You might believe the line from the song “Santa Claus is Coming to Town” (J. Fred Coots and Haven Gillespie (1934)) that “he is making a list, and checking it twice, he is going to find out who was naughty and nice.” Well, the fact is, Santa Claus is a student of behavioral finance. While you might think it is your behavior he is focused on, it is his own behavior that causes him to make a list. Santa is very aware of how easy it is to get off track from his financial goals if he doesn’t have a shopping list. He has studied regret theory and learned from the financial behavior experts, such as Daniel Kahneman and Amos Tversky. He knows that if he doesn’t go by his shopping list, he could end up giving everyone a new Lexus with a bow on it, because he is swayed by their annual “a December to Remember” campaign.

You may be focused on your own holiday shopping list right now (or your own wish list—either before or after December 25^th, when everything is on sale.) You may not think about how important shopping lists are. If you are like most adults, you know that a shopping list is necessary because the brain can’t remember things like it did in its younger years. More importantly, if you have been a client of ours for any length of time, you have heard us refer to the importance of spending consciously and saving unconsciously. This is the reverse of what most humans do. Most people spend money without thinking about it. They subjugate themselves to clever advertising, peer pressure, and product positioning at the grocery store. They spend until the bank account is empty and the credit cards are full. Then they “hope” to be able to retire someday. They hope to have money to save eventually, which they will do consciously. As a client of the Arkansas Financial Group, Inc., you have learned to flip that perspective. You know to save unconsciously and to spend consciously. This is a cornerstone philosophy of our practice, and you know the power of the Savings-to-Spend account to fight the temptation to make rash decisions and compulsive purchases. 

If you have ever compared the simple task of grocery shopping both with and without a list, you know what I am talking about. A good list will help you save time, money, and frustration. Below are a few ideas that will improve the experience:

1. Start in advance—The earlier you start your list, the clearer you become on what you really want to buy. This especially applies to high-end purchases or major financial commitments. 
2. Be specific—You will be armed to fight the distractions that come from a lack of focus and the desire to “just buy something.” It will also enhance the experience if you find exactly what you are looking for, instead of making do with a poor substitute.
3. Know what you don’t want—Even if you aren’t clear on exactly what you are looking for, you may use the process of elimination to help you narrow down the options and avoid buying something you already know won’t work. Examples here including know a product brand that you want to avoid, colors you know won’t work, or sizes that would be too big or too small. 

You may argue that a shopping list takes the spontaneity out of life. Isn’t it fun to go to the grocery store and just see what ends up in your cart for dinner? Or just show up at the car dealership and see what new vehicle grabs your attention? Or just running over to the big box store and see what new gadget you can play with. After all, isn’t it important to get up on the latest technology?

Well, going back to our friends Kahneman and Tversky, these trailblazers are the ones who first informed us that regret is a much more powerful than pride. That means the regret of an unwise decision vs. the euphoria of the initial purchase. So, while using a list may seem a bit boring in the short run, it is the long-term satisfaction of meeting your life goals that is more important. This is the behavioral aspect of what we help our clients do. So, keep up on those lists, and finish this year on a very positive note. 

Kristina Bolhouse, CPA/PFS, CFP®

Vice President/Shareholder

© 2022 Kristina Bolhouse and The Arkansas Financial Group, Inc., All rights reserved.

The Arkansas Financial Group, Inc. is a Fee-Only Financial Planning Firm located in Little Rock, AR serving clients in Arkansas and throughout the country.

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