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It means that someone believes he has wasted 7 dollars on something.

This is an idiom that strays far from its original intent. Someone is describing their feelings or status in terms of a visual cue, namely color. A better example would be a statement like "color me green with envy" or "color my face an embarrassed red." There is no color applicable to having less money, so this is a metaphor that is only understood because of the proper one.

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