Financial psychology is one of the most overlooked aspects of our daily lives. It is a discipline that falls somewhere between psychology and behavioral economics. While money can be a source of joy for some, others could grow increasingly anxious when they think of it.
Like everything else in our lives, our behavior toward anything to do with money is also directed by our personalities. Can you think of a time when you won prize money or perhaps got some extra cash that you were not expecting? Now recall how it made you feel and what did you do with it. Chances are that your behavior tells you a lot about how you generally treat money or feel about it.
Read on to learn about the common money personality types and why is it important to know your money personality!
Why Is It Important to Know Your Money Personality?
Almost all of us have these deeply rooted beliefs that are usually passed down by our parents or family. They can result from childhood experiences or simply be the influence of the community we grew up in.
Like many other such beliefs, our perceptions about money are no different. We cling on to all of these beliefs without ever really considering them. So, we never think about where these beliefs stem from or why we keep holding on to them.
But only when we start to take the reins of our financial matters into our own hands do we realize why it is important to know our money personality. Recognizing and understanding our financial psychology helps us understand our major strengths and weaknesses. It also helps us see how our approach and feelings toward money assist or inhibit our financial success. Upon the basis of this understanding, we are able to structure or modify our money habits. Hence, in this way and many more, our money personality type is critical to our financial health.
The 5 Money Personality Types
Psychologists and experts have categorized money habits broadly into 5 money personality types. It is possible to be a mix of these types or to evolve from one to another as your financial situation changes. The key is to identify your type and then learn to manage your money habits accordingly.
The 5 money personality types are as under:
Spenders also go by the name ‘risk-takers’ because they are fond of the idea of spending, even if they have to do it impulsively. Spenders love to buy new cars, gadgets, etc. and are usually very brand conscious. People with this money personality type are not typically bargain shoppers. They are fashionable and love to make a statement with their style and spending.
A hoarder is someone who lives by the mantra to save, save, and save. People with this personality type like to budget and review their finances to track their financial progress. Hoarders do not even fancy the idea of spending on gifts or entertainment as they feel it is completely unnecessary.
Think of hoarders as people who stash their money under the mattress. They are always worried about running out of money or losing it, so they keep it as close to them as possible. People with this money personality are usually workaholics and hardly have a work-life balance. They are always after acquiring more assets and, in their obsession to acquire more, they forget to even stop and enjoy life for a while.
Much like hoarders, people who are vigilant with money are cautious about their finances. People with this money personality derive a sense of security from wealth, especially if they haven’t had a lot of money earlier in their lives.
The money vigilance personality makes them secretive about their money and distrustful of the common methods of financial management. Such people are even hesitant in sharing their financial information with friends or even their partners. They steer clear of debts and do not as much as entertain the idea of overspending.
Think of the last time you touched the stack of bills lying on your kitchen counter. If you cannot even remember the last time, you are probably an avoider in terms of money personality types. There is a high chance that you do not have an emergency fund, and you have hardly ever thought of your financial health.
A money avoider is a person who finds it daunting to meet important financial deadlines like paying bills or getting done with their tax returns. Avoiders neither make budgets nor keep track of their finances or investments. Such money habits stem from the belief that money matters are too overwhelming or that you are not competent enough to take control of your money matters.
The last one is the money monk who perceives money as a bad thing and believes having too much of it will corrupt them. Money monks usually appear to be very modest and humble who avoid amassing wealth as that corrupts one soul. If they ever decide to invest, it is in socially responsible investments that do not compromise on their values.
People with this personality type believe that there is a limited amount of wealth out there. As a result of this belief, they prefer to give good portions of their share to help others. You will always see money monks spending money on their friends and family. They take every chance to participate in charities and feel guilty if they have a lot of money.
Financial psychology helps us to identify what makes us tick. While one might not be able to completely change their money personality, with the right knowledge about it, we can make the necessary changes to our money habits. Here is another article on hoarding money that you might like reading.
You can also take these insights and your financial management a step further by investing in a smart tool, like the Doctor Money app. This intuitive tool will help you better understand your behavioural patterns regarding money and will help you plan accordingly. With better control over your spending and expenses, you can create a financial plan that gives you a roadmap to your financial dreams!