Did you know we all have a “financial personality type” that can have a huge impact on our financial health? Personality types can reveal a lot about our habits and lifestyles, and the same goes for our financial health.
There are 4 major financial personality types that people generally fall into. The trick is to identify traits that you can resonate with and find ways to improve or manage them. Understanding your personality type and spending habits can help you take charge of your finances. Here’s how.
The Big Spender
The big spender is someone who, well, spends big. He or she usually likes to make a statement with their purchases and isn’t afraid to splurge. While they may not necessarily be materialistic, they tend to place a high value on their possessions and can often be spotted owning the latest gadgets, clothes, vehicles, and whatnot.
The big spender may be comfortable spending money and typically have a huge appetite for riskier investments. They may also have the habit of impulse shopping, constantly being tempted to buy things on a whim. However, this lifestyle may not be sustainable in the long run as it can easily add to existing debt.
If you can identify with this financial personality trait, it may not be all bad if you are able to channel your risk appetite wisely into your investments, which could help you see more returns in savings over time.
Another tip to curbing your impulse purchases or keeping up with the Joneses is asking yourself if you really need the items before purchasing them. A lot of the time we spend on things we don’t really need, to impress people we don’t even know. It would be wise to sit on the intended purchase for a while. If the impulse goes away, then it is really not a necessity, but yet another want.
Remember, having the power to spend does not mean you have to spend big. Instead, channel your resources and spending power to make wiser financial choices.
The Thrifty Saver
The thrifty saver is one of the most conservative financial personality traits out there and they are the complete opposite of the big spender. He or she is more careful with their money and tends to take lesser to no risks on investments. They are not concerned with keeping up with the latest trends and generally have no debts, preferring to save up for a rainy day.
While being thrifty is definitely a positive trait, sometimes being too safe with your money can backfire as you could lose out on making higher returns on riskier investments over time.
A tip for thrifty savers is to have a savings goal in mind and plan out your financial goals accordingly, such as family planning or retirement. The general guide to savings is having 6 to 12 months of emergency funds while the excess cash should be put to work in investments or other platforms with higher interest rates. This way, not only are you saving hard, but you are also saving smart!
The shopaholic tends to develop emotional ties to spending and receiving money. They are similar to big spenders as they can both find it difficult to resist spending money, but shopaholics might not necessarily have enough spending power to fund their lifestyles.
People who identify with this trait often struggle with separating their emotions from their spendings and tend to spend without a budget especially when they are feeling down. When there isn’t a set budget in place, there is a higher chance of overspending or spending unnecessarily.
A tip for shopaholics out there is to be aware of your wants and needs. Set aside a budget for your different needs such as food, transport, savings, and shopping each month. This will help you keep an eye on your spending. Take a step back and evaluate your emotional needs and cultivate the habit to separate your moods from your purchases.
The debtor typically spends more than they earn, which is why they are constantly in debt with little to no savings. He or she could be consistently overspending and fail to keep track of their finances, thus building a lifestyle of poor financial management. They would take out loans from many different financial institutions to tide through financial difficulties, but might not even be aware of how much debt they are in. Most debtors are trapped in this cycle because they are unable to pay off their loans on time and in full.
A tip for debtors is to avoid spending on credit cards and keep an eye on your finances. Speak to a financial advisor or a financial institution to devise a budget and plan to clear your debts. A debt consolidation plan might be a viable solution to keep track and pay off all your debts through a single loan every month.