Yes, it’s possible to get through to New Year’s Eve without declaring personal bankruptcy—here’s how.
The Christmas windows have returned to Holts and The Bay. This marks the launch of a familiar season—the frostbitten season of panic and regret. Every December, I take a moment to reflect on how it is that a single day of the year exacts 364 in financial recovery. I have usually spent wildly in the run-up to the 25th, trusting I’ll either rack up enough debt to scare myself into a higher earnings bracket, or the universe will reward my generosity with a cosmically certified cheque. So far, failure on both counts.
For the last year, I’ve been dating a Jewish man, which means I now add eight more days of holiday celebration to my previous one. I have nightmares about collections officers. For the sake of love and, at some point, retirement, it’s seriously time to get real. No more regrettable affairs with shiny holiday windows and last-look stocking-stuffer deals. The shopping season is well underway and, so far, though I’m far from miserly, I’ve steered clear of debtor’s prison. I’m embracing a three-step program to manage my holiday spending and I present it to you here. My gift to you.
Step one: Leave your emotions at the door. This takes practice, patience and, possibly, monk-level meditation. Solid execution means you’ll make it to Jan. 1 without crying through a single holiday ad for a long-distance phone service or coffee maker. Advertisers understand that emotional manipulation leads to heavy spending, so why don’t we as well? More often than not, we think about how a purchase will make us feel, before we stop to consider whether we actually need it.
My Achilles heel is the Dancing Santa. He’s the tackiest dancing robot on the aisle, but I marvel at his endurance and laugh at his moves. Nothing gets Dancing Santa down. More than once, I’ve said to myself, “I need this kind of a role model in my living room.”
The robotic Claus is my red flag. This year, when I sense his jiggling hips beckoning, I force myself to take a moment away. Maybe I go for a walk, or I spend a minute thinking about lunch. It doesn’t take much. The field of neuroeconomics is awash in case studies illustrating how the mind naturally makes bad decisions when it comes to money. American journalist Jason Zweig wrote Your Money and Your Brain in 2007 to show investors how they could make money in the markets by learning that we have two very different thinking processes at work in our brains—the emotional and the rational. The emotional process tends to govern financial decisions, simply because it is usually the fastest to weigh in. Zweig argues that if you can distract the emotional part of the brain long enough to let the rational side take over, you’ll make smarter decisions. No. Dancing. Santas.
Step two: Never underestimate the importance of free money. I met Prof. Eric Kirzner three years ago, while I was working on a TV show about money. He holds the John H. Watson Chair in Value Investing at U of T’s Rotman School of Management. Prof. Kirzner understands financial markets and knows how to find good deals. He also takes his students to meet Warren Buffett once a year, which further confirms my theory that he is a financial genius.
Kirzner conducts an in-class survey each semester, asking his students if they’d walk from one bookstore to another to save $10 on a $30 book. Almost all of his students say yes. He asks if they’d make the same walk to save $10 on a $1,000 coat, and the students say no. On the book, they’re saving 33.3%. On the coat, they’re saving a miserly 1%. They think it’s not worth the walk. “Why not?” asks Kirzner. “It’s the same ten bucks. When it comes to money, framing is important.” That kind of savings may seem insignificant on a $700 flatscreen, but if you’d walk to save the same amount on a smaller purchase, you shouldn’t be so quick to dismiss it. Besides, we can always use more exercise.
Step three: Cash, not credit. My accountant, Amanda Mills, recently told me that the average consumer spends 40% less when he shops with cash and not credit. “Counting money actually makes us happy,” she says. “It feels physically valuable in a way that plastic—debit and credit—doesn’t.”
So for now, I’m sitting at home, counting my money. I also plan to ask a mall Santa for a raise. And slowly, slowly, my nightmares of creditors are turning to visions of unbought robots dancing in my head.