Does the Costco membership make sense for individuals? Normally, most people use the membership and try to sneak in purchases by their friends and extended family, but as long as you’re someone who’s willing to cook and you have space to store all your stuff, membership might make sense. Usually the response I hear is that they can just use the $60 membership cost to buy food from regular grocery stores or they see no reason to buy in bulk if it’ll just rot anyways.
For Costco to be worth it, you have to generate enough savings from Costco purchases compared to other places that they would normally buy from.
It's easy to make these savings from Costco in a variety of ways.
1) Add a secondary card holder to your account for no additional cost. So if there’s someone else like a friend or another family “living in the same address” (just fake this by the way), you can split the cost with them and they also get a membership to Costco.
2) In-store purchases: From the amounts you spend on groceries and non-perishable stuff, you get 50-100% more volume, so either you can spend less, or you receive more for your dollar spent. If it’s non-perishable stuff, buy more on discount and store it away. Also, if you’re there often enough, they have additional discounts that add to an additional 15-30% benefit, sometimes more depending on your purchase.
Spend $200 every month for in-store items at Costco as an individual, on average the bulk buying advantage gets at least $300 of stuff elsewhere. At $100/month in savings, you make back the $60 membership fee in the first month of spending.
3rd: If the Costco location you go to has a gas station, then you can save there too. The fuel is roughly 7c/litre cheaper than other brands. At $1.15/ltr in Toronto right now and $200/month on gas at that price, at Costco you save $12/month, which is $144/year. The only problem is that there’s a good chance you’re probably waiting 15 minutes in line because it’s busy half the time. But you’re probably doing anything productive anyways, so you can be on your phone and watch more of my videos while you wait.
4th: Costco Capital One mastercard helps to accelerate savings (average total = $135 cash back). Just the credit card alone I find can justify the membership costs.
Gas cashback: $188/month x 12 x 2% = $45
Dining cashback: $250/month x 12 x 3% = $90
So here’s the total savings for regular membership? $1,449
You want more savings? In fact, let’s make it an executive membership because the investment is even better. You personally take on the additional $60 cost to upgrade and become an executive. You won’t need to split that cost with your friend, otherwise they’ll ditch you and find another friend to do the membership, and Costco would turn into a ponzi scheme. What you get as an executive member is a 2% cashback on in-store purchases.
Costco in-store purchases: $200/month x 12 x 2% = $72.
Remember your friend who’s the secondary cardholder? Guess what, you get the in-store cashback from their spending too. So if they spend $200/month too, then as the primary cardholder you get an additional $72.
So what’s the overall savings on Costco executive membership? $1,533
The savings can be higher because I’m being super conservative. Good chance you or your friend will buy something expensive like clothes, furniture, electronics or jewellery, and that all adds to the 2% reward. If you and your friend COMBINED spend $250 per month in-store, in a year you make your $60 upgrade cost back from the cashback.
So is a Costco membership worth it for an individual? YES
So when is it not worth it to get a membership? You either waste too much food. You spend too much. Or you have no vehicle for transport.
My take on Bulk buying? For individuals it’s a good opportunity to try different recipes, freezing some foods for another time, meal prepping, eating more, stocking up on non-perishables, and making fewer visits to the store
But if the membership you starts influencing you to buy more stuff than you’d normally would (because there’s a lot of awesome deals) then you should reassess your membership or cut back on purchases
I tried a few times to do my Costco errands by public transit and it was a pain because of the amount of stuff I had to carry. Also by Uber/Lyft, it was starting to get expensive.
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Intelligent Investor - Benjamin Graham:
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