I recently listened to a webinar where the speaker, when commenting on the state of American’s relationship with their money, said “financial literacy is not how to save, it’s how to shop.” That was thought one. Thought two was the memory that many years ago, a professor at Stanford University conducted an experiment that showed preschoolers were willing to wait longer to receive a treat (a pretzel or a marshmallow) when the treat was out of sight but could only hold out for a short while when the treat was in sight. OK, yes, this was done with preschoolers, but you can’t tell me that today’s screens-in-your-face advertising isn’t built on the exact same principle. Would Amazon be Amazon if it made you wait for those packages? What can we take from this? As the man says “it’s how to shop” so let’s learn how to shop.

First up – let’s put our treat out of sight. When someone comes in for help with cash flow, one of the first things we suggest is removing all the apps on their phone that have to do with money – the spending apps, the investment apps, and the banking apps. Yup, that little earthquake you just felt was the collective shudder of all of you out there who just can’t IMAGINE deleting those apps. Trust me, you’ll feel better once the withdrawal symptoms subside. How many times have you walked into Wegmans for an item or two and ended up walking out with a whole bag of stuff, most of which you didn’t need. Wegmans is a master of putting that marshmallow not only in sight but between you and the cash register and that’s exactly what all those apps work to do so, all together – One, Two, Three – DELETE.

Next up, let’s learn how to shop. Say you want to replace the cookware in your kitchen (and it goes without saying that this fits in your budget) – you could, of course, head out to Amazon, click a couple of keys and have those pots & pans on your doorstep in a day or two. You may have even thrown in a couple of dishtowels, some fancy pot cleaning solution, and a new high-tech potholder simply because they were in sight (courtesy of an algorithm) much like the marshmallow. In fact, because you already have your credit card saved into the program, you didn’t even feel it. Did you spend a little bit more than was allocated for replacing cookware in your budget – chances are, yes. Was it a well-thought-out purchase, not so much. Now, let’s put that marshmallow out of sight. We still need that cookware but now we do a little of our own research (as opposed to reading the dubiously generated reviews on the website) then we look around and figure out where we can get our targeted cookware. Perhaps, we even decide to spend just a little bit more (but still less than we spent in the previous example) and upgrade to an heirloom piece (my ashes will probably be buried in my Le Creuset) and maybe we spend those dollars at a locally owned cookware store where the proceeds will stay local and keep a few locals employed. This is the epitome of financial literacy – you know how to shop and you did so within your budget.

Another trick of the financial literacy trade is to create some “rules of the road” for shopping. Some commonly used ones are:

• One in and One/Two/Three Out – Some people love to shop and let’s assume that works in their cash flow. Before heading out to shop, identify a fixed number of things that will leave the house with the purchase of that new item. Shopping for a new shirt – set aside one/two/three shirts from your closet and donate them when the new shirt enters the house.
• Be a Hunter – With this strategy, we identify the item we need then we “hunt” for that item with the goal being to secure the smartest deal (which isn’t necessarily the cheapest).
• The Hair Shirt strategy – this is for the more masochistic amongst you and involves identifying the targeted purchase and then saving separately for that item by scaling back other budgeted items. Eventually the money available to purchase the item in question stands alone. I like to pair this with the “extra massage for Kitty” strategy by boosting the targeted need enough to include a treat as compensation for the hardship.

The great thing about learning how to shop is that it is the easiest to share with family members of all ages. Earlier this year we talked about scheduling financial conversations into your family life. Several of my recent divorcees post the family cash flow plan on the inside of the cereal cupboard so the whole family knows the score – what a great way to make up for a lack of government sponsored financial education! If there are younger people in your house, what are some ways we can help them better understand finances? Since financial literacy starts with better understanding the cost of things, how about incorporating one of the above strategies for that new cell phone your youngster has been incessantly pestering you for (Mom, Mom, Mom, Dad, Dad, Dad… Mom, Dad’s not answering….). Help them identify the cost of the new phone then guide them in the hunt while allowing them to wear a Hair Shirt to find the dollars. As educators learned years ago with the recycling movement, teaching the youngsters a strategy goes a long way towards bringing the whole family into line.

So here’s your homework – We’re about a month from the holiday season, a time when even the most disciplined amongst us sometimes stray. Let’s make our lists now, learn how to shop, and enjoy a great January with no fiscal regrets.