So, what’s your money personality?
You probably not given this much thought, but like everything else, we all have a money personality, just like we all have different characteristics regarding other factors, like our fears, dreams, and passions.
Your money personality dictates your emotions and behaviours towards money. Ultimately, it affects the core things in personal finance- spending, saving, and investing. And knowing your money personality is the key to building a healthy financial life.
The 5 Money Personalities
Sometimes, individuals identify with more than one money personality, which is allowed. I would rank myself as a big shopper (when it comes to books and candy), a saver, and most recently, an investor. However, you should choose what personality rings close to home when you gauge your habits around money.
If you are always in the race to keep up with the Joneses, you are a big old-time spender! You want to have the latest gadgets, from smartphones to television and music systems, the newest car model, high-end real estate, or fashion items. You are not a bargainer either. You shop in high-end shops where prices are over the roof. You are rich (or not) but want to make a statement about your position.
You are also not afraid of taking significant risks when it comes to investments. Money is never a problem for you. You spend it however you want without worrying about getting into an endless pit of debt.
Pro Tip: I am not saying you shouldn’t spend your money on whatever you want. As a personal finance educator, I’d only recommend checking your finances to ensure whatever you are spending on is more long-term and not short-term. Second, have savings, like an emergency kitty, and savings for other short-term and long-term goals. Third, ensure you are not getting deep into debt as you try to keep up with the latest trends.
Shoppers are a little bit like spenders, only that they might seek to get a bargain (hello annual sales and Black Friday). A shopper will look to buy whatever they find and think they need it, even when they don’t.
This is more of an addiction than just wanting to keep up with the latest technology. Sometimes, it is more of an emotional reaction, like people who shop when they are lonely or depressed. Shoppers might even be concerned about getting into debt, courtesy of their habit.
Prop tip: thanks to online shopping, purchasing whatever you want gets easier by the day. However, take a step back and think about your financial situation before buying anything, especially when it is on sale. I am not talking about necessities like house shopping. I have developed a habit of giving myself a day or two after seeing an item I want to purchase. Mostly, after the third day, it hits me that I never needed it anyway. This will come in handy when you want to borrow money for spending. And, you can always save and buy the item later on.
On borrowing, gauge whether it is a good or bad credit and how the money or whatever you are spending it on is advancing your journey toward financial freedom or growing your wealth.
Third, evaluate what fuels your spending habits. Is your shopping spree compensating other aspects of your life, like boredom? Finally, when items are on sale, think twice. Some of these sales rarely save you any money.
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Unlike spenders, savers are more conservative with their money, even when it comes to investing. If you are a saver, you try to avoid debt and only buy things you know you need and rarely follow current trends.
Pro tip: saving is healthy. In fact, it is one of the cores of personal finance planning. However, do not let the world pass you by. You are allowed to enjoy life a little bit. You can start by saving money for vacations or purchasing gadgets and electronics in safe accounts like SACCOs and Money Market Funds. This way, you are still conservative with your investments while your money is earning you a few shillings.
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Debtors will take loans and live beyond their means so that they can buy stuff. The difference between debtors and shoppers or spenders is that they are not spending money on things to keep up with the Joneses or try to compensate for anything.
Debtors never track their spending or think about where their money is going and certainly do not think about investing or saving for future goals. If you are a debtor, you are probably knee-deep in debts but can’t account for that spending.
Pro tip: start by making a budget to help track your spending for the last 3 to 6 months. To do this, gather all your statements, bank, Mpesa and credit cards. You can do this on Excel, Google Sheets or get a personal diary.
Track all expenses, from utilities for takeouts and clothe purchases. It will help you determine where you spend most of your money and narrow down to what expenses you can cut down. It will also enable you to keep track of all the debts you have and develop a repayment plan that will get you out of debt.
Remember to come up with a saving and investment plan, and ensure you always have an emergency kitty to avoid getting back into debt for frivolous reasons.
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This group of individuals is well aware of their financial status and are always trying to have their money works for them (earning passive income). An investor’s decisions are well calculated, and since one is looking to make a passive income that caters to their future needs, they are willing to take a certain amount of risk to achieve that.
Pro tip: you are on the right path to building wealth and healthy financial life. However, keep in mind that investing is a long journey, and it never takes a day. Be patient, revise your investment strategy and portfolio whenever necessary and always keep educating yourself.
The bottom line
As we are gearing for a healthy financial life, the first step is understanding your money personality. Then, make the necessary changes that will bring you closer to your goals, whether you are saving to buy an asset or for early retirement. Always remember that personal financial planning is not a one-time thing. It is a never-ending process. So never stop!