- Amanda Vaught email@example.com
Financial advice is not one size fits all. To get a better idea of what advice is best for you, it’s helpful to figure out your individual money personality.
Financial success is linked more to behavior than income. We have clients earning $40,000 per year and amassing significant savings accounts. In contrast, for people born wealthy, 7 in 10 families will lose their fortune by the second generation, and 90% lose it by the third. (Source: Marketwatch)
Any fool can make a fortune; it takes a man of brains to hold onto it. - Commodore Vanderbilt
Do you need to change your behaviors to enhance your financial well-being? Your money personality may provide insight into your relationship with money.
Researchers determined that there are four common money personalities: Money Avoidance, Money Worship, Money Vigilance and Money Status. Each personality has its own characteristics and its own pros and cons. (There are more money personalities related to disordered behavior around money, such as gambling or shopping addictions. These are beyond the scope of this article. Please note we are not trained psychologists or psychiatrists, and this article is for informational purposes only.)
1. Money Avoidance
Money avoidance personalities have a negative association with money. They may think: rich people are greedy, money corrupts, and virtue lies in living with less money.
|- Generous||- Undervalue yourself|
- Possible self-destructive financial behaviors
- Ignoring bills
On the positive side, someone who thinks that money corrupts will often be generous. They may often buy dinner or drinks for friends, or give a lot to charity.
On the negative side, a money avoidance personality may not seem ambitious, or they may not advocate for a raise at work when they’ve earned it. They may ignore bills completely or make late payments.
Financial Advice for Money Avoiders
Take some time to evaluate what it is you do value in life. Some questions to ask yourself are: How does having money conflict with those values? How could money help you achieve goals aligned with your values?
Create accountability around these goals with a loved one or financial advisor. For example, if you have trouble opening your bills, ask a friend or family member if they can help keep you on task. You can also set up an automatic payment system so that you don’t have to think about it. You can work with a financial advisor to help you set savings goals. This helps you provide money to your future self.
2. Money Worship
Money worship personalities believe money will magically improve their life. Money solves problems, and you can never have enough money.
|- Ambitious||- Overspend|
- Become attached to 'stuff'
Financial Advice for Money Worshippers
Work on improving yourself and your relationships. Notice: where in your life do you find happiness that is not related to material possessions? Work to expand on those relationships or experiences. Strive to be happy now so that when future-you earns more money, you can use it to accentuate that happiness.
3. Money Status
Money status personalities link their self-worth with their net worth. They believe that wealthy people live a life of luxury. They may also place value in outward displays of wealth.
|- Appreciate quality|
- Enjoy fruits of their labor
|- Misconception of how wealthy people spend money|
- Exaggerate how much money they make to others
Financial Advice for those with Money Status Personality
Generally speaking, you need help saving. Climbing the economic ladder requires you to save money, not spend it. Use savings techniques like writing down and visualizing goals, automating a savings process, and save money before you spend your income.
4. Money Vigilance
Money vigilance personalities place utmost importance in saving for a rainy day. They think saving is very important. They believe that you must work for your money and not be given handouts.
|- Great saver|
- Tends to be wealthier
|- Excessive anxiety if not saved enough|
- Secretiveness, or lying to others
Financial Advice for those with Money Vigilance
If you are over-vigilant, you can miss out on enjoying the benefits and sense of security that money can provide. Many vigilant-types delay retirement unnecessarily. Working with a financial planner can help relieve anxieties around “having enough” and allow you to enjoy other aspects of your life.
Curious where you land? Nerdwallet offers a quiz to help you determine your money personality type.
We recently discussed money personalities and money behaviors at our June 2020 webinar, How to Cope Financially During Covid: Tools for the New Economy.
Many people believe that money is just numbers and, therefore, thinking about it should be a rational endeavor. In fact, most personal finance behaviors are driven by emotions. Better understanding your own emotions around money will help you recognize where you may need to make changes in your behaviors to improve your financial outcome. With that said, do not feel bad if you make an irrational choice about money – that is completely normal.