add one }
For me, shopping with actual cash is the answer. It really hurts to hand over the bills and if I don’t physically have the money on me, I cannot have some of the items I want. Now, obviously there are essentials, and this very quickly sorts out which those are!!
There was a study a while back that found people with credit cards spend as much as 30% more on average. I know there are cash back rewards and stuff, but many of us could all benefit from just using cash!
It is incredible how well fractional pricing works. I use it as a landlord on my rental property. If I list my place for rent for $1,200 I won’t get any interest at all. If I list if for $1,175 I get all the emails I can handle. I can’t believe that $25/ month really makes any difference to people.
Good tip for those who are struggling to find tenants. And with more tenants to choose from because of a perceived deal, you can pick and choose the ones who are most likely to respect the property, which more than makes up for the $25 a month difference.
I tended to underestimate prices and time. My girlfriend set me straight though when I was always arriving late. I would say “Well it takes 30 minutes to get there so if we leave at 9 then we’ll be there at 9:30” to which she always replied “Add 20 minutes to that. Are you in the car driving at 9 or walking out the door at 9? Are you already sitting down where you want to be at 9:30 or are you looking for parking at 9:30?” She’s always my reality check.
It’s the same thing when we go shopping. I always think we only spent $25 and she keeps correcting me “it’s more like $30”. It gets me a little mad when she’s always right but I’m learning.
It’s always better to be safe. I wish more people would be like you two because being punctual is becoming a lost art.
And no worries about her always being right. Happy wife happy life, and this also extends to girlfriends.
Rounding up is a tactic I should incorporate. I’m good at seeing how a price like $19.98 is really just $20, but I always end up underestimating the total when I start trying to add things up.
Round up, round up, round up – gotta remember next time!
I cured myself of a pretty bad retail therapy habit this way: I would go to my favorite store, armed only with cash, usually about $20.00. I would walk around the store and pick out the items I wanted – then when I was done browsing and enjoying looking and thinking about all of the new items, I would pick through my cart and pick out the one or two items that I could not live without, and put the rest of the items back.
Walking around and looking at items was all the shopping fun I needed, apparently. Eventually I cut down on this practice as well, and I just don’t use shopping as therapy any longer.
Interesting method Chris,
Did it work on the very first try or was it painful to put the items back the first time around?
It’s funny how some people would see $19.98 as $19 when they they shop. I always round’em up, may be that’s why I usually only buy what I NEED.
Whatever works Alex! 🙂 Only buy what you need and eventually you can afford much more than you ever want!
I also love it how they show you the “original” price and the “on-sale” price. That tricks you into believing you are saving money! They have no intention on selling the item at the original price anyway. The “on-sale” is what they want from the beginning.
The original price gets a ton of people. You often have to remind them that you aren’t saving 50% because you still have to shell out that 50% to get the item!
I always round up when dealing with money or time. That way I’m always over prepared. Better to have extra of those two things than not enough.
Absolutely right Stefanie. It’s always better to over save than to be broke!