We often stress about the importance of financial literacy, such as gaining a strong understanding of how money works and having the resources to make the right decisions.
But when it comes to building financial health, one thing most people can’t consider is their money personality type - or their emotional approach and response to money.
We each have our own beliefs and emotions about money, and they are mostly shaped by our individual life experiences (e.g., inherited from our parents or influenced by our current circumstances).
During my 10 years of researching the psychology of money and happiness, I found that there are seven different types of money personalities. Usually, we belong to a combination of many types, and not just one.
7 Personality Types of Money
Identifying which types you face, and understanding the pitfalls of each, can significantly improve your relationship with money. This can help you do things like spend less on impulse buying, be better at budgeting, invest wisely and ensure a good nest egg for retirement.
1. Compulsive Savers
Signs you may be a Compulsive Saver:
You save money relentlessly, sometimes without thinking about the real end goal.
You believe saving money is the only way to feel safer in life.
You are very talismanic. (Friends will always come to you for advice on which phone company is the cheapest, which point card is worth it, or when to buy a plane ticket at the lowest price.)
The Trap: Some Compulsive Savers are so afraid of losing money that they spend their entire lives without spending anything they worked hard to save. For example, they may choose to forget hobbies or activities that can bring them happiness and purpose.
Money advice: It’s all about simplicity; learn to find a balance between saving money and enjoying life. Think about where you see yourself in the future and how you can use your savings to get there.
2. Compulsive Buyers
Signs You May Be a Compulsive Buyer:
You tend to spend money on things you don’t necessarily need.
You have an incredible personality and love to treat people with something special, sometimes for no particular reason.
When you are under emotional stress, your way out is to shop, especially for instant gratification.
Mistake: Even though they have a lot of debt, Compulsive Spenders will often continue to spend. In fact they may try to hide large purchases from friends and family. In extreme cases, they may be at risk of bankruptcy if they spend more than they consistently earn.
Money advice: Making a budget plan will help you see things from a different perspective. Remind yourself that buying a new car (when you already own it), for example, means sacrificing money for important things like saving for retirement or paying off debt.
3. Compulsive Money Makers
Signs You May Be a Compulsive Money Maker:
You believe that generating more money is the secret of happiness.
You spend most of your energy trying to generate as much money as possible.
You get approval and recognition from others for your financial success.
The Trap: While Compulsive Money Makers are usually on a strong path to achieving financial freedom, they can enter dangerous territory if they begin to neglect important relationships to prioritize increasing their wealth (e.g., choosing to work on weekends rather than spending time with loved ones) .
Money advice: Know that there is more to life than money. And if you have a large amount of wealth, give it a purpose by helping others, whether that means donating to an important cause or treating yourself to a family vacation you’ve been talking about for years.
4. Money Does Not Work
Signs you may not care about money:
You rarely think about money (and just the idea of making a budget makes you nauseous).
In extreme cases, you believe that money is unreliable or bad.
You feel that money cannot influence important decisions in life.
The pitfall: Many people who don’t care about money feel they only need a certain amount of money to be happy, which is a healthy thought. But the situation can get worse if they are not responsible with their finances (e.g. relying on a partner or spouse to do the work for them).
Money advice: Even if you’re financially comfortable, tell more things like where your money goes, how much your monthly expenses are, and where you owe. Doing all of these things can save you a lot of financial stress in the future.
5. The Saver-Splurger
Your symptoms may be Saver-Splurger:
You share common traits between Savers and Buyers.
You start saving a lot of money, but then remove the spending incentive out of nowhere.
When you use your savings, you may be spending on things you don’t need or rarely use.
Traps: This can be emotionally exhausting when the pendulum swings from compulsive savings to compulsive strokes. Saver-Spenders often feel depressed and frustrated for working hard to save money, and losing it quickly.
Money advice: Like Compulsive Spenders, Saver-Splurgers rarely think about what they are spending when they decide to overspend. Before making a big purchase, imagine how you will feel in the next week or two. Don’t forget your financial goals.
6. Gamblers
Signs you may be a Gambler:
You share a common nature between Money Makers and Buyers.
The thrill of risk and the promise of reward is a pleasure that you can harp on quickly.
You sometimes risk your money with the intention of escaping boredom.
Traps: It is not uncommon for Gamblers to face sudden storms or devastating losses. The most obvious risk is when gambling is out of control and they borrow things like their retirement money or children’s college funds to make up for losses along the way.
Money advice: The goal is to be introspective and strict with the financial risks you take. Balance and security are important to have, so start setting aside monthly savings before making big financial decisions.
7. The More Worried
Signs You May Be Worried:
No matter how much money you have - you are always worried that you will lose it at some point.
You are less confident in your ability to achieve financial freedom.
You are always obsessed with the worst case scenario of what will happen if you run out of money.
Traps: It’s wise to know what can happen if you don’t make preparations for your future. But letting worries and anxieties consume your happiness in the present is not a good thing.
Money advice: Look for the positive around money conversations. Try to understand where your financial worries are coming from, whether that means talking to a financial advisor or a therapist.
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BUSINESS & MONEY
