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Emotions are connected to how we spend our money, how we save, and how we invest. When it comes down to it, money is an emotional issue for married people and singles alike. The key is to understanding what type of financial personality you fit in, and how you can change for the better or make it so you aren’t living in fear of money.
Here are the Five Financial Personality types:
The Extravagant Spender
You know the type. They always have the latest iPhone, latest model BMW, biggest home on the block, always showing off the latest designer looks, making it seem like they have all the money in the world to spend. But, in reality, they could be broke, broke, brokety broke. You wonder how on earth they can afford the finer things in life, pay a mortgage, and take amazing vacations. These spenders don’t fear debt because they don’t keep track of it.
Penny-Pinchers
Remember when your parents would yell at you for leaving the front door wide open during the winter and say “What are you doing? Do you want to heat the whole neighborhood?!”? Now that you’re an adult, I’m sure you understand what they meant. These savers know that a penny saved is a penny earned, and they keep the heat or AC on a comfortable temperature, they make sure all the lights are out when they go to bed, only shop when they need something, and generally have no debt. They could be better known as “cheapskates,” but mostly known as spenders who “live beneath their means.”
The Shop Till You Drop Spender
You ever get so bored you go on the Amazon app to check out the latest deals, and even if you don’t need them, buy them anyways? Or you can’t sleep and buy that kayak you think you might use even though you never went kayaking and hate the outdoors, but it was on sale? These spenders get emotional gratification from the things they purchase, constantly seek out bargains, and are happily satisfied once they are found. They can sometimes be fiscally conservative, investing in 401K plans for retirement or other stocks, while others don’t see planning for the future as a priority.
Drowning Debtors
They open new credit cards when they are already swimming in debt. They don’t bother keeping track of how much they spend and what is in their checking account. They spend their money as soon as they get it, and like to spend more than they earn. You ever pay a credit card debt using another credit card? Then you might be a debtor. You don’t put much thought into investing because all your money goes to the minimum payments on the 5 credit cards you maxed out.
Wise Investors
These spenders know how much they make, where their money is going, and how they will invest it. They have spreadsheets to help them keep track of their expenditures, as well as their investments, and watching the stock markets is a form of adrenaline for them. They have a well-thought-out plan for their retirement, and can’t wait for the day when they can purely live off their investments. They are risk takers, but are strategic in how they make their money work for them.
Fixing Your Financial Personality
Once you have decided what classifies your financial personality, here are some helpful tips to make sure money isn’t such a burden and how easy it is to make small changes that can benefit you in the long run.
Extravagant Spenders: Try spending on things you need, not things you want
It’s hard to break the habit of buying the finer things, if that’s what gives you pleasure. But, before you take the plunge and purchase that $500 Coach handbag, ask yourself “Will this purchase mean anything to me in a year?”. If the answer is “not really”, then save the money for something you really need. Open a savings account and and have more long-term goals for your money.
Penny-Pinchers: Everything in moderation
It’s good to save for a rainy day, but don’t let the days just pass you buy and miss out on the fun things in life. It’s okay to splurge a little to enjoy your money, like taking that trip to Hawaii or buying that robot-vacuum to make household chores a little easier. Also, try investing some of your money, and try minimizing your risk while maximizing your returns.
Shop Till You Droppers: Stop spending money you don’t have
In order to control your spending, it’s good to check on your credit cards and see how much interest you’re being charged with each purchase. Try to focus more on saving the money you have. If spending money is something you are doing to compensate for other areas of your life, then look into finding out why and work on changing it. Have “The planning” mindset rather than the “I want it now” mindset.
Drowning Debtors: Make a financial plan
Take a look at what you owe, what you make, and what you want to save, and make a plan to see how much time it would take to pay your debts off. Start looking at where you can invest your money. Hire a financial advisor to help if you feel overwhelmed. Set up a budget and spending plan so you know where your money goes each month. And remember, it’s all about the baby steps.
Wise Investors: Keep doing what you’re doing
You know where your money is going and what you want to gain financially, you’re in perfect shape. Just stay on top of the financial trends and continue to educate yourself.
So, what’s next?
Your financial personality is not easy to change, but being aware and knowing the changes you need to make is the first step in facing the money hurdles. Self-awareness is key, and knowing you’re also not alone in your behaviors will make you feel less ashamed and more willing to take control of your financial goals.