Like almost everything else in life, your response to money is largely dictated by your personality. But have you given much thought to how you behave in regard to your finances and how that behavior affects your bottom line? Understanding your money personality is the first step and will help you shape your approach to spending, saving and investing. So what's your money personality? Read on to find out.

What's Your Type?
Money personalities have been analyzed in a variety of ways and many people can identify with aspects of several profiles. They key is to find the profile that most closely matches your behavior. The major profiles are: big spenders, savers, shoppers, debtors and investors.

  • Big Spenders
    Big spenders love nice cars, new gadgets and brand-name clothing. Big spenders aren't bargain shoppers; they are fashionable and they are looking to make a statement. This often means a desire to have the smallest cell phone, the biggest plasma TV and a beautiful home. When it comes to keeping up the Joneses, big spenders are the Joneses. They are comfortable spending money, don't fear debt and often take big risks when investing.
  • Savers
    Savers are the exact opposite of big spenders. They turn off the lights when leaving the room, close the refrigerator door quickly to keep in the cold, shop only when necessary, and rarely make purchases with credit cards. They generally have no debts and are often viewed as cheapskates. Savers are not concerned about following the latest trends, and they derive more satisfaction from reading the interest on a bank statement than from acquiring something new. Savers are conservative by nature and don't take big risks with their investments.
  • Shoppers
    Shoppers derive great emotional satisfaction from spending money. They often can't resist spending money, even if it's to purchase items they don't need. Shoppers are usually aware of their addiction to spending and are even concerned about the debt that it creates. They look for bargains and are pleased when they get a good deal. Shoppers will often shop to entertain themselves, even if the items they buy go unused.

    Shoppers are an eclectic bunch when it comes to investing. Some invest on a regular basis through 401(k) plans and other automatic investments and may even invest a portion of any sudden windfalls such as bonuses or inheritance money, while others view investing as something they will get to later on.

  • Debtors
    Debtors aren't trying to make a statement with their expenditures, and they don't shop to entertain or cheer themselves up. They simply don't spend much time thinking about their money and therefore don't keep tabs on what they spend and where they spend it. Debtors generally spend more than they earn and are deeply in debt and they don't put much thought into investing. Similarly, they often fail to even take advantage of the company match in their 401(k) plans.
  • Investors
    Investors are consciously aware of money. They understand their financial situations and try to put their money to work. Regardless of their current financial standing, investors tend to seek a day when passive investments will provide sufficient income to cover all of their bills. Their actions are driven by careful decision-making, and their investments reflect the need to take a certain amount of risk in pursuit of their goals.

SEE: The Successful Investment Journey

Advice for Your Personality
Once you recognize yourself in one of these profiles and have put some thought into how you approach money, it's time to see what you can do to make the most of what you have. Sometimes making just small changes can yield big results.

  • Spenders: Shop a Little Less, Save a Little More
    If you love to spend, you are going to keep doing it, but you should seek long-term value, not just short-term satisfaction. Before you splurge on something expensive or trendy, ask yourself how much that purchase is going to mean to you in a year. If the answer is "not much," skip it. In this way, you can try to limit your spending to things you'll actually use.

    When you channel your energy into saving, you have another opportunity to think long term. Look for slow and steady gains as opposed to high-risk, quick-win scenarios. If you really want to challenge yourself, consider the merits of scaling back.

  • Savers: Use Moderation
    Ben Franklin once recommended "moderation in all things." For a saver, this is particularly good advice. Don't let all of the fun parts of life pass you by just to save a few pennies.

    Tune up your savings efforts too. Pinching pennies is not enough. While minimizing risk is any investor's prime goal, minimizing risk while maximizing return is the key to investing success.

  • Shoppers: Don't Spend Money You Don't Have
    A critical step for shoppers is to take control of their credit cards. Unchecked credit card interest can wreak havoc on your finances, so think before you spend - particularly if you need a credit card to make the purchase.

    Try to focus your efforts on saving your money. Learn the philosophy behind successful savings plans and try to incorporate some of those philosophies into your own. If spending is something you do to compensate for other areas of your life that you feel are lacking, think about what these might be and work on changing them.

  • Debtors: Start Investing
    If you are a debtor, you need to get your finances in order and set up a plan to start investing. You may not be able to do it alone, so getting some help is probably a good idea. Deciding on who will guide your investments is an important choice, so choose any investment professional carefully.
  • Investors: Keep Up the Good Work
    Congratulations! Financially speaking, you are doing great! Keep doing what you are doing, and continue to educate yourself.

SEE: A Pre-Retirement Checkup

The Bottom Line
While you may not be able to change your personality, you can acknowledge it and address the challenges that it presents. Managing your money involves self-awareness; knowing where you stand will allow you to modify your behavior to achieve your desired outcome.

Related Articles
  1. Investing Basics

    Explaining Risk-Adjusted Return

    Risk-adjusted return is a measurement of risk for an investment or portfolio.
  2. Investing Basics

    Calculating the Margin of Safety

    Buying below the margin of safety minimizes the risk to the investor.
  3. Savings

    How Volatile Exchange Rates Affect Your Vacation

    Those ever-changing fluctuations can make a difference in anything from your hotel room to an ATM transaction.
  4. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  5. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  7. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI KLD 400 Social

    Find out about the iShares MSCI KLD 400 Social exchange-traded fund, and learn detailed information about its characteristics, suitability and recommendations.
  8. Mutual Funds & ETFs

    ETF Analysis: iShares Agency Bond

    Find out about the iShares Agency Bond exchange-traded fund, and explore detailed analysis of the ETF that tracks U.S. government agency securities.
  9. Mutual Funds & ETFs

    ETF Analysis: Guggenheim BulletShrs 2018 HY CorpBd

    Find out about the Guggenheim BulletShares 2018 High Yield Corporate Bond ETF, and get information about this ETF that focuses on high-yield corporate bonds.
  10. Mutual Funds & ETFs

    ETF Analysis: PowerShares DWA SmallCap Momentum

    Find out about the PowerShares DWA SmallCap Momentum Portfolio ETF, and explore detailed analysis the fund's characteristics, suitability and recommendations.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth ...
  3. Return On Investment - ROI

    A performance measure used to evaluate the efficiency of an investment ...
  4. Transferable Points Programs

    With transferable points programs, customers earn points by using ...
  5. Net Line

    The amount of risk that an insurance company retains after subtracting ...
  6. Political Risk Insurance

    Coverage that provides financial protection to investors, financial ...
RELATED FAQS
  1. Is my IRA/Roth IRA FDIC-Insured?

    The Federal Deposit Insurance Corporation, or FDIC, is a government-run agency that provides protection against losses if ... Read Full Answer >>
  2. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  3. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  4. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  5. What percentage of a diversified portfolio should large cap stocks comprise?

    The percentage of a diversified investment portfolio that should consist of large-cap stocks depends on an individual investor's ... Read Full Answer >>
  6. What are common delta hedging strategies?

    The term delta refers to the change in price of an underlying stock or exchange-traded fund (ETF) as compared to the corresponding ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!