How do you spend your money? Do you take pleasure footing the lunch bill for all your mates? Do you keep track of your finances or do you prefer to ignore everything and hope that things sort themselves out?
I came across this pretty neat article over at Financial Times talking about financial personalities and how you behave affects your behaviour with money.
According the the article, financial psychology is a discipline that that lives in a realm between psychology and behavioural economics. People who want to sell you things pay close attention to your personality and how that influences how you spend. I reckon it’d be a good thing to get to know ourselves a little bit better too (so that we’re less likely to fall for their marketing tricks).
The Financial Times people have interviewed some psychologists, and they’ve broadly agreed on the following six financial personality types:
- The Anxious Investor
- The Hoarder
- The Social Value Spender
- The Cash Splasher
- The Fitbit Financier, and
- The Ostrich
The article has a short survey at the end that helps you find out your financial personality.
I gave the survey a go and Hoarder as a result!
For hoarders, money is security. Risk is a no no and we prefer to hoard cash, rather than invest or spend. As a result, Hoarders end up not managing their money optimally. Anxious investors tend to take too much risks, while the Hoarder may tend to avoid risk altogether. While having a pile of cash is great, keeping too much money at hand means that in the long run it will lose its value (hallo, inflation, my friend!). For these kind of people, it’s important to find investment approaches that fits their tolerance to risk.
Here’s an excerpt taken from the description of how a Hoarder acts when it comes to money:
“You are uncomfortable with investing because you fear making a loss. You do not enjoy shopping, and may question the spending habits of those close to you. If you have teenage children, you probably have clothes that are older than them.”
Oh, I so relate.
Have a go at the survey yourself and find out your financial personality, click here!