Have you ever thought about how and why you deal
with money the way you do?
Why do you choose to save, or not save? Why do you avoid talking about money, or is it no problem? Why do you make the spending decisions you do?
Part of our money behavior comes from what we saw our parents do growing up. Did they fight, or discuss things calmly? Did they plan ahead, or was it one crisis after another? Did you see them paying the bills? If so, what was their attitude when they did it? And were there ever bills that didn’t get paid? If there was debt, were you aware of it? Did they ever talk to you about saving or investing?
All these experiences affect how we treat money as adults. If your parents fought about money, you might avoid money conversations with your own partner. If you grew up poor, you might overspend on all the things you never had. If your parents always had credit card debt, you might assume that is how it always is. If your parents talked openly about investing and saving for retirement, you might feel pretty comfortable with that. If not, you probably don’t.
Another part of the picture is our individual personalities. A naturally optimistic person might be more of a risk-taker when it comes to investing. If you are indecisive, that probably affects your money behaviors. Someone who likes to stick to a routine will probably resist changes, even if it would improve their finances.
We also learn money lessons from pivotal moments in our lives. It’s natural that the things that happen to us personally, or to someone we know, will have a big impact on us. This can be both good and bad. We can let these experiences affect us TOO much, or we may even learn the wrong lesson from them.
For example, if you or your partner had an accident or sudden illness and had to miss a significant amount of work, you would learn very quickly the value of an emergency fund. But for someone who has always been healthy, it is easy to think “that won’t happen to me.” Or maybe you saw a loved one lose a lot of money on an investment. That might make you afraid to invest your own money, even if your situation is completely different.
Four Basic Money Personalities
One way to describe the patterns of behavior that come out of all of these factors is as money types or money personalities. In the excellent book “Money for Couples” by Ramit Sethi, who is one of my favorite personal finance authors, Ramit identifies four basic money personalities that he has seen when working with people on their finances.
I have also seen these four types countless times during my coaching!
Understanding your money personality can help you identify and change money behaviors that might be holding you back.
Check out the descriptions below and see if one, or more, of these types rings true with you.
The Avoider
This is the most common money type. An avoider will say or do anything to avoid talking about or dealing with money. They may do this consciously or subconsciously, but at the center of it is a fear of confronting the reality of their situation.
They will deflect all money conversations. They may avoid opening their mail or looking at online accounts. They may even reframe their avoidance as a virtue by saying things like “money just isn’t that important to me.”
What You Lose By Being an Avoider
Avoiders can lose literally tens or even hundreds of thousands of dollars. This might be by ignoring debt, by not understanding their retirement savings, or even just by staying in a low-wage job because they’ve never really thought about making a change.
You also lose the ability to actually make your situation better, because as long as you are avoiding it, you can’t change it.
It can also be a very stressful way to live. Many of my clients, when we finally do look at the numbers, find out that it’s not as bad as they thought! Which means they could have saved themselves a lot of stress by just looking at things sooner.
But even for someone whose financial life is running pretty smoothly, avoiding looking at finances means you are not using what you have to its full advantage. And that is making you poorer and less safe than you need to be.
If you are married, avoidance puts the burden of managing the finances on your partner. It’s not fair to them, and your lack of participation means they don’t get the advantage of a second set of eyes, or an alternate point of view, when making decisions about what is, ultimately, your money too.
Advice for Avoiders
Think about what your life will be like in 10 years if you KEEP avoiding. Where will you be living? What will your finances be like? What dreams will you still be putting off?
Think about the damage that your avoidance is causing to your spouse or partner, other family members, or friends.
Then imagine what your life could be like if you were confident about dealing with money! Imagine the things you could have, and the possibilities that would open up to you. Imagine being stress free and having a plan.
If you are ready to change, start small. Just reading this article means you are already thinking about finances, so yay you! Start to educate yourself about personal finance—competency brings confidence.
And don’t feel like you have to struggle alone. So many things are easier when you have someone to do them with. Ask your partner, or a friend, or a financial coach like me to go through things with you. You might feel embarrassed, but your friends and family care about you, and my coaching sessions are completely judgement free. Trust me, the help will help!
The Worrier
For the worrier, money conversations are always negative. If one financial goal is reached, they find another thing to worry about. Sometimes they have good reason to worry—they might genuinely be in a bad situation! But even when worriers have more than enough money they don’t stop worrying—it is part of their identity.
What You Lose By Being a Worrier
Worriers end up living less of a life than they need to. When you are only focused on what can go wrong, it is very difficult to dream for the future, or take a chance on something, or just to live life. It also causes a lot of stress! It doesn’t feel good to worry all the time, but if it’s the only behavior you know it’s hard to quit.
In a couple, it can mean that one person always has to play the role of the re-assurer, and their always-worried partner can never dream with them, and can never look past the worry. It can be exhausting, and it can hold both people back.
Advice for Worriers
Ask yourself, what do I get out of worrying? Does it provide control? Maybe it keeps you from having to look at other areas of your life. What would your life be like if you stopped worrying about money? What would it take for that to happen?
Play out the worst-case scenario. What would happen? Is this worse than what can happen if you keep worrying forever?
Think of an area in your life where you feel confident, competent and decisive. Ask yourself why you don’t worry as much when you are in that role. Then ask yourself how you could feel the same way about money.
Let’s be honest, you might always have a tendency towards worrying. But with time you can add competency, curiosity, and even excitement to your relationship with money, and that will be a huge step forward!
The Optimizer
Ramit describes optimizers like this: “Optimizers are maniacally focused on their numbers. They love rules and beating the system. They track everything, and are usually quite skilled when it comes to day-to-day money management […] but they miss the bigger picture.”
For example, my clients who are optimizers will sometimes have complicated systems for getting credit card points while ignoring their credit card debt, which is canceling out those points! Or they might be dutifully tracking how many coffees they get at Starbucks, but have never taken time to learn about their 401(k).
Some optimizers are so obsessed with saving for the future that they miss out on life right now. They can’t justify spending $15 to see a movie with their family because their spreadsheet tells them what that $15 might earn if they invest it for the next 30 years.
What You Lose By Being an Optimizer
Hyper-focus on spreadsheets and schemes can be a way of avoiding dealing with the bigger issues of your finances. Suddenly you realize that a decade or more has gone by and you never really took time to think about what you really want out of life. While you have been busy tracking the price of toothpaste, life has passed you by.
Frugal optimizers can find themselves finally getting to that future they have been saving for, and then realizing that they have no idea how to now use their money to enjoy life. All they know is austerity!
My optimizer clients also rarely let their partner have any meaningful input into finances. They have complicated spreadsheets that only they understand, and the other person is left out in the cold. This leaves them disconnected, and unable to work together as a team.
Advice for Optimizers
Take a break from your spreadsheet and look at the big picture of your finances. Think about what you want out of life. Are you actually putting your money towards those things? If you have a partner, take time to talk to them about what their hopes and dreams are. How can you work together to make them a reality?
If you are frugal optimizer, try setting an amount each month that you have to spend on something fun and nonessential for yourself. The amount can be small, but force yourself to spend it. At the end of a year you can look back and see what things you loved and want to keep spending money on. It is a way to practice living life now!
The Dreamer
Ramit describes dreamers this way: “Dreamers use magical thinking when it comes to money. Something is always ‘coming soon’ that will pan out and change their financial situation.”
While the dreamer avoids reality, something or someone has to pick up the slack. They might be financing their dream with credit card debt, or it might be a partner who has to shoulder all the financial burden while the dreamer continues to live outside of reality.
What you Lose By Being A Dreamer
As long as someone is propping up their dreamer lifestyle, being a dreamer is actually pretty great! But when the credit card bills get too big, or their partner can’t hold it together anymore, or some other thing happens that forces them to confront reality, then their house of cards collapses.
Advice For Dreamers
Relying on the “next big score” to get you out of your hole is NOT a financial plan. I repeat, it is not a financial plan! You need to make a real plan for what you will do if the big win doesn’t happen, and also one for if it does. Then if your ship comes in, great! If not, you have things covered.
If you are the partner of a dreamer … dreamers need a true wake-up call. Looking honestly at their finances can sometimes do that. In other cases their partner needs to set boundaries. They will never stop dreaming, but if they can understand the consequences, then they can know what you need from them to make the situation manageable.
Using Your Money Type To Unblock Yourself Financially
There is only one person who can take action on your finances, and that person is you.
Understanding the things that might be blocking you, or steering you in an unproductive direction, can play a huge role in unblocking yourself financially. Knowing your money personality can be a way to identify what those blocks are.
Think about which money types described above resonate with you. Use the advice in each section to try to start thinking and acting differently about your money. But above all, remember that you don’t have to be stuck in past behaviors. Money is there to help YOU live the life you want to live. How you want that life to be is up to you.
If you would like to learn more about money personalities and money behavior, I highly recommend Ramit Sethi’s book, “Money for Couples.” Single people can also get a lot of insight out of this book, but might prefer his book, “I Will Teach You To Be Rich.” Morgan Housel’s “The Psychology of Money” is a personal finance classic, and also deals with this subject.
Financial Coaching Can Help!
Want personalized, one-on-one help getting unstuck with money? That is exactly what I do as a financial coach! Together we will go step-by-step through your finances. We will look at money behaviors, and we will come up with a plan for your future. We will work on debt payoff, budgeting, communication about money, creating new habits, planning for retirement, and more.
I offer affordable rates and a free 30-minute intro call. Coaching is done over video calls, and I do not sell financial products, just practical solutions to help put you in control of your finances.
⭐See what I offer and sign up for your free 30-minute initial consultation.
⭐See my coaching packages with prices.
⭐Read my 5-star reviews and client testimonials.
