Million Dollar Journey

Questrade Democratic Pricing - 1 cent per share, $4.95 min / $9.95 max

Building Wealth through Saving and Investing

How to Save Money at Costco

We’ve been Costco members for a while and really enjoy the store for essentials and unfortunately, non-essentials.  I’ve written about the great Costco debate which included the pros and cons of the store.  Some of the high points are the competitive prices, quality, samples and the best in the biz return policy.  Like anything, there are drawbacks as well, specifically the membership fees and the lure of the deals which can result in spending more money than you planned.

Even as a relatively frugal person, I have a weakness for a good deal.  A good deal to me is a quality product at a price that is lower than market value – which is what Costco’s business model is built upon.  While I may succumb to a random good deal at Costco, I’m slowly improving on  tempering my “buy the deal” urges.

So the argument remains that people simply spend too much at Costco to really save money and that you’re better off buying smaller portions at other discount stores that don’t require a membership.  I must admit that it’s a little too easy to fork out $100+ at the check out, but here are some money saving tips that have worked for us to minimize our Costco bill.

Make a List

The number one strategy for taking advantage of good prices but sticking to the essentials is to make a list.  Costco generally has the same item day after day with very little changes in price (besides the seasonal section).  The regular essentials we buy from Costco generally costs less than other retail outlets and can really make a difference in savings if you do it right.  The list will also create a “mission” around the shopping trip and ultimately reduce browsing.

Know the Store

Along the same lines of making a list to prevent browsing, it’s important to get to know a general layout of the store and where they keep the essentials.  Low margin meats and milk are strategically located in the back of the store to tempt consumers with other items first.  From there, create the list in the order that you would naturally walk through the store.

Set a Time Limit

Another tip to reduce browsing is to set a time limit for your shopping trip.  What we typically do is visit Costco about an hour before closing on the weekends.  This is around supper hour, so there are less people, and there’s a sense of urgency while shopping.

Eat Dinner First

I’ve written about this savings tip before – always eat before you go out shopping.  When grocery shopping, we are more inclined to buy more (junk) on an empty stomach, especially with Costco having so many “prepared” food items on display.  Not only do we spend around 10%-15% more when grocery shopping hungry, we tend to load up on unhealthy items.

Split the Food

Even though we like to keep our expenses in check, one thing that we don’t skimp on is good food.  We find that the meats at Costco are high quality and at a very reasonable price per kilogram.  The only issue is that all the food is in bulk, and if you don’t plan it properly can result in a lot of wastage.  An easy solution is to split the food into portions and freeze it.  For example, we buy the giant packages of chicken thighs or ground beef and use zip lock freezer bags to divide the food into appropriate supper sized portions for the family.

Use Cash not Plastic

This is a trick that works at just about any retail outlet.  We all know how easy it is to swipe a credit/debit card when paying the cashier and not even thinking twice about it.  Why not simply bring enough cash to pay for whatever is on your shopping list?   Nothing quite like the motivation to avoid the embarrassment of not having enough money at the check out.

Do you shop at Costco?  If so, what are some of your strategies to prevent blowing the budget there?







42 Comments, Comment or Ping

  1. 1. Gary

    for those who are really frugal, there is a work around to the yearly membership as well. You can actually go to Costco with a gift card instead of a membership card, the interesting thing is that you can buy a gift card off of their website & FYI you can buy things on their website with other credit cards (like mastercard) which can earn you airmiles

  2. @Gary – I had no idea – thanks for the heads up on the gift cards.
    @FT – thanks for the tips. As we now have 3 in our family we have been considering Costco as we will inevitably need to buy more grub!

  3. 3. Echo

    Totally agree on the high quality of food. We buy all of our meat at Costco and split the giant packages into daily portions for freezing. We go to Costco once a month with our grocery list and buy meat, some dairy, frozen veggies and strawberries, laundry detergent, dishwashing detergent, paper towels and toilet paper. Typically that comes to around $300/month, or half our grocery budget.

    Good point on eating before you go. You may want to try all the samples when you’re there, but that’s how they get you to buy them!

  4. 4. Jungle

    The best way to save money at Costco is by not going!
    Same goes with Walmart. You can spend so much money in these stores loading up your cart.

  5. 5. Bob

    But if I pay cash, I don’t get the cash back reward on my Costco AmEx . . .

  6. 6. Zdenek

    I really love Costco because even “cheap” stores like Walmart and Superstore are expensive if you compare the same item, pro-rated by weight or quantity, to Costco.

    All you need is to have enough room at home to be able to buy in bulk and store it somewhere. You probably need one or two separate freezers as well. If they have an item for sale I buy it even if I don’t need it at the moment and just add it to my storage.

    Some stuff is more expensive in Costco so don’t buy everything. Typically fruits are expensive (thou their organic carrots are super cheap). Prepared meals are usually also not cheap.

  7. 7. ITS

    FT,

    I think your title should be “How to Spend Money at Costco”

    If you expect to save money inside a store, you are doing it wrong. ;-)

    /biggest pet peeve is when half of tv commercials begin with “save”, when in reality they want you to spend spend spend…

  8. 8. T

    The way I save money at Costco is by counting the items in my cart. Most items that I buy at Costco are generally $10 each so if I already have 10 items I stop knowing that I likely have already spent $100.

  9. 9. Big-D

    It is funny when reading blogs like this and how to “save” money. The only way to save money is to not spend the money to begin with. If you want to save money .. then you put it in the bank and store it for when it is needed. You are looking to limit your spending on impulse buys. That is all really this article boils down to. Every purchase needs to be looked at as an indivdual cost benefit analysis, and if it passes the muster test, then buy it. If you have no self control, then you have to determine if belonging to a place like costco is in your best financial well being.

    I use costco, and spend around 8-10k a year there. I put it on my Costco Amex and get money back. That is me. I feel zero compunction about what I am buying. I know the cost of every item I purchase from at least two or three other merchants and determine if it is a good deal or not. I know if it cheaper to buy at kroger or cheaper to buy at another store and buy those items when I am at those stores. An example, Velveta shells and cheese used to be 6 packages for 6 bucks. I got that at costco as it was a cheap as the on sale at kroger for six individual boxes. Well now Costco has some organic mac and cheese which is 8 bucks for 6 packs. Well now I wait for it to go on sale from Kroger.

    Yes it is a lot of information you have to keep in your head, however at the end of the day, that is what you are looking for. If you want to have it simple, write it down what the prices are and keep track of your inventory at home. If you are running low, then you have to plan or find a sale, or get it at the price you can get it when you need it.

    My favorite quote in the world is “A lack of planning on your part does not constitute an emergency on mine.” Modify that for shopping and it is the rather apt. Once you know the 100 things you buy, you know where to get them, and where they are cheap. Buy those items and you can know you have the best price, and be happy when you shop and don’t worry about overpaying.

  10. 10. Elbyron

    Gary’s suggestion to use gift cards is a great way to effectively use your non-Amex credit card for shopping at Costco, and be able to get rewards (which are hopefully better than the rewards on the free Costco Amex).

    But that trick doesn’t bypass the annual membership fee, at least not for very long. Before I bought my membership, I tried buying gift cards online using someone else’s membership number. I took the card into the store and told them I wanted to use it without having a membership. They directed me to customer service, who then asked me for ID before issuing a temporary 1-day membership number (which has to be presented to the cashier). Now presumably if I hadn’t used the whole balance on the gift card, I could come back another day and get another temporary number. However, they are keeping track, and probably wouldn’t let me continue doing this month after month.

    I do have a helpful tip for reducing the annual cost of membership: time your renewal carefully. First of all, you can actually get 13 months by simply buying/renewing at the beginning of a month – the card only has an expiry month, not date, and so it is good until the end of the same month of the following year. Secondly, do a trip at the end of its expiry month, and buy enough to last you all the way through the following month (or 2 months, maybe even more if you’re really good at stocking up). This way you only pay the renewal fee every 14 – 16 months, thus reducing the cost per year by about 15 – 25%.

  11. 11. Zdenek

    @Big-D Time is also money so it depends how much time and effort do you want to put into searching for cheapest items, driving around the town.

    Many items are necessity so the idea that “the only way to save money to save money is to not spend the money to begin with” does not really work. You still need to buy food, basic stuff like soap and toilet paper.

  12. 12. krantcents

    I always go shopping with a list. I do use their credit card for convenience and pay it off ebery month.

  13. 13. Darcy

    Costco is one of my favorite stores. The eating before going is a great tip: hungry man can be easily convinced that $40 worth of Corn Dogs is a great investment.

    I’ve been known to blow my budget at Costco but really there are 5 things I get there consistently so in the last year I go in with blinders ignoring everything but what’s on my list. Plus, I find if I go to the regular grocery store first the giant boxes of are less tempting at costco.

  14. 14. Big-D

    @zedenek – I know time is money, I did not state that I did one day of shopping in one fell swoop. I shop for the items I get and want at each store when I am there, and stock up. I go to Costco twice a month. I go to Kroger once a week as it is closer and 90% of my stock items I get from there. I go to walmart once a month and get my things that I need there when I am there. I am not driving around saving a nickel or a quarter on each item and wasting $5 in gas to get to and fro. I have a pattern and get what I get when I am at those places.

    As for the “not spending to begin with” works just fine if you have a budget. Yes there are necessities, but those are considered sunk costs by any accounting standpoint. Thus as long as you get the cheapest you can on those, then you are doing the best you can for those items you purchase. I am talking about everything else. Anything not spent is actual savings. Do you really need those two DVDs? Do you really need that Fruit Smoothie maker? That is the trap the author was talking about with this article. If you don’t need it, don’t buy it and that is the only way to save.

  15. 15. Zdenek

    @Big-D – I agree and what you are saying makes sense =)

    I am trying to change my mindset (and my wife’s =) to become more or less stuff minimalist. If you adopt that perspective then you automatically consider owning two DVD players as something that is out of question.

    With lots of stuff you have to maintain it, clean it, upgrade it etc. Life is too short for that.

    cheers

  16. 16. Echo

    @Elbyron – I thought I was the only one who timed my renewal to get an extra two months out of my membership :)

    I only shop at Costco once a month so in the last month I’ll go on the 30th/31st, then completely skip the next month and go back on the 1st day of the following month to shop and renew my membership.

    It’s probably the cheapest thing I do in order to save what amounts to about $10 a year.

  17. 17. Big-D

    @Zdenek – The fun part of personal finance, is there is no one way, it is personal :)

    Minimalism works, however, I tend to go for more items that can do more than one thing at a time. I play video games, thus my Xbox 360 can act as a DVD player if I spend $10 and get the remote. Done. My PC has windows media center in it and I can record channels, and play them on the TV. Instantly no cable anymore and instant DVR for free.

    It all depends on your goals. I want to retire early, thus I work hard, and make sure my life is pretty easy around the house so that I can work hard during the week. Once my son is in school – I can pay off my house quickly, and then I have less outgoing cash flow, and we can see where I sit.

  18. 18. Zdenek

    @Big-D – I think we do pretty much the same thing. I just canceled my cable and I use PC hooked to TV to watch YouTube and movies (rented from red box or library).

    It is also a good idea to spend a bit more money on quality items so you don’t need to keep shopping for the same item in short time e.g. I bought a stainless steel bucket to keep indoor food for compose. Plastic usually doesn’t last too long.

    In terms of online shopping, I found Amazon sells lots of cheap good stuff. Sometimes the price is like 50% cheaper than the same item in Sears or Home Depot. Browsing online and reading user reviews also helps.

    I hope to work 4 days a week sooner than later esp. with my daughter growing up – the best years will pass by fast so I don’t want to miss much. I am trying stock trading and it looks good so far =)

  19. 19. Big-D

    Amazon is great if you can find someone who does not want to stick it to you w/ shipping. I don’t need that much “stuff” so I don’t spend that much online anymore. Textbooks and a few movies are about it.

    My son is a senior in High School – thus I get to have the time to myself soon depending on where he goes to school. He might commute, but at least I don’t have to worry about him at my house and leaving him home alone as he will be an adult (well 18).

  20. 20. Ed Rempel

    Hi FT,

    It’s funny, in our office we have the “Costco rule”. When we go through the cash flow for a new client and find they spend more than you would expect on groceries, our first question for them is: “Do you buy your groceries at Costco?”

    A typical family of 4 may spend $400-600/month on groceries, but if they spend $800/month, there is a good chance they shop at Costco. Just like Big-D said – $8-10K/year – and enjoying it.

    Obviously the reason is that they buy all kinds of other things there that add to their life. To be fair, not nearly everyone that shops at Costco spends more.

    However, our experience is that the majority of people that shop at Costco need this article – because they spend quite a bit more than people that buy their groceries any where else.

    Ed

  21. 21. JK

    I disagree with your discouragement against browsing at costco. Because they have no advertising, browsing is the only way to find the real deals in the store.

    Like the other poster mentioned, the important thing is to simply know your prices. If you know your prices then browse to your heart’s content.

  22. 22. Ed Rempel

    Hi JK,

    I agree with you. If you know your prices and have self-discipline, then browse to your heart’s content.

    It is dangerous, though. We have gone through the cash flow for thousands of people and I can tell you that the average Costco shopper spends about $200/month more than the average non-Costco shopper.

    That is not because the prices are not really lower. It is because they are tempted to buy non-grocery items or they accumulate food.

    All those cool items and electronics. It only takes a few extra purchases that you would not buy anywhere else and you have spent more on groceries for the year.

    We have also seen couples with 2 freezers full of bulk meats they bought at low prices in bulk. Stocking up on bulk foods only saves you money if you eat it all.

    When I go to my regular grocery store, I go in for 5 items and come out with 5 items. When I go to Costco, I find myself browsing through the electronics, the deck items, books, bulk party supplies or I think about buying 6 of something instead of just 1 or 2.

    It is a matter of knowing yourself. If you shop at Costco, you will probably buy some cool stuff that will add to your life. However, unless you are very disciplined, you will probably spend quite a bit more.

    For most Canadians, it is quite unlikely that you will actually save money shopping at Costco. That is why this article is right on.

    Ed

  23. 23. Zdenek

    @Big D – Amazon.com offers free shipping most of the time and I pick up my stuff at the border for a small fee from a local storage business. For example I bought a nice vacuum for $100 cheaper than the same one in Sears and I paid no shipping. It also works great for games when you have many kids to give presents to. Good luck with retiring early =)

    @Ed – I wonder whether your analysis is truly correct? One needs compare Costco bills with all other household bills because Costco sells pretty much everything. I am having trouble understanding why people would spend more given that clothing cheaper 50% or more than elsewhere (where do you get $25 jeans or $40 jacket?), toys are the same and most household items are also discounted.

    Perhaps people over-eat and thus over spend. If you have full freezer then you can’t spend more for meat until you finish what you have.

    Of course if you buy electronics just because then you can spend substantially (even thou cheaply in compare to e.g. FutureShop).

    Cheers

  24. 24. Big-D

    @ed – I don’t spend 800 bucks a month on groceries. I typically spend no more than $300 a month. With $200 of that coming from costco, and $100 from Kroger. I buy other things there which are good prices and buy items which I give/sell to others. I have bought 8 TVs for other people from costco as they have the best prices. I brought my rain gutters from them (My brother is a professional home builder and he said the prices were the best he had seen). I run a small business, and use costco for my accounting and payroll.

    There are other things they do, which have value, which are not only “grocery bills”.

  25. 25. deb

    I coupon instead of going to costco. I save on average 60-70% off my total bill. This weekend alone i got over 80 deodorant and 30 ziploc boxes free!!!! I donate the overage my family wont use and get a tax receipt for the amount donated!

  26. 26. Andrew F

    I find Costco memberships are a waste of money unless you have a big family to feed. You can usually pick up deals as good or better than Costco by shopping sales.

  27. 27. Troll

    We use the “Executive” membership for $100. They give 2% cashback at the end of the year. We spend ~$400/month on groceries, so our membership is fully funded.

    Also, we pay attention to the weekly specials to stock up on staples like cereal. They are periodically marked down 25%+.

  28. You can also buy food in bulk and store left overs by freezing them. We freeze bread, meat, left over pasta, soup, fish, plus many others. If you need more freezer space, you can always buy a compact freezer.

  29. 29. Shiraz

    We use Costco for specific items that we use or eat regularly and know we can actually get through…I’ll pass on the bucket of mayo. The savings from purchasing meat alone more than pays for the membership over the course of the year. We also have a Costco AMEX (no fee) that pays up to 2% back. We pay off the card every month so we never have to worry about interest payments. That being said, every so often we do get pulled into buying something we hadn`t planned on, particularly if we go in hungry!

  30. 30. Wayne

    Hotdog and a pop for a buck and a half, I go hungry all the time.

  31. Their soft serve ice cream is reasonable as well. :)

  32. 32. Elbyron

    I’ll often plan to go in hungry, just so that I have an excuse to buy a hotdog! I don’t find that it makes me any more likely to buy junk food (I have pretty good restraint). I do occasionally buy something on impulse, like a door mat or solar lights, but typically they are things I would have eventually bought elsewhere.

    @Shiraz
    If you pay off your Costco Amex each month, then you only get 1.5% back, and only after you’ve spent over $5000 for the year. The first $5000 spent only earns you $20 back due to the tiered structure. And you’re limited to a max of $500 back per year, so any spending over $37,000 has no reward. Of course, it would be difficult to spend 37K per year on an Amex card, since it isn’t accepted everywhere. You’ll get more cash back if you use Aspire Cash Platinum (if under 15K spending) or Aspire Travel World (if over 15K). Mastercards like these aren’t accepted at Costco stores, but see my post above about buying cash cards on costco.ca. And if you spend a lot at Costco, then as Troll mentioned in post #27 above, buying an executive membership could save you enough to pay for the entire membership cost!

  33. 33. Jeff

    Look for items priced at xxxx.x7:
    I bought a patio set for really cheap, and when I asked an employee why it was so cheap, he replied: that item is on clearance. So I asked how can I know of an item is on clearance, and he said: just check the item’s price, and if the cents end with a 7 ( e.g. . 97), it is on clearance.

  34. 34. Lalu Panju

    Costco is over rated store. Buying in bulk doesn’t necessarily mean good deal particularly food, due to limited shelf life. Due to following reasons I don’t shop at Costco
    1) Average Costco has 25000. You get less choice at Costco. Lot of products are not even available there
    2) Credit Cards – Costco accepts only AMEX when everyone uses Visa and Mastercard
    3) Costco Stores look & feel – There stores look like warehouses. It is very inconvenient to shop at Costco during winters. They don’t keep the place warm.
    4) Membership costs – As a consumer I don’t see any reason why I need to pay the Costco the money to even set foot there. This has to be my primary reason for not shopping there.

    What I like about Costco though is their return policy. Gas prices are cheaper at Costco but then there are long queues. Some folks have to drive some distance to get to nearest Costco store unlike regular gas stations at every nook and corner. You end up burning fuel to save couple of bucks.

  35. 35. John Cooper

    Why do people spend more at Costco than elsewhere? Customer demographics. Costco shoppers have more disposable money to begin with. There was an article in Fortune a few years ago that stated the average salary of a Costco member is $95,333. That’s probably at least twice the average salary of a Walmart shopper, and a lot of extra disposable income to spend on $400 blenders.

  36. 36. Zdenek

    @Lalu, here is what I think about your reasons:

    1) Costco is not Walmart. It works differently. Walmart sells lots of low quality products so they seem to have more selection. Costco ensures its products are high quality so you don’t feel you need such selection. If you need something special go to other store.

    2) Yes that is small disadvantage but if you use their AMEX you will get money back 2%. You can also use Interact

    3) I never noticed people being cold in Costco. If you are, put more clothes on =)

    4) You can easily get membership cost back through savings!

    You can put bulk food into fridge or freezer. If you can’t you can still benefit with cheap clothes, toys, electronics and household items.

    The savings are substantial, many time deep below prices in Walmart, Superstore or Home Depot.

  37. 37. Michael

    I admit to being a big fan of Costco for their great deals and quality products that you don’t see elsewhere. I am generally careful with my money and although I would like to believe that I am saving money by being a Costco member I’m sure I am buying goods that I would not have otherwise purchased and thus spending more overall. But that does not mean I will cancel my executive membership!

  38. 38. Jungle

    Last time I browsed Costco with someone else, ( who had a membership,) I noticed:

    The pop, activa yogurt and floor was more expensive than what I can pay at No Frills, Food Basic and Freshco on sale. And that was the reason I came to Costco.. I didn’t buy them, because like everyone else here, I thought Costco was cheaper..

    I buy pop on sale for $0.21/can, activa for $0.50/ per yogurt and 10 KG floor for $6.99. All without paying membership fees. I stock up toilet paper for cheap, when it’s a loss leader then I use coupons on top. We are getting double rolls in the $0.30-$0.33 range. Costco was more expensive. There prices everyday, are more expensive.

    I’ve been tracking our spending down to every penny for almost 4 years on spreadsheets. Including grocery, household and personal hygene products. I have a good idea on how much we spend and how to find savings. Our spending is reviewed every month to look at where we are spending too much money and how to save.

    I agree with Ed. I believe we beat Costco savings and membership fees, just by being a smart shopper and using coupons-. BTW Costco will not accept coupons.

    Squackfox also did a thing on Costco and basiclly said you will not break even on the membership, unless you are exclusively shopping at Costco for more than 4 people over a one year period.

    I believe you can even beat that by paying attention to the flyers, buying stuff on sale and using coupons on top and shopping exclusively at the discount grocery stores.

    Also Ed I think you are underestimating how much a family of four spends on grocery. $400 seems way too low for a family of four..

  39. @Jungle, there are def some items at Costco more expensive than other stores when they have sales. One thing though, i think they dropped the price of Activias! We buy them for $10.89 for 24!

  40. 40. Cardinal

    I keep an eye on the coupon deals. They seem to come up every 3-4 months on a lot of the things I regularly buy. I don’t buy things like laundry detergent unless they happen to be on the $3 or $4 off special. Then I’ll buy two. I save enough just on coffee, peanut butter and cheese to pay off my membership; but I get the executive membership. The 2% rebate makes the membership just about free anyway. In Canada the savings at Costco are pretty substantial.
    My wife got all excited because I came home with a huge package of kitchen sponges (24). When I compared the prices to my local supermarket the savings at Costco were the equivalent of “Buy 6, Get 18 Free” at the supermarket. We don’t buy the produce because we can’t get through the quantities.

  41. 41. Newbie investor

    I believe Costco is only cheap when you use their in-store coupons – those deals are really good. Their products are not always cheaper, you really need to know unit prices for all the essential items you buy every week in order to compare which store is cheaper. I plan my meals every week according to what kind of meat is on sale at the store. I don’t do my weekly shopping at Costco as 1) I don’t think their veggies are cheaper, and 2) the meat is good quality but it’s just too much for 2 people and I hate freezing and defrosting meat.
    I will admit that I even had lunch at Costco – by eating their samples. Then I start shopping. The savings I get at Costco was not worth the membership fee so I stopped my membership

  42. 42. Gerard

    I gave up my costco membership after a year. I guess it would save me money if I lived the costco way (big car, big freezer, big house, eating lots of processed food). But those lifestyle changes would cost me waaay more than I would save! And I would have to eat thawed frozen meat for a month. Plus, for a huge store they’re missing an awful lot of cheap good food: dried legumes, tortillas, rice (other than basmati), most herbs and spices, unseasoned whole canned tomatoes… granted, they’re great for soy sauce, olive oil and parmesan.
    For hardcore frugal foodies, I think you’re better off shopping local store sales and ethnic supermarkets. Wider selection of fresh meats, great herbs, spices, and produce, huge selection of dried stuff. Not to mention being closer to town and playing better music!

    Trackbacks

Reply to “How to Save Money at Costco”

Subscribe without commenting



Get the Latest

      

Money Tips Newsletter

Premium Sponsors



Recent Comments

  • Tawcan: Thanks for the update and looks like you’re doing very well. I agree with SST here, I’d simply...
  • Louise @ Good Financial Choices: You are in a fabulous position already, and look on track to meet your ambitious...
  • canadianbudgetbinder: Good for you mate. Your story reminds me of my own. I’m under 40 now and mortgage and...
  • Stompie: First off Sean congratulations on living so well within your means. Adding up a few approximate numbers here...
  • SST: Interesting to note that while Frugal Trader bases his principal residence price at “purchase price...
  • on the fence: Thanks for all the kind responses. Extra appreciation for the voices of genuine care to avoid the...
  • Ed Rempel: Hi on the fence, You are right that the limit you can invest is the credit line limit. If you have a...
  • Ed Rempel: Hi Robin, CRA allows you to use the “flexible approach” when you mix deductible and...
  • Ron: Hi Ed, I’m planning to use SM (or RM) with dividend stocks because I like the flexibility of extra income...
  • Interested: Thanks Frugal. If one is a new investor/Smith Manoeuvre investor, does this analysis apply? I.e. Should I...
 css.php