Growing up, I always thought people that shopped at Costco bought convenience, not savings. It was only after I started taking my financial independence seriously that I started to realize the potential for savings at Costco. And let me tell you, Costco is a great place to save money.
I think the rub for a lot of us is paying a membership fee to ‘Save money’. For some of us, we just can’t quite see how paying out of pocket to go buy in bulk is going to be something a frugal person would do. But the truth is, a big part of embracing frugality is reducing some of the variety in your life.
But reducing variety isn’t always bad! For example, since my wife and I got serious about slashing our $1,400 a month grocery expense, we’ve been cooking 3x a week. We cook Monday, Wednesday, and Friday. And we eat leftovers on Tuesday, Thursday, and Saturday. Don’t be mistaken, I have not for one minute regretted leftovers. I like cooking, but I don’t like having to cook from scratch 5+ days a week.
If you make it easy to save money, you make it easy to stick to your strategy. This is part of my approach to financial independence. If we can figure out how to make it easy to save money, we can create the habits that will sustain us to and through retirement.
Why I Recommend Costco
I hated Costco so much that it was common for my wife and I to get into arguments before we even walked through the doors. I just had always linked stress of some sort to my experiences in Costco. Maybe it’s the warehouse style shopping experience? Or the hundreds of people frantically blasting through the shelves to get their frozen chicken wings?
Whatever it was, I hated Costco. But here I am recommending it wholeheartedly to whoever wants to get their grocery budget under control. The savings at Costco are undeniable. Here’s a few examples.
- At Costco, you can get organic quinoa for $2.22 a pound while at Sprouts you’re paying $4.49.
- At Costco, you can buy a 24 pack of Lagunitas Beer for $1.12 per beer while at any other grocery store you’d typically pay $1.67. And at a bar? Try $7 plus tip.
- How about 27oz of Organic Almond Butter for $12.39 ($0.46/oz) while at Sprouts you’re paying $9.99 for a 12oz container ($0.83/oz).
- Finally, what about a 2lb bag of organic coffee beans for $8.99 while at Sprouts you’re likely paying $11.99/lb for organic whole coffee beans.
These are 3 examples of food being less than half the price per unit as Sprouts. And this is not to bash on Sprouts! I love sprouts. But the truth is, when we are talking dollars and cents, it makes sense to invest your time and money at Costco.
But Is The Membership Really Worth It?
In my opinion, yes.
Now, be warned. There will be a sweet 5’0″ lady who will absolutely insist you sign up for the “Executive Membership”. Which happens to be 2x the cost of the “Gold Star Membership” required to get you in. On the plus side, they guarantee you’ll get at least the cost of your extra $60 back or they write you a check for the difference.
To do the math in your head, you need to spend at least $3,000 a year to make up the difference between the cost of the two memberships. Or more accurately, $3,240 if you would otherwise invest that $60 in the market.
Now, the point of this post isn’t to explain the differences between the cards and which one you should get. With the Executive, you get 2% back on all ‘qualifying purchases’. So this can add up pretty quick if you’re a family of 5 with 3 boys. With the Gold Star Membership, you just get the opportunity to rack up the savings with no rewards.
Personally, I think the potential rewards back do not justify the psychological incentive to spend more every time you’re in there. Get the Gold Star and keep being frugal.
For more info on the memberships, you can visit their membership page here.
Savings at Costco on Gasoline
As I mentioned earlier, if you’re having trouble figuring out whether or not to go all in on Costco, ask yourself this question. Are you willing to get gas there?
If you are, you’ll save about $0.20 a gallon without factoring in the 2% cash back. What does that mean?
Frugal Feline Future Value
Say you decide to become a Costco member and want to see what the end result of getting all your gas from them would be. For this example, I’m using the current prices in Scottsdale, AZ at my local Costco in November, 2020.
- Average Miles Driven in a Year in United States: 13,476
- Average MPG of a Car in the US: 25
- Average Gallons of Gas Needed to Buy per Year: 539
- Annual Spend on Gas for one car at Costco ($1.99/gal): $1,072
- Annual Spend on Gas for one car at Circle K ($2.29/gal): $1,234
- Annual Savings by Going to Costco for Gas: $122
- *If you go for the ‘Executive Membership’ add a $20 kick back as part of your 2% rewards.
Now, without the rewards, say you invest that $10.17 monthly savings in the stock market at 8%, in 38 years (world record life of a cat) you’d have $26,887.
To be completely honest, I was a little underwhelmed at this number. Now, to be fair, most households don’t have just one car. So, if you’re a two car household your investment would look more like this.
So you’d have $53,748 just by deciding to get your gas from Costco and invest the savings difference.
Again, this isn’t a crazy number. But, that doesn’t mean you shouldn’t do it.
Savings at Costco on Groceries, Household Disposable Items, Alcohol
It’s almost impossible to put a number on this one as spending is so all over the map and the savings are hard to calculate. So sorry to disappoint, but I can’t give you a Frugal Feline Future Value on your savings at Costco. What I can say is, purchasing from here will save you money every single time. The alcohol is always cheaper. The Costco Brand – Kirkland has truly a great reputation. And the deals are.. just great.
I’m torn on what to recommend. On one hand, I want to tell you to go sign up for the executive membership and see what you end the year with. It’s guaranteed that you’ll get at least your extra $60 back in savings or they write you a check for the difference. But, the reason they do that is because they know people spend more when they think they’re getting money back. Technically you are getting money back, but it’s a bad incentive for people trying to be frugal.
So, I do think you’ll get more money back than you initial $60 extra. But I still recommend against the Executive Membership.
I recommend buying whatever you can from Costco. Don’t pick up a new frozen pizza habit just because you can get them cheap at Costco, but replace your existing purchases with a cheaper alternative from Costco. Get your gas from there (that’s pretty much guaranteed savings). Tires and car batteries are also a great deal from there.