More and more these days, emphasis is being placed on the importance of becoming financially literate; that is to say, learning about how money works and effectively developing the skill sets to make informed decisions about it. Those skill sets involve budgeting, investing and personal finance management and will help support various life goals, like buying a home or a car, retirement, beginning a family, responsibly navigating debt, further education, starting a business, or even taking an exotic vacation. Financial literacy is therefore the foundation upon which your relationship with money should be built. But before getting there, it may be helpful to start with a basic awareness of what your particular money personality is and how it has so far helped to shape how you spend, save and invest money.

What’s a money personality?

Have you ever wondered why your challenges with money seem different than somebody else’s, say, a spouse or a sibling? For instance, you find it extremely difficult to save, while that person, who has a similar financial background to yours, seems to always reach their saving goal whenever they set out to? That’s because, in the same way that psychologists have identified the major archetypes for the different personalities which determine people’s behaviour — from the friends they tend to make to the way they’re inclined to dress — they have also identified some basic personality money traits people have that will define their outlook on money. Is this important? Yes, understanding your money personality is actually quite helpful, because when you understand it, you can become more self-aware as to why you act the way you do with money, why it’s hard to break those old spending and saving habits. It’s a first step that will aid you in making changes to how you spend your money accordingly.

Five basic money personalities

The basic traits psychologists have identified are:

Compulsive saver: If spending a lot of money causes you great stress, then you’re a compulsive saver. Do you go around the house compulsively turning off lights, listening for drips at the faucets? The compulsive saver is often disinclined to use their credit cards and is mostly debt-free. Nobody seems to know what, exactly, they do with their money as they live very modestly. Even at the office, they’re always looking out for the boss’s money. People often think of them as cheap, or, in Jamaican parlance, “mean”.

Compulsive or big spender: On the other hand, this type of spender is super-comfortable spending lots of money on things that he or she values. It might be a flashy sports car, or maybe their favourite football player’s jersey. Doesn’t matter. They are the polar opposite of the compulsive saver. They are flashy and their presence is announced often without a word being said. The phrase “money is no object” is the mantra they live by.

Shopper: The shopper does not go as hard as the big spender because he or she doesn’t necessarily have their funds to spend. However, shopping is a high for them, which they will euphemistically term “retail therapy”, and which pulls them out of an emotional funk. In the early days of the pandemic they were the ones visiting shopping websites as though they were drug addicts at a drug den. They’ll buy things they don’t even need. But spending money is a short-lived thrill, as it is often followed by an emotional crash, as guilt and panic set in at the reality of their lowered bank balance.

Debtor: The debtor doesn’t think about his or her financial situation and tends to spend more than they earn. Life is for living; things will sort themselves out. This personality type is always deep in debt, skipping from one maxed-out credit card to the next, and borrowing from Peter to pay Paul. The debtor remains blissfully ignorant that their bad money decisions have far-reaching consequences regarding their financial well-being.

Investor: This type of person is primarily focused on the long game and loves to put their money to work. They are always buying real estate, flipping houses and cars, and so forth. They are comfortable with taking risks for the potential of long-term reward. Like adrenaline junkies, they are constantly seeking business opportunities. Their mantra is: No risk, no reward.

Bottom line

As with just about everything else in life, your response to money is predominantly dictated by your personality. Figuring out what your particular money personality (or combination on the spectrum) is will help to bring clarity and insight regarding how those traits will affect your bottom line.