Money – it’s something we all desire, depend on, yet often struggle to hold onto. But why does it slip away so easily? Two words: financial psyche. Yes, you heard it right. We’re going on a journey to uncover the hidden facets of our ‘money personality’. You might be wondering, ‘Money personality? What’s that all about?’ Consider it the missing ingredient in your financial formula, the secret sauce that can transform your approach to money management.
What’s Your Money Personality?
We often stress about the importance of financial literacy, such as gaining a strong understanding of how money works and having the resources to make informed decisions. But when it comes to establishing financial health, one thing most people fail to consider is their money personality type — or their approach and emotional responses to money.
We each have our own beliefs and emotions about money, and they are mostly shaped by our individual life experiences (e.g., passed down from our parents or influenced by our current situations). There are seven distinct money personality types. Typically, we fall into a combination of many types, and not just one.
The Compulsive Saver
Some Compulsive Savers are so afraid of losing money that they go their entire lives without spending any of what they worked so hard to save. For example, they might choose to skip out on hobbies or activities that could bring them happiness and purpose.
It’s all about moderation; learn to find a balance between saving money and enjoying life. Think about where you see yourself in the future and how you can use your savings to get there.
The Compulsive Spender
Even if they have large amounts of debt, Compulsive Spenders will often continue going on shopping sprees. They may even try to hide large purchases from friends and family. In extreme cases, they can be at risk of going bankrupt if they consistently spend more than they earn.
Creating a budget plan will help you see things from a different perspective. Remind yourself that buying a new car (when you already have one), for example, means sacrificing money on essential things like saving for retirement or paying off debt.
The Compulsive Moneymaker
While Compulsive Moneymakers are usually on a strong path to achieving financial freedom, they can enter dangerous territory if they start neglecting important relationships to prioritize growing their wealth (e.g., choosing to work on weekends over spending time with loved ones).
Recognize that there’s more to life than money. And if you do have a sizeable amount of wealth, give it purpose by helping others, whether that means donating to an important cause or treating yourself to that family vacation you’ve been talking about for years.
The Indifferent-to-Money
Many people who are indifferent to money feel they only need a modest amount of money to be happy, which is a healthy mindset. But things can get ugly if they’re not responsible with their finances (e.g. depending on a partner or spouse to do the work for them).
Even if you are financially comfortable, make it a point to know things like where your money is going, what your monthly expenses are, and where you stand on debt. Doing all these things can save you a lot of financial stress in the future.
The Saver-Splurger
It can be emotionally exhausting when the pendulum swings from compulsive saving to compulsive splurging. Saver-Spenders often end up stressed and disappointed in themselves for working so hard to save money, only to lose it so quickly.
Like Compulsive Spenders, Saver-Splurgers rarely put thought into what they’re spending on when they decide to splurge. Before any big purchase, imagine how you might feel the following week or two. Don’t lose sight of your financial goals.
The Gambler
It’s not unusual for Gamblers to encounter sudden windfalls or devastating losses. The most obvious risk is when the gambling gets out of control and they borrow against things like their retirement money or children’s college fund to make up for losses along the way.
The goal is to be introspective and strict with the financial risks you take. Balance and security are essential to have, so start setting aside monthly savings before making any big financial decisions.
The Worrier
It’s smart to be aware of what could happen if you don’t prepare for your future. But letting worry and anxiety eat away at your happiness in the present moment is never a good thing.
Seek positivity around money conversations. Work on understanding where your financial worries are coming from, whether that means talking to a financial advisor or a therapist.
Embrace Your Money Personality for Success
Identifying which types you fall under, and understanding the pitfalls of each, can significantly improve your relationship with money. It can help you do things like spend less on impulse purchases, be better about budgeting, invest wisely and ensure a nice nest egg for retirement.
The secret to financial freedom isn’t just about earning more or spending less. It’s about understanding your money personality and using that knowledge to make better financial decisions. So, go ahead, embrace your money personality, and watch as your financial life transforms!
