Your reaction to money, like practically everything else in life, is heavily influenced by your personality. But have you given any attention to how you behave in reference to your finances and how that conduct affects your bottom line?
Understanding your financial personality is the first step in shaping your approach to spending, saving, and investing.Money-related personality traits can be categorized into distinct groupings. This topic has been studied in numerous ways, and many people can relate with aspects of multiple of these money personality traits.
The goal is to identify the category that best matches your behavior. The primary profiles are heavy spenders, savers, shoppers, debtors, and investors.
“We have these notions clunking around in our heads, and many of us have inherited them from our parents,” says Brad Klontz, an associate professor of finance at Creighton University. Your childhood experiences, the culture you grew up in, and the habits of those around you all shape your internal views. Experts have identified four basic personality types; you may be a combination of these or shift from one to the other as your financial circumstances change. Identify your personality type and learn how to control your money beliefs and ultimately your paystub!
You enjoy the act of spending money and frequently do it impulsively. You’re the type of person who frequently buys impulse purchases at the checkout, lavishes gifts on your loved ones, or gambles with your assets. You’re also probably in credit card debt and don’t have anything saved for emergencies or retirement. Big spenders enjoy good cars, new technology, and designer clothing. People with a “spending” personality type aren’t usually bargain hunters; they’re stylish and always wanting to make a statement. This frequently translates into a need for the latest and greatest mobile phone, the largest 4K television, and a gorgeous residence.
Also called “hoarder,” you are the complete other side of the spender. You are frugal with your money and enjoy discovering good deals. You most likely have an emergency fund, retirement savings, and a financial buffer in case something goes wrong. You could feel awkward discussing money with others. They usually have no debts and may be considered cheapskates. Savers aren’t interested in keeping up with the current trends, and they get more satisfaction from reading the interest on their bank statement than from buying something new. Savers are naturally conservative and do not take large risks with their investments. Your hesitation regarding money may prevent you from requesting a raise or recognizing how you match up versus colleagues.
Debtors aren’t aiming to make a statement with their expenditures, and they don’t shop to entertain or cheer themselves up. They simply don’t spend much time thinking about money and, as a result, don’t keep track of what they spend and where they spend it. Debtors generally spend more than they make and are severely in debt while not putting much effort into investing. Debtors and enthusiastic buyers buy stuff without contemplating the results of spending more money than they make. They often don’t stop to think about whether they can afford to buy anything since the excitement of the purchase is greater than the notion of the ramifications.
Investors are consciously aware of money. They are aware of their financial status and attempt to put their money to work. Regardless of their current financial situation, investors hope for the day when passive assets will provide enough income to meet all of their expenses. Their activities are motivated by deliberate decision-making, and their investments reflect the necessity to assume a certain degree of risk in pursuit of their goals. This personality type finds immense joy in accumulating fortune and believes that money is the key to happiness. Investors understand how money works and are deliberate and cautious in their investing methods.
How to Improve your Financial Health
Financial health is a term used to refer to the state of someone’s personal monetary issues. Financial health has multiple dimensions, including the amount of savings you have, how much you save for retirement, and how much of your income you spend on fixed or non-discretionary expenses. Once you establish which of these personality types describes you the most and have put some thought into how you approach money, it’s time to explore what you could do to achieve the best of what you are capable of. Small modifications can frequently produce enormous benefits. In any case, you should always hold memory and concentration regarding your expenditures.
Although financial professionals have developed basic standards for each sign of financial wellness, each person’s situation is unique. As a result, it is good to devote time to creating your own financial plan to ensure that you are on track to meet your objectives and that you are not putting yourself in undue financial jeopardy if the unexpected occurs. To enhance your financial health you must first take a hard, realistic look at where you’re now at. Estimate your current and total net worth and realize you stand. This includes everything you possess, including retirement accounts, vehicles, and other assets, as well as any and all debts.
When it comes to effective personal finance, it’s not always easy to keep your financial health in tip-top shape. We become preoccupied with living our lives. However, here are a few basic principles and tips to help you enhance or maintain your financial health. Personal finance rules can be fantastic instruments for achieving financial success. However, it is critical to evaluate the big picture and develop habits that will help you make better financial decisions, ultimately leading to greater financial health. While you may not be able to change your money personality, you can accept it and handle the financial issues that it poses.
Maintaining good financial health and well-being should be everyone’s primary goal. After all, it is the key to expanding your net worth and reaching your long-term financial objectives. Make it a point to keep your living expenses under control and to exercise financial wellness by saving and investing. Create a financial strategy and tweak it over time. Over the years, your general financial health and financial behaviors should improve. Realize that your financial health remains entirely your business. Nobody one can teach you about finance or manage your duties for you.