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angela self's smart cookies

In my first week of university, I found a $10 bill on the sidewalk. After grabbing it and realizing it was mine to keep, my girlfriend and I used it to buy ice cream. I wouldn't have spent my own money that day on two cones, but this was "found" money and so I handed it over guilt-free. Where our money comes from often determines how we value it. For example, if you blew $20 you found in an old pair of jeans because you considered it "found" money, or treat your annual tax refund as a splurge cheque, or let money build up in a savings account for your dream wedding while your high-interest credit card carries a balance, then you don't look at all money equally - and this way of thinking could be detrimental to your financial picture.

Authors Gary Belsky and Thomas Gilovich outline a few suggestions to curb this way of thinking, known as mental accounting []/note> - in Why Smart People Make Big Money Mistakes.

They suggest that we should imagine all sources of cash as earned income. When we get a tax refund or a birthday cheque, we should ask ourselves how long it would take to earn that same amount after taxes. We'll probably have a higher respect for this new-found cash after answering. If you have trouble doing this at first, then store "found" money in a savings account for at least three months before touching it. It's highly likely that after this time period you'll view the money as savings and will be less likely to spend it frivolously. Also, if you're using plastic, stop and quickly ask yourself if you would buy the item if you had to use cash. We sometimes have a harder time parting with our cash than we do laying down our credit cards.

The bottom line: Money is money is money, and if we want to make the most effective use of our income, we'll start treating every dollar that comes our way equally.

Angela Self is one of the founders of the Smart Cookies money group. Read her weekly column on managing debt and saving money at