Written by: Deborah Cartisser
We all arrive in adulthood with beliefs and emotions around money that are shaped by our parents and our life experiences around money. Taking time to understand how this programming shapes our way of handling money can go a long way to help us be more deliberate and less reactive in our financial lives. The goal is to foster a healthier approach to money.
Ken Hoda, the author of Happy Money, describes 7 money personality types and typically, people fall into more than one category. Identifying your types can significantly improve your relationship with money. It can also help you to understand your partner and your children and their natural reactions to money.
The Compulsive Saver
Saving money is a constant in this person’s life, perhaps without a specific goal in mind. Saving as much as possible is their focus and it tends to engender feelings of security. Often they have come from households that have faced financial hardships and there is anxiety around money. They tend to be frugal and their need to save is a theme that permeates their money behavior. While saving is both admirable and necessary, the saver may go too far by not allowing themselves to enjoy the money they worked so hard to save. A warning sign: when hobbies and activities that bring enjoyment and purpose are given up simply to avoid spending money.
Moderating behavior: Explore where the fears around money come from. By confronting the anxiety, they can work towards creating a balance between saving for the future and enjoying life. Continue to work towards long term savings and create a budget that allows for discretionary spending.
The Compulsive Spender
The compulsive spender tends to spend their money as quickly as they get it. Spending tends to be spontaneous and sometimes reckless. When in a state of emotional distress, their solution is to spend for immediate gratification or for self-soothing. Spending becomes a means of emotional control. This becomes detrimental when spending exceeds earnings, debt is racked up and excessive spending still continues.
Moderating behavior: Take time to understand why you are making each purchase. Insert a pause when considering spending, to think about whether you really need it and whether you can afford it. If you can start to understand why you are overbuying, you can begin to seek out other ways to address the emotion.
The Compulsive Money Maker
An underlying belief with this type is that making more money equates to greater happiness. Most of their time and energy are spent trying to make as much money as possible. They derive validation from the recognition and approval they get from others for their financial success. This can be a problem when their focus on growing their wealth eclipses the other things that are important to them, such as their personal relationships. They tend to be attracted to spenders, which can be a destructive combination.
Moderating Behavior: Learn to balance making and saving money, while also enjoying it. Helping others or finding charitable organizations to support can be another source for validation. It can also add to a sense of purpose.
The Worrier
This personality feels anxiety around money, regardless of how much they have. They tend to be pessimistic and lack self-confidence. They may obsess about the worst case scenario, what will happen when they run out of money. They worry about life in general and this is projected onto money. Allowing worry and anxiety to erode happiness is the danger for this type.
Moderating behavior: Seek positivity around conversations about money. Work with a financial advisor who can give you a framework to understand how prepared you are for your goals and retirement. Seek to understand where your financial worries stem from and seek out a therapist for additional support.
The Indifferent to Money
This personality prefers not to deal with money if at all possible. They are often described as happy and oblivious and tend to value non-material things such as academic or artistic success. Often, they depend on a partner or spouse to deal with their financial decisions. There is sometimes an underlying belief that money is inherently bad.
Moderating behavior: Start cultivating an awareness of where your money is going each month. Learn how you spend and be sure to carve out funds to go to savings each month. Create sustainable habits to support your financial health and reduce stress caused by not knowing or not understanding finances.
The Gambler
Gamblers are addicted to the thrill of risk and the promise of reward. This personality type shares traits with the Money Maker and the Spender. It’s not unusual for them to experience large windfalls and devastating losses. It becomes dangerous when their assets are used to promote their gambling, such as retirement funds or a child’s college savings account.
Moderating behavior: Devise ways to engage in activities that satisfy the desire for risk, that don’t affect your financial health. By understanding their propensities to endanger their finances, they can impose limits on their behaviors. Set limits for spending, the way you would for a normal budget and get help for compulsive behavior that you aren’t able to control.
The Saver-Splurger
This type is typically very regimented and serious with their saving but is also prone to impulsive spending. When savings are used to splurge, it may be on things that aren’t needed or are rarely used. It is very stressful for them to go from compulsive saving to compulsive spending. They may be trying to control their life through their relationship with money. Tighter than normal controls sometimes can’t be sustained which leads to the splurging.
Moderating behavior: Like spenders, the Saver-Splurger often doesn’t think before splurging. Create goals so there is an understanding of the importance of savings and why it is needed. This can be used to weigh purchasing decisions. Impose dollar amount limits and time limits on impulsive spending. I had a client who wouldn’t spend over $500 without sleeping on it first. Taking a little time to consider something before buying it can save a person from regrettable purchases. If you are more of the spender, your fear is on missing out, whereas savers are worriers who tend to fear not having enough. Identify where the fear comes from and discover positive ways of facing it.
By understanding your money personality you can take the first big step towards financial health. Learning about your propensity towards money can help you to take steps to make changes and make more deliberate choices. Understanding the money personalities of your family members can help defuse money conflicts and help you to have more constructive conversations and arrive at better financial decisions together. Not all children have the same money personality, despite being raised in the same household. By looking at your children’s natural tendencies with money, you can teach them positive habits using different tools. Understanding your unique money personality can improve your financial decisions, your relationships, and the financial lessons that you impart to your children.
Have additional questions on learning your money personality and its effect on your financial health? Contact one of our expert advisors today!
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