What is your Financial Personality?
Understanding your financial personality.
An emotionally driven decision is relatively harmless when, for example, you step up to the ice cream counter and choose a flavour from a vast, tempting selection. But when it comes to managing your money, emotions have a way of affecting your decisions that could, unfortunately, cost you more than the price of an ice cream cone.
Snap judgments, cognitive biases and outside influences that you are largely unaware of just might be standing in the way of fulfilling your own self-interest. Being honest with yourself about how you manage money can help you make simple changes in one area or another that could make a difference to achieving your financial goals.
Which kind of money manager are you?
Using this list of profiles to identify which type of money manager you are could be a positive step towards improving your financial situation and possibly, your quality of life.
If you’re a super-saver, it’s simple; saving money is one of your top priorities – maybe even a personal passion. You like to research items before you buy them, thumb through the coupon and sales flyers, and always look for bargains, sometimes even for things you don’t need. Your personal definition of security is money in the bank. But this approach can have its downfalls. Constant saving could be interfering with your ability to enjoy life a little more. Overlooking opportunities and experiences that could reward you for the hard work it took to earn the money in the first place could end up fuelling your compulsion to save. Consider spending to help you achieve a few specific goals or enjoy some new experiences and after they’ve been accomplished, go back to super-saving while you decide what should be next.
Hey, big spender! Does buying things provide you with instant gratification? Splurging on items for yourself or others can be a pleasant gesture but can lead to dangerous territory if you wind up spending more than you earn. Increasing debt can weigh heavily on your ability to stay ahead of the payments and cut into your overall shopping budget. In extreme cases, possible bankruptcy could bring your spending habit to a disastrous end. Try to get a handle on your spending by sticking to a firm budget. Not only will a budget help you live within your means, but it might also help you to save up the money for any future plans faster.
The money maker. If saving and spending money always take a back seat to the act of earning it, this could be you. Some people are driven to make as much money as possible – and while there’s nothing wrong with working hard with the aim of becoming wealthier, there can be disadvantages to focusing exclusively on earning. Think about it: Is it the amount of money that’s important, or is it the status, recognition and power that’s often associated with wealth? The unseen costs of this type of obsession can materialize in a variety of ways, including neglecting important priorities, such as personal health and relationships, which can reduce happiness and satisfaction with life over time. Realizing that money is also to be enjoyed or shared with purpose could add some excitement and fulfilment to an otherwise tiresome routine. Consider channelling your drive for success in a new direction, such as supporting a favourite charity or giving back by being a business consultant or mentor to young entrepreneurs.
The cool customer won’t readily admit that money has much influence over their life. They think budgets are for the money obsessed. Making it a priority to not worry or think too much about money and striking a reasonable balance of responsible financial habits is their preferred approach.
Keeping tabs on how much money is being spent while avoiding too much debt can contribute to maintaining a comfortable balance of financial freedom and stress without going over the line. But it’s important to avoid becoming too casual with funds and overlooking investment, saving and smart purchasing opportunities that could boost your financial security over the long term.
The saver-splurger regularly covers the distance between being a thrifty saver and tossing large sums of money at impractical or unnecessary things. But the satisfaction that comes with disciplined saving habits can quickly dissolve if a sudden spending spree results in having to start the process all over again. Spending hard-earned dollars should feel more like a privilege than an impulse. If you feel you want to spend a lot of money on something, stop and consider how that purchase will make you feel a week, month or year from now. Was it a wise choice? Or could that money have been better spent elsewhere or saved to help achieve other financial priorities? Taking a less extreme approach to both saving and spending could be the compromise you need to stabilize your finances.
The risky high roller uses money as a gateway to excitement (even to the point of gambling) and lets the prospect of a great reward outweigh the possibility of losing it all. The problem is that taking greater risks to make up for previous losses can create a potential path to ruin. Instead, taking calculated financial risks that contain some element of security can help protect you from going a step too far and doing more harm than good. If you feel the need to heighten risk, make sure your existing obligations, such as paying bills, reducing debt and setting some funds aside to meet specific goals, are looked after before making a big move that could have a devastating effect.
If you fret and worry about money and think you’ll never have enough, it could spell trouble down the road. There’s a chance that you may not even know what amount of money is enough, so you just keep saving – and worrying. In fact, no matter how much money you have at any given time, the fear of losing it or your ability to continue earning it may be enough to keep you anchored to a worst-case scenario: losing your financial independence. Maybe it’s time to take a step back and build a more positive relationship with money, which can lend itself to a more satisfying frame of mind and an improved overall outlook on life. And what could be better than that?
Need a different perspective?
Regardless which one of these profiles best describes your relationship with money, seeing money from a different perspective can be useful if you’re concerned about adopting better financial habits. Getting your advisor involved can help guide you past whatever might be clouding your judgment and influencing your decisions. Reach out to your advisor to take advantage of their experience and insights and apply them to establishing a more secure financial future.