Editorial – Wallet on a Diet, Part I

Found any great deals lately?

It’s strangely ironic that one of the biggest shopping weekends in North America?beginning Black Friday?coincides with the final weekend of Financial Literacy Month, a push for greater awareness of where our money goes and how to manage it.

It’s no secret that an increasing number of North Americans have no idea how to handle their finances. And while many of us are clueless about investing, It’s even more crucial to long-term financial solvency to figure out how to deal with money on a day-to-day basis.

One much-touted strategy is deal seeking. With unemployment, recession, and the rising cost of goods, there’s been a huge media focus on finding savings at the register?or the online checkout. We’ve all heard of extreme couponing. Stores are offering freebies and rock-bottom loss leaders to lure us in. Group-buying sites have exploded in popularity and are trying to make serious inroads on the online Christmas shopping market this year.

But in a way, this increased focus on ?frugal? money-saving tactics is a blow rather than a boon to our wallets. After all, no one can deny that $25 for a $200 item is a too-good-to-pass-up deal. So we buy it?we’d be foolish not to, right??and then we’ve got $25 less than we would have had if the item had stayed out of our financial reach.

In the end, we’ve ?saved? hundreds?but spent hundreds that could have been saved (or used toward reducing our debt).

It’s common sense that in order to become financially solvent we need to pay out less money than we’re bringing in. And although for some the true necessities of life cost more than they can earn, many of us fritter away a few bucks here, a few bucks there, until we find we’re limping from paycheque to paycheque.

It’s most evident around Christmastime. We feel like we’re barely making ends meet?and yet we plunk down hundreds, even thousands, on the latest toys, electronics, treats, and designer accessories when the frenzy of shopping hits us.

It’s about manufactured need. We see something, and the idea plants itself in our brains: I need this. My kid needs this. And It’s such a good bargain! Throw limited time into the works?hour-long sales, 24-hour bargains, online auctions?and the pressure’s ramped up so high that we can’t take the time to even think over our purchases before making them.

How to cope?

In her Economy Lab series at CBC, Frances Woolley, a professor of economics at Carleton University, says we should approach financial management with the same attitude we’d use when embarking on a serious diet. In fact, she says, ?[the] logic behind budgeting and dieting is exactly the same: if you can monitor and control what’s coming in and what’s going out, you will be able to achieve your savings (or weight loss) goals.?

Even a good budget isn’t the answer. After all, Professor Woolley says, a budget is only as good as the person using it. ?Household finance is like a diet,? she points out. ?Resist temptation.?

She makes a good point. Budgets and diet plans both have big goals, short-term pain, and long-term payoff. That piece of pie looks delicious, but you’ll forget about that alluring sight and smell in two hours. You’ll also avoid 400-some calories. Similarly, the spa treatment is truly a steal at 50 per cent off its regular price, but in a few days will you regret not buying the $99 seaweed wrap?

This time of year, the news media is full of helpful tips to rein in overconsumption of Christmas goodies. Next week we’ll examine some of these strategies and see how they might play out in the mad frenzy of shopping, spending, and saving That’s become December. Who knows? Applying some holiday diet strategies to the world of personal finance might give us an even better gift than a buff bod come January 1.

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