Being financially literate is very crucial as it gives people the knowledge and skills they need to manage money effectively. But most Americans don’t have a solid foundation to make financially smart decisions. The result is that nearly half of them don’t expect to have enough to retire, and most of them are in some sort of debt. Even 40% of Americans can’t afford a $400 expense in case of emergency.
Most people are often stressed about their financial literacy and find ways to manage their financial resources. But many of them don’t work out for people while people blame themselves or the technique. The concealed reason why some of them don’t work is their personality. Michael Tristan Tolston, a research psychologist from Ohio mentions the 7 different money personality types of people. Typically, people fall into a combination of many types, knowing which one you have will help you in making better plans for financial freedom.
- The Compulsive Saver: These kinds of people put away money endlessly, sometimes with no goal in their mind. They believe saving money is the only way to feel safe in life. And some of them are so afraid of losing money that they might go their entire lives without spending any penny they worked hard to save.
- The Compulsive Spender: People who spend money on things they usually don’t need come in this category. These kinds of people have outgoing personalities and love treating people with special things. When they have any emotional distress, one of the solutions they choose is to spend, mostly for instant gratification. Many times they end up in large amounts of debt, regardless of how much they earn.
- The Compulsive Moneymaker: Many people also feel earning a lot of money is the secret to happiness. They will spend most of their energy trying to make loads of money. While these ones usually achieve financial freedom earlier, there’s a chance they enter a dangerous territory where they tend to neglect their relationships and lifestyle and suffer emotionally and mentally.
- The Indifferent To-Money: People who rarely think about money fall in this category. Many people have this mindset that they need only a modest amount of money to be happy which is actually regarded as a very healthy mindset. They also don’t let money influence any important decisions of their life. But if they are not responsible with their finances and don’t make any budget things can get ugly.
- The Saver-Splurger: These ones share their traits with savers and spenders. They start out by accumulating a lot of money but usually give into spending impulses. This behavior is often emotionally exhausting and excessively stressful because people are consistently swinging from compulsive saving to compulsive splurging.
- The Gambler: Gamblers share common traits with Moneymakers and Spenders. They are mostly thrilled by the risk and rewards that many times gamble away their money just to escape from boredom. The most obvious risk is when their gambling gets out of hand and they start to borrow and gamble to make up for the losses.
- The Worrier: Some people are constantly worried no matter how much money they make. They lack confidence in their abilities and are constantly obsessed over what worse could happen to them. Worries and anxiety eat away their happiness and they become quite miserable in life.
According to Michael Tristan Tolston, identifying the personality types you fall under and their pitfalls can help you plan better and improve your relationship with money. In the long run, Understanding and planning accordingly will help them to spend less on impulse purchases, be smarter about budgeting, invest wisely and have enough money to retire with ease.