There are individuals across the world who often stress a lot about the importance of gaining financial literacy. It includes the development of an understanding of how money works and having sufficient resources to make well-informed decisions. When it is about establishing financial health, one aspect that people fail to consider is their money personality type. It also refers to their attitude and emotional responses toward money.
Every individual has a set of emotions and beliefs regarding money. These are their personal life experiences. People accumulate these experiences from their parents and the influences of current scenarios.
There are seven distinct money personality types that people belong to and influence their thought process regarding finance. They typically fall into a combination of several types and not just one personality. Recognition of these types and understanding their drawbacks can significantly improve their relationship with money.
Money Personality Types
In this segment, we will explore the different money personality types, the kind of relationship each personality carries with money, and how to handle associated negative aspects.
People possess different beliefs and emotions about money that shape themselves from individual life experiences from a very early age. On most occasions, people acquire behavioral patterns from their parents. All these learnings usually influence the decisions of individuals about money and their ultimate financial decision. The results could be positive or negative but might also make them suffer from conflicts.
It is now time to check out traits of various money personalities and see how one can deal with their respective personality type –
1. The Worrier/Hoarder
Money offers security for hoarders who might even store large amounts that would be better off investing or spending it on productive work. Hoarders happen to be one of the money personality types who hate taking risks.
No matter even if they possess a whole lot of money, they worry they can lose them anytime. They lack confidence in their ability to attain financial freedom. These people remain obsessed over what might happen if they go on to lose their money.
It is good when someone remains aware of what might happen if they do not prepare for the future. Still, allowing worry and anxiety to eat into their happiness in the current scenario is not a good thing to do.
Ideally, one must always look to attain positivity in various conversations linked with money. They also need to put some effort into understanding where their worries are. Talking to a financial advisor can be of great help in this regard.
2. The Compulsive Saver
When someone is a compulsive saver, they might keep their money away even without having any goal in mind. Their belief suggests that saving money is the only way through which they can feel a sense of security in life.
If an individual is of this money personality type, they would be highly frugal in their approach. Friends often connect with them for suggestions on the cheapest phone available in the market or when is the ideal time to buy a flight ticket at the lowest price.
This habit has some drawbacks. These compulsive savers become so fearful of losing money that they can go through their whole lives without spending any amount from their savings accounts. For instance, they might skip some activities or hobbies that could fulfill their purpose and make them happy.
It is important to note that all those who are compulsive savers must strike the right balance between saving funds for the future and enjoying their present life.
3. The Compulsive Spender
A compulsive spender spends money on things they do not necessarily need to possess. They have an extroverted personality type and love to make people feel good about themselves. There is no need to have any specific reason for that. Whenever this type of person is under emotional stress, they consider spending money as a solution to this problem. It helps them to receive instant gratification.
One of the problems that individual with this money personality type encounters is that even if there is a large portion of the debt, a Compulsive Spender will continue to shop for their favorite items.
These people always spend more than they earn. They might even try to hide their significant purchases from friends and family members. Under extreme situations, they risk suffering from bankruptcy if these people keep spending more than they earn.
Hence, they must create a budget plan that can help them see things from a different perspective. These people must remind themselves that purchasing a new car when they already have one does not make sense. It means a person is sacrificing money on necessary things like paying off personal loans or saving funds for retirement. Doing so would automatically improve their credit score.
4. The Spender-Saver
When a spender-saver is around someone, they can identify their personality from those traits they carry that exist among a saver and a spender. These are the money personality types who start by saving a good amount of money, but suddenly, they give in to all those impulse purchases.
Whenever they use their savings, they might start spending on things they do not need or rarely use. They will make cash payments or spend through debit or credit cards.
The disadvantage that spenders-savers often face is emotional exhaustion. They have this problem whenever their mind shifts from compulsory saving to compulsory spending. Saver-Splurges often suffer from stress and become disappointed in themselves for working hard to make money only to lose the same in double-quick time.
Like compulsive savers, saver-splurgers rarely have control over their expenses once they decide to spend. Before making any major purchase, think about how these people might feel the following week. It is an important note to lose sight of their financial goals.
5. The Compulsive Moneymaker
As the name suggests, this individual is someone whose focus lies on how to make money. They firmly believe that earning more money is their secret to happiness. Hence, these individuals spend their maximum energy and as many funds as possible. Compulsive moneymakers become extremely happy when people recognize and approve of their financial success.
Just like any other person, this compulsive moneymaker also has a pitfall. Even though these people usually follow a solid path to attaining financial freedom, they might soon enter dangerous territories if they neglect crucial personal relationships in their pursuit of increasing their wealth. For example, opting to work on weekends over spending quality time with their friends and loved ones.
These people must understand that there is more to life than making money. Money has importance, but if they have a sufficient amount of the same, a person must give it some purpose by allowing others to improve their lives. It can be through donations to important causes or by treating themselves to family vacations they have been planning for quite some time.
6. The Gambler
If someone is a gambler, they will carry the combined traits of compulsive money makers and compulsive spenders. Hence, they will experience the thrill associated with risk and the promise that reward holds inside them. When a gambler resorts to gambling, he can easily get lost in these aspects of life. They can even try to escape boredom by gambling away their money.
It is not unusual for Gamblers to face sudden bursts of money or devastating losses. The most terrible risk is when their gambling habit gets out of control. Then they will start borrowing against the money they had accumulated for leading their life after retirement and the fund kept aside for children’s higher education. Gamblers would start using these funds to cover their losses.
Ideally, these individuals must introspect and remain strict with the financial risks they take. They need to have balance and security in their life. Therefore, gamblers must set aside their monthly savings before making a significant financial decision.
7. The Money Monk
There are some typical signs to suggest that you are a money monk or you are indifferent to money. These people rarely spend their time thinking of money. The thought of creating a budget makes you nervous.
Under extreme situations, money monks consider money as bad or something very evil. They have a strong feeling which suggests that money must not be one of the components to influence someone’s crucial decisions in life.
It is now time to talk about the drawback that this kind of person carries within their personality. We will find that these individuals feel they only require a moderate amount to experience happiness. It is no doubt a healthy mindset that one can keep while leading their life. Things can become worse if they do not responsibly use their finances.
Therefore, even if money monks feel financial comfort, they must make sure to know exactly where they are spending the money. Apart from these, they should keep track of monthly expenses and their stance on dealing with debt. If they can do these things consistently, these individuals can save themselves from financial distress in the future.
Money Management of Four Personality Types
Money carries different meanings to different individuals. It can motivate them in unique ways. When one thinks of managing their finances in an ideal manner, they must remember that there is not one strategy available that can be suitable for all. Each individual should adapt plans to their personality so that they can easily follow through on them and get their due reward.
We all know money has its importance. Still, it is a tool that only allows a person’s life to get better and does not rule it in any manner. Therefore, making smart money choices is the need of the hour. Unfortunately, it is tough for individuals to stick to their budget and have more savings.
A person’s habits related to money are a result of their personality. They can improve their finances by adapting their money personality. The thing that goes behind getting rid of irrational decisions and improving one’s financial decision-making process is behavioral finance. It is a sub-part of behavioral economics, which focuses on psychology.
Behavioral finance seeks to understand why people behave the way they do, especially when their decisions do not align with what is usually known as effective financial decisions. We can get a fair idea of people’s decisions through their money personalities. Just like someone’s personality affects their communication styles, relationships, and priorities, it also impacts their choices linked with finance. Let us now check how the following four personality types deal with money management –
1. The Achiever
Achievers are the ones who always have the willingness and urge to meet their goals. They consider money as a sign of power and success. Hence, these people will always stay motivated to earn decent money and display their wealth with luxurious material goods.
They are do-it-yourself investors and prefer making their own decisions while making finances. These people can easily use financial opportunities where others might miss out. Due to their decisive approach and the desire to make money, these people are always prone to formulating risky money-related decisions.
An individual with an achieving personality comes under a lot of stress while managing their finances in a relationship. Due to their independent nature, they can make concrete decisions without any input from their partner. Achievers can easily suffer from frustration. They experience the same when they should explain the reasons behind their final decisions.
Achievers must try to attain more clarity in expressing their financial objectives to their family members and partners. A good strategy would be to set up a formal meeting on a weekly or monthly basis to discuss household finances. In that meeting, they can discuss significant purchases and practices they must follow to maintain a budget and take care of concerns.
Tips for Personal Finance:
- An Achiever can counter the habit of making swift and risky financial decisions. They must consider creating an advisory board to help them get through some of their major financial situations.
- They can also benefit a lot from using a list of questions before making significant purchases, which include topics like, does it make them get closer to their overall goal, the amount of risk involved, and how much the risk is compared to the return they receive from making the purchase.
2. The Enthusiast
Enthusiasts are those who will always have the desire to traverse, try new avenues, and enrich the lives of individuals they genuinely care about. They use the money to expand their freedom and attain the lifestyle they always want. Enthusiasts show generosity with their money by donating to charities or paying on behalf of their friends.
Due to their social nature, these money personality types will often consult with friends and family members and take their advice regarding the decisions to make money.
These individuals often offer and receive referrals concerning services, finance professionals, and services they use. Short-term goals become a source of motivation for an enthusiast. Hence, they work hard to save for making trips and would be willing to pay extra amounts for undertaking new experiences.
An individual with the enthusiast personality type might require taking note of important things while dealing with relationships. Enthusiasts have the habit of exceeding their budget which might cause problems while managing monthly household expenses.
However, these people are always willing to compromise on spending because of the value they give to individuals and their relationships. They must try and create collaborative financial goals with their family members and partners.
Tips for Personal Finance:
- Enthusiasts must remember to reward good financial habits to avoid burnout of budget. There are occasions when they can afford to have financial weekly cheat days where they can go out and spend money or buy themselves something they have been wanting if they maintain their monthly budget.
- These individuals must try and automate savings with the use of online banking and other apps for personal finance. As Enthusiasts value social approval, they must have partners who are accountable for setting more significant financial goals.
3. The Steward
Stewards have the earnest desire to have harmony and stability in their lives. Their main purpose of money is for creating a sense of security that has a positive impact on other areas of life and reduces the level of stress.
Stewards are responsible when it comes to the use of money, showing discipline while preparing budgets and saving for the future. They feel most comfortable being at home and are always willing to spend an extra amount for creating a warm environment in personal and professional circuits.
They stay aloof from materialistic pleasures and enjoy quality, but not any kind of luxury. Their humility makes them good at managing their finances. Still, Stewards must know how to spend and treat themselves now and then. The desire of these individuals for stability makes them avoid risk at all costs. The inability to take risks can make them miss out on investment opportunities and other lucrative deals.
An individual with a Stewarding personality type can offer a great foundation for personal finances in a dynamic family. As they are responsible, it will allow them to manage expenses and stick to their ambitions.
This money personality type prefers avoiding conflict, which might cause problems if they have someone in their family who has the habit of overspending. They always have the risk of not raising their voice against this habit of their partner or any other family member, which in turn negatively impacts their finances.
Tips for Personal Finance:
- Stewards must create a good corpus of funds for meeting contingencies that might crop up in the future. They can fall back on their safety nets and feel at ease even when they do not lie in their comfort zone.
- These people must depend on trustworthy finance professionals who can offer the necessary education and provide guidance on those topics they are not sure of.
4. The Analyst
People see Analysts for their willingness to learn and make plans. They look at money as something to tinker with and an avenue for controlling several variables in their life. These people are logical in nature and love doing research on various strategies and financial products before committing themselves to any action.
These money personality types enjoy working on details and do the number crunching to ensure they get the desired outcome. Analysts love making use of financial technology as well as spreadsheets to ensure their planning becomes even more efficient. Their curious approach allows them to raise questions, which others might overlook, even if they do not have a direct impact on their financial result.
While making purchases, Analysts look for value, and utility and would often look to find prudent options. Even though these individuals’ tendency to focus on details helps them become effective planners, it can also act as a hurdle to executing their plans with perfection. These people might look to formulate a perfect plan that takes into account those details, which are of less significance and hence, might forget their actual purpose.
An individual with this personality type can be a great addition to handling personal finances in relationships. These people love to focus on those details, which others might find stressful, and can contribute by ensuring there is a set plan to reach a combined financial goal.
Analysts must realize that most individuals are not as interested in dealing with numbers as they are and in relating their analysis with preferable qualitative outcomes. They must work on expressing their thoughts. Then they can work alongside their partner and family members to ensure everyone is thinking on the same line.
Tips for Personal Finance:
- While managing their money, Analysts must ensure to include factors and questions that are not simply based on numbers. For instance, they can think of a situation where, if there was no job, what would they have done? If they had to spend a whole sum of money, what would they purchase?
- It will help them strike the right balance between planning and a substantial outcome. Analysts must also remember to formulate plans of action and deadlines while creating plans and goals. If they start focusing a lot on the details and aiming for perfection might make them suffer from paralysis analysis. It might prevent them from using their plan.
We have discussed seven money personality types that exist among different individuals worldwide. They include the hoarder, the compulsive saver, the compulsive spender, the saver-splurger, the compulsive moneymaker, the gambler, and the money monk.
After discussing these traits, this article has also specified four personality types that show up at the time managing money. These types are the achiever, the enthusiast, the steward, and the analyst. In each of them, we have even specified the tips they must follow for managing their personal corpus of funds.
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