I would hazard a guess that most of us never thought about how our personalities could affect how we spend, save, and invest. But improving our personal finance game requires self-reflection. What fears cause us to spend too much money? How are we motivated to save money? To understand what compels us to spend or save, we need to look inwards. So, let’s look at 5 financial personality types and how they affect our money habits.
1) The Spender
We all have that one friend. You know the one. He’s got the nice car, goes on luxurious holidays, and always first in line to buy the new iPhone. That person is a Spender.
In general, Spenders grow up in a financially stable environment. Some Spenders could afford material luxuries even from a young age. And because a Spender’s household rarely, if ever, discuss money in a negative way, Spenders tend to have low anxiety over their financial future.
Spending & Saving Style
Spenders don’t just approach money with a nonchalant attitude, they also tend to derive self-esteem and pleasure from splurging their money on lavish things. You can spot a Spender picking up the bill at dinner, wearing the latest fashion, or partying at the hippest bars on the weekends.
Spenders may not prioritise saving. Their income goes to their daily expenses and lifestyle expenses first, and saving money is only an afterthought.
On the flipside, Spenders understand the time-money trade-off. For example, a Spender would pay for valet parking instead of circling a crowded parking lot because the valet saves time. They see value in spending a little bit more money for convenience and quality.
As investors, Spenders tend to have a high-risk appetite. They’re also confident in their investment abilities. Coupled with some investment knowledge and keen business sense, Spenders can profit big time when they take risks.
But confidence is a double-edged sword. Spenders could take unnecessary gambles because they’re overconfident about a trade. They could incur large losses if those gambles don’t pay off.
If you have the traits of a Spender, be aware of how much money you’re spending on lifestyle expenses as a percentage of your income. Are you spending your entire salary on expensive sneakers every month? Spending all your money now on lifestyle expenses would mean you won’t have enough savings to keep that lifestyle in the future when you’re retired or out of a job.
It’s also equally important that you ask yourself why you’re spending money on those things. Are you spending money to make yourself feel good? Or is it to show off and feel accepted by society?
When it comes to investing, reassess the risks that you’ve taken. Ask yourself whether those risks will pay off exponentially more than the losses that you could potentially sustain.
2) The Hoarder
A Hoarder LOVES to accumulate cash. They stash money into fixed deposit accounts for fear that the next big financial crash or a catastrophic emergency would wipe out their savings.
A Hoarder could come from a background where money wasn’t a pleasant topic to talk about. In some cases, Hoarders may have witnessed how money issues caused major problems in their families. If Hoarders grew up acutely aware of their family’s financial struggles, they tend to have a lot of anxiety over their financial future. So, spending money becomes an act that worries them.
Spending & Saving Style
Generally, Hoarders are frugal. They put a lot of thought into saving money. On the other hand, you could argue that they don’t put as much thought into spending money. You might think that’s a good thing, but Hoarders may not know how or what to spend money on. As a result, there’s a lot of second-guessing and self-doubt that stems from the uncertainty of how an expense can benefit them. Sometimes, a Hoarder’s reluctance to make a necessary purchase can cause them more problems.
Think about it: if a Hoarder were reluctant to buy new running shoes because his old ones were falling apart, he could injure himself on his next jog. That injury carries a much higher cost (financially and physically) than just buying new running shoes.
Hoarders are very risk-averse. They could miss investment opportunities because they’re unwilling to lose money in an investment. So, they end up putting most of their cash in low-risk low return vehicles such as fixed deposits.
Because Hoarders know what financial struggle feels like, they do everything they can to avoid uncertainty. So, Hoarders love to hold cash “just in case”. Not investing their cash (even when they can afford to) only hurts a Hoarder’s financial future.
If you also feel anxious about investing your cash, read up on different investment strategies and the risks involved to ease your anxiety. Long-term passive investing in a basket of ETFs, for instance, carries much less risk than picking 1 or 2 hot stocks. Talk to a financial advisor about how much risk you’re comfortable taking. That’s because financial advisors can help you weigh the pros and cons of each investment.
3) The No-Eye-See
No-Eye-Sees have no idea what’s going on in their bank accounts. They don’t keep track of their money at all.
The No-Eye-See probably never knew their family’s financial situation as a child. Ignorance is both a blessing and a curse, in this case. As adults, the No-Eye-See feel overwhelmed when dealing with money. The bills, bank statements, and tax return forms are chucked into a drawer, never to see the light of day again.
Spending & Saving Style
The No-Eye-See doesn’t like to think about money. But they don’t have any qualms about spending money. Because they don’t budget, they may spend their income without setting aside some money for their savings. So, the No-Eye-See may be living paycheck-to-paycheck.
The No-Eye-See tends to relinquish control over their finances to a family member, partner, or a financial advisor. Faced with financial products and jargon, they don’t know where to start looking so they don’t even try to understand.
As investors, they can have either a high or low-risk tolerance. They let the financial planner decide for them. But there’s a danger here that they may be advised to invest in a product that isn’t suitable for them.
A lot of us fall into this category because we weren’t taught about money from a young age. When we’re adults, we feel powerless when it comes to money that we don’t even attempt to control our finances.
To combat this sense of powerlessness, start small. Build the habit of expense tracking, and gradually work your way up to budgeting, saving, and investing. Instil a sense of curiosity about your money. Take courses online, watch YouTube videos on budgeting, gamify your financial education. Ask your financial advisor all sorts of questions. No matter how stupid you think your questions are, your financial advisor’s job is to answer those questions.
Talk to your friends about money. Spend time thinking about your financial goals. Maybe you want to own a home. Perhaps you want to pay for your dream wedding. Or send your children to the best universities. When you’re goal-oriented, it’s easier for you to take charge of your bank account and your financial future.
4) The Lalang
The Lalangs follow whatever everyone else is doing. So, they’re easily swayed by a sales pitch or peer pressure.
Just like the No-Eye-See, the Lalangs probably grew up in an environment where they’re oblivious to their family’s financial standing. They don’t learn the importance of saving money from an early age. However, the Lalangs grew up with an understanding that being different (or poor) would make them an outcast. For the Lalang, deviating from the norm equals bad.
Spending & Saving Style
The Lalangs often fall into the “social trap”. They’re the demographic most susceptible to advertising, the latest trends, and keeping up with the Joneses. So, they’ll spend money on things that may not actually fulfil them.
Unlike Spenders who would spend money to save time and add value, Lalangs don’t discern quality and value because they’re comparing themselves to other people.
Like the No-Eye-See, the Lalang doesn’t keep a budget.
Lalangs can fall for MLM scams or buy into stocks based on other people’s advice. Whether the investment fits their investment profile is irrelevant to them. So if they’re not careful, they could end up losing a huge chunk of their savings on bad investments.
If you feel pressured to spend money to fit in, chances are there’s a little bit of Lalang in you (hey, I’ll admit, I have some in me too). But you need to ask yourself how your Lalang ways affect you financially. Just like the No-Eye-See, you should set a budget to instil discipline in your spending. And don’t be afraid to be different! So what if that one guy at work drives a Mercedes Benz? Material things aren’t a marker of a happy and successful person, no matter how much society and advertising companies say otherwise.
Also, don’t make investment decisions based on what other people tell you. Do your own research, talk to your financial advisor. Take a cue from Warren Buffet: Don’t invest in something you don’t understand.
5) The Calculative Bugger
A Calculative Bugger constantly looks for the best deals. A close relative of the Hoarder, the Calculative Bugger keeps a close watch on his finances.
Calculative Buggers may have had some exposure to personal finance at a young age. For instance, Buggers would have learned how to budget as a child because their parents gave them an allowance, instead of buying them everything they wanted.
Spending & Saving Style
Buggers track their spending and saving almost obsessively. When considering a purchase, they weigh their options and do extensive research. They’re always on the lookout for the best shopping bargains, or the best credit card deals. Because they like to optimise their money, Buggers navigate spending much better than most people.
But Calculative Buggers can be cheap. They may sacrifice better quality for a cheaper price. So, Buggers could actually end up spending more money in the long run because cheaper goods break or wear out quicker.
Calculative Buggers like to be in control of their investments. They may prefer to pick their own stocks, rather than invest in a passive vehicle such as ETFs. They may work with a financial advisor but they may not actually buy into investments recommended by those advisors without doing their own research.
Buggers also tend to be cautious investors that are willing to take calculated risks.
As Buggers like to have a 360-degree view of all of their money, they could waste too much time doing everything on their own. Like Hoarders, Calculative Buggers have a hard time dealing with uncertainty and feeling out of control.
If you’re a Calculative Bugger, ask yourself, do you spend too much time tracking your expenses and investments? Do you feel out of control if you don’t look at your bank account daily? Is the trade-off between time and money worth it?
As a Bugger, you need to practice balance and learn to let go a little. Tired of keeping track of every single cent? Automate your savings instead.
You should also practice big-picture thinking. It may not do you any good to spend an extra 15 minutes in traffic every day just to avoid paying tolls. Those 15 minutes add up. That’s an extra 90 hours a year that you’re spending stuck in traffic.
Which Financial Personality Types Are You?
“Until you make the subconscious conscious, it will direct your life and you will call it fate” – Carl Jung
Ultimately, how we view money signals much larger questions in our psyche. What are our anxieties about life’s uncertainties? How do we view our self-worth in relation to material things? Where do we derive happiness from; saving or spending or neither?
This list is a good starting point to help you identify your own financial personality quirks. For me, I know I’m part Calculative Bugger, part Hoarder, with a splash of Spender. Once you know yourself, only then can you take measures to cultivate good financial habits and eliminate the bad ones.
So, what financial personality type(s) are you?