Whether you are highly aware of its influence in your daily activities, or you have a nonchalant attitude towards it, money plays a huge role in our lives. As your personality traits substantially affect how you perceive and allocate your budget, scientists described 5 financial personality types. Do you want to see in what group would you fit, and how could you improve your financial situation? The response is yet to come in the article below.
1. The Investor
As the type name already suggests it, people who invest are those who love the risk, trade frequently and have enough confidence to think they will beat the market. Investors have the most conscious attitude towards money and try to put their money to work. Most of the times, their decisions are carefully-made: as Greg Davies, specialist in studying trading patterns says “They often buy high and sell low, as they are more comfortable with risk when things are good, and remove risk when times feel bad.”
However, a 2011 study by academics at the University of California, found out that most investors underperform, namely 82%, because they were trading instinctively rather than strategically.
Advice: You’re doing a good job, but there is always room for improvement. Continue to educate yourself, limit your trades to the amount you could afford to lose and try to act for your long-term financial benefits.
2. The Big Spender
The Big Spenders like to make social statements by having the latest car, clothes, or phones. They use money for love and attention and are the main representatives of consumerism.
Advice: The advice to keep in mind is straightforward: shop a little less and save a little more. Even though it is hard to change the habit of buying stuff, you should always think twice before making a purchase and try to filter the things that you really need from those bought by reflex.
3. The Ostrich
The Ostrich is someone who would rather bury their head in the sand than organize their finances. They fail to make long-term investment decision, and leave everything to the luck of faith, as Ms Hammond said: “Making no decision always feels easier than the possibility of making the wrong decision”.
Advice: Ostriches should try to take slowly their heads out of the sand. They should try to examine their finances, take a close look at better saving rate and consider approaching a financial planner.
4. The Saver
For many- money represents security. They hate taking risks and hesitate investing, or even spending. Adrian Furnham, professor of psychology at University College London states an extreme case: “I met a man the other day who was 94 and saving half of his pension”.
This behavior is usually observed in people who were raised in a family where money was tight. That is the main explanation for the need of a lot of financial security.
Advice: As you might already know, cash is not a suitable long-term investment. A financial advisor could help you find the right investment approach and the level of risk you are comfortable with.
5. The Debtor
Last, but not least, almost everybody has a friend that is broke before the end of the month. These type of people are called debtors and they are not trying to make a statement with their purchases, nor they shop to cheer them up. They simply spend too much and don’t put much effort in keeping their financial assets in order.
Advice: Try to keep track of your expenses on a daily basis; check your bank account more often and don’t allow yourself to borrow too much from your friends.
The Bottom Line
Even though it is not easy to change your money personality, the first step is to be aware of your spending patterns and try to improve them. Being financially stable and benefiting at the maximum of the money you hold gives you personal security and fulfillment; acknowledging your behavior will help you to better achieve your financial life goals.