Did you know that your personality affects your personal financial life and behaviors?
Perhaps you are the kind who often insists on paying the bills at the social gathering. I mean the one who is extremely generous. It may not mean that you have a huge wealth but have pleasure in settling bills or status anxiety.
But you could also be the budgeting champion among your buddies. You are the hero at grabbing various bargains in malls and online. However, it could also be that your obsession with discounts leads you to spend money on products that you do not need. This could imply that you lack self-esteem or loneliness.
There is also one who is always obsessed with checking their investment portfolio or bank balances. I guess I belong here! I may not always check my bank balances, but I keep constantly looking at my investment portfolio. But I also fit in the first description.
For a long time, financial psychology has been an overlooked discipline. This is an area that links behavioral economics and psychology.Typically, marketers and advertisers have taken advantage of this discipline and tempt consumers to spend money even when we are unaware of it. It is therefore important to examine the importance of this field and how it likely to affect an individual’s savings attitudes and attitudes. It is also likely to affect the behavioral intentions of an individual’s spending.
Whether you are a student, parent, or jobless, it is likely that you are faced with various financial problems. We all have limited income sources. This places us in a limited financial condition, and hence you must set some of your income for saving before you spend.
However, only some people save and invest while others spend and spend. Typically, savings results from the act, behavior or activity of setting aside part of your income. As such, you do not consume some of your income for a specific period.
Among individuals as well as the community, savings tend to have positive consequences. For individuals, savings are important when they are no longer productive. It can also be used as a buffer in the future when you are no longer earning.
In the future, savings can also be utilized as a useful investment. This therefore highlights the importance of saving for millennials as it will significantly affect their personal life when they eventually enter their twilight years.
Given the importance of spending and saving, it is important to understand if our intentions, and attitudes based on our personality types affect our personal financial life and behaviors.
Intentions and behaviors tend to be closely related. According to psychology, a behavior can be described as the generic term which includes an activity, action, movement, reaction, and response of living organisms. On the other hand, intention refers to a planned decision which has beliefs or goals which are oriented towards a specific goal.
Traditionally, it has been noted that behaviors have coherent limits. Additionally, behaviors are more meaningful when they are associated with measurable things.
Behavior is interesting to study as they relate directly to actions which are observable. In this case, they relate to the concrete actions of savers and spenders. It determines if you will become poor or wealthy in the future.
According to psychologists, personality traits determine if we have better control of our bucks or not. It subtly directly tendencies to trade, invest, save or spend. It also determines if we become more rational investors, less impulsive shoppers or more successful savers.
Personality traits also have an impact if money controls us or we control the money. Additionally, finding the interception between financial psychology and personal finance helps us in recognizing unhealthy patterns including debt problem, additive consumption as well as other underlying issues which may help us to become poor.
It is critical to ask which financial personality type you are. Could the personality type lead you to become wealthier or not?
After spending several days interviewing psychologists and reading several psychology journals and articles, I identified several financial personality types that I will be sharing with you in a while. These include The Planners, The Miser, The Ostrich, and The Spenders. This article will be in two parts. Please make sure you read both parts
Meanwhile, I’ve been asking why I did not study Psychology; maybe I need a certificate or Degree in it.
If you have an opening or know someone with an opening, perhaps I may consider it. I don’t know if I’m kidding (sic)
They a hoarder type. These are individuals who believe that money represents security. To this end, they would rather stockpile their cash instead of investing or spending. They no appetite for risk.
An extreme case is where the individual is even saving their pension. These people simply stash their bucks in savings accounts even when the government gives incentives for people invest in various investment instruments; they still don’t take this advantage.
They cash their investment and put their money in bank accounts fearing that it will lose the value if they do not take it out.
Sometimes parents contribute this to this personality behavior especially when they are strict on their children. This is especially among low-income families were children that money and lots of it are necessary for security.
Despite that cash is important during a rainy day, it does not necessarily mean that it is a suitable long-term investment. This is especially in a world where inflation is constantly rising.
Quick Tip: If you have this personality type, find a financial adviser and discuss the best investment approach that will work for you. In this case, the investment approach should be taken care of the level of risk that you are comfortable with.
This is the worst financial personality type. It refers to people that “bury their heads in the sand rather than organizing their finances.” Their personal finances matter is in a total mess.
They rarely look at their bank statement or investment portfolio. They have several business and investment proposals collecting dust on their desks. They may have some cash to spare but never make long-term investment decisions.Typically, this behavior is driven by anxiety. Typically, when you make no decision, it is always easier as compared to when you have the possibility of making a wrong decision.
Consider the decision of most governments across the world; they have decided to enroll all working citizens in pension’s schemes automatically. This is unless they decide to opt us. If this was not the case, it is pretty likely that most people would never join one
An extreme version of this personality type is a wealthy investor who gives their money to the financial advisor but fails to constantly how they are investing it. The financial manager could easily be eating their returns or gambling with.
Quick Tip: Ostrich needs to take their heads from the sand. They must set aside a couple of hours every week to examine their personal finance. They must check their incomes and expenses. This is important as this will help them to know how they can save their money.
In the next article we examine both the The Planners and The Spenders