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Six financial personality types - which one are you?
Financial psychology
... is a somewhat overlooked discipline that occupies the space between psychology and behavioral economics. Advertisers and marketers trying to tempt us to spend money are well aware of it.
If we understand how the financial environment affects us, we can better control our cash instead of being controlled by it, turning us into more rational investors, more successful savers or less impulsive shoppers.
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Financial psychology
... is a somewhat overlooked discipline that occupies the space between psychology and behavioral economics. Advertisers and marketers trying to tempt us to spend money are well aware of it.
If we understand how the financial environment affects us, we can better control our cash instead of being controlled by it, turning us into more rational investors, more successful savers or less impulsive shoppers.
The Anxious Investor
Lovers of risk, anxious investors trade frequently and believe they have the edge over others. Many have absolutely no idea what their returns actually were and only remember their good decisions.
The Hoarder
For hoarders, money represents security. They abhor risk and may even stockpile cash that they would probably be better off investing — or even spending.
Find an advisor you feel comfortable with who can discuss the right investment approach — and level of risk — for you.
The Social Value Spender
Does shopping make you happy? Do you frequently buy your loved ones presents “just because” and blow the budget at Christmas and birthdays? You could be a social value spender.
If you are concerned about your spending and borrowing habits you need to study your bills — perhaps with the support of a close friend.
The Cash Splasher
Cash splashers view themselves as generous, but they also use the money to make others think more highly of them.
They are likely to wave their checkbooks about at charity auctions and spend money on things they could easily do without, from expensive cars to club memberships.
The Fitbit Financier
They check their online bank balance and track their spending as often as someone training for an extreme sporting event measures their calorie intake, resting heart rate and sleep quality.
Take a step back and look at the bigger picture. A session with a financial planner could help you identify your goals and plan for a less stressful future.
The Ostrich
Someone who would rather bury their heads in the sand than organize their finances. “Making no decision always feels easier than the possibility of making the wrong decision.”
Ostriches should take their heads out of the sand — slowly. Set aside an hour a fortnight at first to examine your finances, taking a close look at your income and outgoings, and where being more organized and aware could save you money.
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The Investor
People who invest are those who love the risk, trade frequently and have enough confidence to think they will beat the market.
A 2011 study found out that most investors u...
The Big Spender
The Big Spenders like to make social statements by having the latest car, clothes, or phones. They use the money for love and attention and are the main representatives of consumerism.
Advice: Think twice before making a purchase and try to filter the things that you really need from those bought by reflex.
The Ostrich
The Ostrich is someone who would rather bury their heads in the sand than organize their finances.
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 a better saving rate and consider approaching a financial planner.
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The Slow And The Fast Way To Build Wealth
- The long-term approach to wealth building: If you’re younger and your income limits allow, open up a Roth IRA. Invest in mutual funds and ETFs while making sure you have enoug...
9 Ways To Building Wealth Fast
- Save on vehicles. Before buying a car, investigate vehicle reliability, pricing and financing.
- Rent. Most rentals offer more flexibility in case you need to move. Also, not having the mortgage payment allows you to start saving earlier.
- Don’t be a consumerist, buy only the things you really need.
- Save a percentage of your income so you have more money to invest.
- Work hard on your current work regardless of your feelings for it. It’s easier than finding a new great opportunity and may lead you into a promotion.
- Educate yourself even if it doesn’t bring any immediate benefit, being educated opens new opportunities on the long run.
- Invest in yourself and your marketing to open up new opportunities.
- Being an entrepreneur is the best way to maximize your earnings, short of being an investor. Try it, even if it fails the learning from it will be invaluable in your next attempt.
- Real estate won’t make you rich overnight, but it’s a solid strategy to increasing your network.
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Key Ideas
To accumulate wealth...
- You need to make it. You need a long-term source of income that's enough to cover your basics.
- You need to save it. You need t...
Making Enough Earned Money
Earned income comes from what you "do for a living."
- Consider what you enjoy as you will be more likely to succeed financially.
- Consider what you're good at and see how you can use those talents to earn a living.
- Consider what will meet your financial expectations.
- Consider how to get there. Determine the education requirements, etc.
Evaluate your income situation annually.
Saving Enough of It
To ensure that you save enough money, your wants should not exceed your budget.
- Track your spending for at least a month.
- Trim the fat. Break down your wants and needs.
- Adjust according to your changing needs.
- Build your cushion. Aim to save around three to six months' worth of living expenses.
- Contribute to a retirement fund and try to get the maximum your employer is matching.
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