As with other important decisions in life, the choices we make about spending, saving and investing, are significantly linked to our money personality type. Our personality type consists of various character traits that can be classified into specific groups. These traits are influenced by our values, upbringing and experiences.
Researchers have identified 5 money personality types, and although you may not fit into a specific group in every single way, the goal is to identify the type that most accurately matches your behaviour, in order to become more aware of how you manage your money.
1. Big Spenders
These are the men and women who have the latest gadgets and electronic toys, the fanciest cars and only dress in brand-name clothing. These people love to spend and are happy to spend rather that hunt for bargains or wait for sales. People with this personality do not shy away from making riskier investments and certainly do not fear debt. They splash out and live large, treating themselves to all the latest material possessions.
They are the Great Gatsby’s of the world, but need to learn to budget and spend a bit more time planning before they spend.
Savers are the polar opposite of Big Spenders. Often deemed as cheapskates or misers, Savers are very aware of not spending money on non-essential things. They save wherever they can, whether it’s by switching off the lights to save electricity when they are not in the room, or by meticulously plotting their trips to make sure they save on fuel. Their credit cards are only there for emergencies and they will always opt for the more conservative investment plans.
As Savers are often driven by the fear of not having money, the best thing for them to do is to have a dedicated emergency fund, to ease that fear. Next, they need to educate themselves as to how their money can grow, by easing their grip a little and investing in low risk options.
This personality type is fairly easy to spot, as they are often out shopping and talking about the latest sales. They are also the wasters. They buy products in bulk and various other items they don’t need or even end up using. They derive immense satisfaction from spending and receiving money. Like an addiction, they may be aware of the debt they are accruing but the urge to spend is far too strong to stop. Shoppers can vary from investing regularly to not investing at all.
The best advice for Shoppers is to minimize the temptation and ability to spend. By closing credit card accounts or only taking a certain amount of money to the shops, will limit their buying power, when their impulse to shop overwhelms them. Also implementing a ‘waiting period’ before spending can combat their impulsivity. This will encourage them to stop and think before making unnecessary purchases.
These individuals are quite a sad case, as their spending is neither driven by their emotions nor their ego. Debtors simply lack the thoughtfulness needed to maintain a budget and to make sure they are not spending more than they earn. These people are consistently in debt and are often aware of it. Debtors also often miss out on good investment opportunities.
Debtors need to get organized! By putting all their bills and statements together in a file, they will be able to physically see where they are going wrong. Setting reminders to pay bills on time and scheduling regular opportunities to review spending and saving, will go a long way in helping them to manage their finances better.
Investors are planners. They are consciously aware of money, understand their financial situation and purposely find ways to make their money work for them. They are future-orientated and therefore seek out the best opportunities to invest their money, regardless of how much they actually have. Investors manage their finances responsibly and always put a lot of thought into what they spend their money on.
Investors need to keep doing what they doing, because they are the ones who make their money work for them in the short term and long term.
Regardless of which money personality type you have, the most important thing, is to be aware that you do in fact have a certain inclination or pattern of behaviour when it comes to spending, saving and investing money. Being aware and acknowledging that you have a tendency to handle your money in a particular way, will empower you to take control and be more mindful of your current financial situation. It will also encourage you to start thinking about your financial goals for the future.