There are lots of different approaches to managing money. Each has its advantages and pitfalls. Below are five of the main ‘financial personality types’ and their pros and cons. Which financial personality type do you match?
The Gambler
Gamblers like to frequently take risks with their money. They’re driven by the possibility that they could win a lot more money. But of course, losing is always a possibility too.
There are times in life when we can all benefit from taking a gamble. However, frequently gambling money can be dangerous – especially large amounts of money. You should only ever gamble what you can afford to lose.
The Borrower
Borrowers prefer to buy now and spend later – even if it means paying more in the long run. They typically live for the now, even if it means living beyond their means.
There’s nothing wrong with borrowing money, so long as you’re able to pay your debts back. Unfortunately, many borrowers end up in a lot of debt that they can’t pay back, which can mean having to financially struggle later on. The key is to always budget ahead when borrowing.
The Spender
The spender likes to splash their cash as soon as they get it. Like borrowers, they typically live for the present – rarely saving up money for tomorrow. However, they also rarely take out debts and so are less likely than borrowers to suffer for their impulse purchases.
A refusal to borrow or save up money means that spenders often aren’t able to afford those larger luxuries in life, leading to a lack of progress in life. By learning to borrow responsibly and save up for goals, spenders can learn to get more out of life.
The Saver
The saver is constantly putting away money for tomorrow. Setting aside money typically means being prepared to spend less – and so savers typically spend a lot of time shopping around for deals and discounts, as well as making cutbacks.
Savers rarely run into financial problems and are sometimes viewed as one of the most ‘sensible’ financial personality types. Perhaps the biggest weakness of savers is that they can sometimes be so busy saving for the future that they forget to enjoy the present. Make room for mood-boosting expenses.
The Investor
The investor is less concerned with saving money today and more concerned with saving money in the future. They’re willing to spend a large amount of money on a product upfront if it saves them money in the future. Like savers, they also like to set aside money for the future, however they also like to find ways to make this money grow over time. Investors are most likely to become wealthy.
It’s important that investors take calculated risks otherwise they can easily become gamblers – getting professional help with wealth management can often be a way to reduce risk. Like savers, investors can also benefit from learning to occasionally live in the present, as well as knowing when to put one’s wealth to use rather than simply hoarding it.
Key Takeaways for Each Financial Personality Type
- The Gambler: only gamble what you can afford to lose.
- The Borrower: only borrow what you can comfortably afford to pay back.
- The Spender: learn to borrow responsibly and save up money to enjoy more spending power.
- The Saver: don’t scrimp and save to the point that life becomes miserable.
- The Investor: set investment goals to prevent wealth hoarding.
