By Sudhir Khot,
Understanding the correlation between money personality and its impact on financial health is as important as earning money. By identifying whether you’re a spender, saver, or risk-taker, you can tailor your financial strategies that align with your behaviour and that will help you overcome your financial challenges, reduce stress, and achieve long-term stability and growth
By Sudhir Khot,
"The way you manage money is a mirror of your personality. By mastering your money mindset, you can transform not only your finances but your entire life." — Suze Orman
Why do some people succeed financially while others fail, even with the same background? The answer lies in your money personality. Many people are unaware of their financial habits and stay trapped in the rat race, wondering why they aren’t financially stable despite working hard. Success isn’t just about education or hard work; it's about how your personality shapes your financial decisions. Whether you're a spender, saver, risk-taker, understanding your money personality is crucial. It influences every decision and can be the key to improving your financial health and achieving financial freedom.
It's not about how much you make, it's all about how well you manage your earned money. Once you understand what type of money personality you belong to, you can create a financial fitness strategy to build steady growth and reduce financial stress. Awareness is key to success. Getting aware of your current status will help you to improve your financial fitness.
Every person on this earth is unique and bears unique characteristics. Your upbringing has made you, who you are now. If we check minutely, we will be able to find over 25 different money personalities. Your culture, family, experience and macroeconomic conditions of your country create your money personalities.
Your money personality is more or less like your parents. But you also have the choice to become aware and work on your money mindset to improve. The following are the most common money personalities. Understanding them will help you to shape your spending, saving and investing. Let's go a little deeper.
● The Saver: They are very conservative and do not take the slightest risk with their investment. Most of the time savers do not beat inflation, thus their real rate of return becomes negative.
● The Spender: They are very comfortable spending their money. They do not have a fear of debt and are always ready to take risks when investing. There is a powerful quote - When emotions go up intelligence goes down. The availability of easy loans and credit cards, forces them to overspend leading to a debt trap. They lack financial discipline.
● The Investor: The investors are very much aware of their financial situation and accordingly they invest their money. Their decisions around money are very careful. Therefore most of the time their real rate of return is positive.
Once you understand your thought process around money, you will be able to manage your money more effectively. You will be in control of your emotions around money. Here are some ways it can improve your financial health:
1. Identifying Strengths and Weaknesses: Every personality type has its own strengths and weaknesses. E.g. If you are a Spender, you want to enjoy life today. This leads to a struggle to save. Being aware of this status of your money personality, you must start to pay strategically so that you start creating a solid rock bed of investment.
2. Creating Financial Harmony: Family culture plays an important role in financial decisions. People develop their money habits by observing others. Thus once you are able to understand the money personalities of your spouse or family members, you can tune in to & reduce conflicts.
3. Tailoring Financial Strategies: If you are a Saver and do not wish to take risks, you can invest in debt mutual funds and then create systematic transfer plans to equity for better returns. You can also create a separate account from where your UPI system works. Transfer a specific amount and once exhausted, stop using UPI. Not carrying a credit card is the most powerful strategy to control spending emotions.
4. Leveraging Your Money Personality - Awareness is the first step to success. Once you are aware of your money personality you can leverage it for a better life. Know your strengths and weaknesses to make a few alterations to your financial habits.
Conclusion
Just working hard will not make you successful. You need to understand your psychology around money and success. By understanding your real money psychology and making important improvements in habits, you can improve your thoughts around money and become financially fit.
(The author is Financial Therapist Founder, Financial Fitness. Views expressed are personal and do not reflect the official position or policy of Outlook Media Group and/or its employees. The article is for information purpose only; please consult your financial planner/s before investing.)