We all have certain beliefs and behaviours that guide us in our choices in life, whether that is in respect of the food we eat, how we live, the way in which we work or bring up children, our political views etc, so it stands to reason that these personality traits cross over to our financial identities.
Although the financial services industry tends to pigeon hole people into various categories such as balanced investors, retirees, young married, cautious types and more, I believe that there is a whole other set of identities that relate to how we run our financial lives.
You may have heard people claim that they are a ‘spendthrift’ or that they are ‘saver’ but I think it is a little more complex. In reality we rarely have such black and white styles of money management.
There have been a number of studies with authors listing up to 20 different personality types but I have narrowed it down to seven which I think cover most of us.
Type 1 – The Investor
The investor doesn’t like to spend a lot of money on things that will depreciate in value but will spend on technology if it makes life easier in some way or saves time.
They prefer to put their money where it has a chance of appreciating so in actual investments, property, art and other collectibles. They will often spend money on holidays and events as these are memories and are seen to have value. When buying things like cars or white goods they will tend to set a budget and stick to it without being swayed by sales people.
The investor has a good idea of what they want, what matters and where they are heading, is often immune to fashions and pressure, but will often make good long term decisions by focusing on the bigger picture.
Type 2 – The Bargain Hunter
The Bargain Hunter is the person who spends hours poring over websites and catalogues before making any major decision, making every kind of comparison and seeking out bargains and items on sale. The danger can be to take so long that opportunities are lost, or to buy things that are not needed because they look like a ‘bargain’ at the time.
Buying things that appear to be good value can be quite the opposite, especially if ready cash isn’t available and credit is used. These partial analytical types are great at sourcing bargains but may need a little focus.
Type 3 – The Planner
A Planner is organised and has lists for everything. A planner will never go to the supermarket without a list and will rarely deviate. Meals are planned a week ahead, holidays and big expenses are paid for in cash from money set aside for just this reason.
Most likely to be the ones with detailed financial spreadsheets, a strategy for the future, and using budgeting apps. Life is planned in general and they will have financial goals that they will usually hit. Least likely to make impulse purchases or to forget to pay a bill.
Type 4 – The Minimalist
Minimalists are the people who live in a simple home, grow much of their own food, have few modern conveniences and are more interested in nature than all the usual trappings of modern life. They prefer simple pleasure and dislike materialism.
These types often save a large amount in their earlier working life, in part as they spend little and also because they want to move out of the traditional workplace early so often retire to a small home far younger than the average retiree. It is no hardship to have one old car and not have a 40 inch television.
Minimalists are often financially secure and manage very well on very little. Probably not a type we find too many of in Dubai.
Type 5 – The Giver
The Givers are life’s altruists and find it more fulfilling to gave and help others than doing or buying things for themselves. These people are the ones who are most interested in investments of an ethical and/or environmentally sound nature and also contribute proportionally more to charity than the general population.
A giver will not hesitate to spend large sums on their children’s education even if free state schools are available as they willingly sacrifice a great deal for their children even if it means going without things themselves. They also often care little about their own image, spending little on clothes or cars, or other status symbols that others may find important.
Type 6 – The Procrastinator
This is the person who is forever intending to get their finances in order yet never does. They have a vague idea that there are things that they need to do to protect their family, or to provide for the future, but they never quite get around to doing more than thinking about it.
Procrastinators have good intentions but almost need to be pushed into doing things and making the right decisions. If they don’t they could well find themselves in financial difficulty if something goes wrong, or will reach retirement age with very little to fall back on.
Type 7 – The Hybrid
We don’t all fit into just one category and it is possible to have different styles in different areas of your life. You might be a Planner at work but have Investor tendencies when on holiday as you feel you have earned the luxury of first class travel and hotels. You might be a Giver in respect of your children but otherwise a Bargain Hunter.
Depending on which category you fall into you will probably see others are either good or bad but the important thing is to have a financial identity. Once you identify how you think and operate it is easier to establish your real priorities and know how to manage them. It may be that your and your spouse have different styles but understanding that should ease any tension, let you each take on the tasks that you do best, and allow you to work together to achieve your goals.
A good financial adviser will talk with you not only to establish what you want to achieve, but also how to do so taking in to account how best suits you and your personality. There is not a one size fits all solution, but rather a tailored approach based on you as an individual.
For advice and assistance on the widest range of personal financial planning issues please contact me at firstname.lastname@example.org and see other articles on this website.
Podcast of Dubai Eye radio show with a round up of 2016 and a discussion on this article: Dubai Today on Dubai Eye – 2016 roundup + your financial personality type 09/01/17