Although researchers disagree on just how much of our personalities are dictated by our genetics and how much comes from the way we were raised, one thing is clear: Your personality has a huge effect on how you relate to money. In terms of financial personalities, there are five major types. See if you recognize your major motivators and behaviors in one of the money personality types below:
The Saver
People with this money personality don’t care about keeping up with the Joneses, and are content with an older car or smartphone. For savers, frugality comes naturally: They fix leaky faucets right away, and were the first ones to switch to CFL bulbs. Although they can come across as cheapskates, savers get their satisfaction from watching their bottom line grow; as a result, they’re typically the ones who can afford to retire early.
Pro Tip for Savers: Loosen the Purse Strings a Little. A saver is never going to be happy throwing money at luxury items, but making room for a treat now and again is what makes life a fun adventure. It’s also crucial for savers to take on a little extra risk by moving some of their money into investments with better potential returns than a standard savings account.
The Spender
Among all of the major financial personalities, the one known as “the spender” revels in having the latest and greatest of everything, and much of their self-worth comes from using buying power to look good to others. Spenders are willing to go into debt to get what they want when they want it; they also don’t care much about finding the best price. Spenders are often seen as fun to be around, especially when their willingness to part with their money includes being generous toward friends and family.
Pro Tip for Spenders: Consider Future Value. Spenders should try to ensure that their purchases are worthwhile. Ask if the purchase you’re considering will still make you happy in a year’s time. If it isn’t, then try placing the money you’d have spent on the item into an investment account instead.
The Shopper
The shopper loves to purchase new clothes, gadgets and other items that will give them a status boost. But unlike spenders, they view shopping as a game to win; they enjoy hunting for great deals and finding bargains. The shopper is likely to enjoy extreme couponing and belong to warehouse clubs — and they’ll often buy unnecessary items just for fun. Some shoppers make great investors when they turn their bargain-hunting expertise to their savings.
Pro Tip for Shoppers: Cut up the Credit Cards. Shoppers must make sure they never spend money they don’t have. Vow to quit using credit cards at the mall, and switch to a cash system for nonessential purchases. To do this, make a household budget and allocate a set amount to discretionary spending each month; then set aside that amount in cash. When your discretionary cash for the month is gone, so is your shopping for the month; and if there’s a surplus, then deposit it into a savings account.
The Debtor
The debtor doesn’t think much about money at all, to the point where they blow their paychecks long before the bills are due. The debtor doesn’t necessarily have a shopping habit or desire to look good for others. He or she simply doesn’t have any idea where the money is going. Debtors typically owe so much money that the concept of saving for retirement seems completely out of reach. Debtors often feel so overwhelmed by their finances that it’s easier to ignore the problem than to deal with it.
Pro Tip for Debtors: Seek Help. Debtors who are living paycheck to paycheck and can’t get their debt under control should find a professional financial advisor; they’ll help devise a spending plan to ensure the bills are paid. They also help their clients begin to save and invest for the future.
The Investor
Investors are willing to risk a portion of their savings for higher returns. Unlike savers, who often find it difficult to play the market for fear of losses, investors are willing to risk short-term losses to make long-term gains. The investor looks forward to a future of financial independence sooner rather than later.
Pro Tip for Investors: Switch Off the Autopilot. Although most investors tend to find themselves in great financial shape, they can’t be complacent. Investors should take a lesson from savers by finding ways to cut costs — which will provide even more money to invest!
There are many financial personalities. But remember, no matter what your money personality type, you can address your weaknesses by starting down the road to financial independence. All it takes is a willingness to be honest with yourself about your habits and the courage to take the first step.
Photo Credit: Dave Fayram
A sixth class is ignored in this article: The entrepreneur. Invests in his own enterprise, not the other man’s , and is relatively independent of the macro economy.
Makes wealth for himself – not measured in terms of fiat money pricing.
It seems I’m a cross between “Saver” & “Shopper”. I’ve never followed the crowd or kept up with the Jones, and I weigh pretty much every dime we spend. But I also love the thrill of the hunt, whether shopping for gifts, groceries, mortgage, autos, etc. Nothing like the satisfaction of getting the best value at a great price! 🙂
RE: The Spender
Another test I used to use is “have I wanted this item for as long as it takes to save or pay for it?”
Assume that I once had $25 ‘free’ cash left after the bills and food were paid for each week. If something cost $100, even if I had the cash, I would ask myself, “Have I wanted this for at least 4 weeks?” If not, it’s an impulse purchase to be avoided.
I still do this, but in more general and less specific terms, as the budget has grown..
Very clever, Tom. I like it!