Often times, when we evaluate our financial responsibility, we’ll attempt to offset potential vices by pointing to behaviors we think should be commended. A couple examples: “I go out to eat for every meal, but that’s okay because I’ve owned most of my wardrobe for over five years.” Or, “I just bought an expensive boat, but I’ll save money on dinner by using it to go fishing.”

By looking at our actions in this manner we miss the big picture. That is, we don’t understand how truly sound we are financially. This is because our financial profile consists of numerous habits, tendencies, and actions – not just a handful of financial habits or decisions.

I’ve been thinking about how multidimensional we can be when it comes to our finances. With that in mind, I put together a list of financial profiles. I came up with five financial personalities, but I’m sure there are plenty of others we can add to the list. Check out my list, and honestly ask yourself which of these lifestyles you are presently living. Perhaps you’ll discover that this exercise will help you determine whether your current lifestyle and the financial results you’re experiencing are satisfactory or might be in need of a change.


Financial Personality Types

The Gambler risks his or her disposable income and uses the rest for day-to-day living.

The term gambling generally describes using money in a way that is mathematically destined to produce a negative return in most cases. This type of person is living a dangerous financial lifestyle and has a serious problem. They’re likely to be in the midst of a financial hardship. And if they aren’t currently, they’re highly likely to experience financial hardship in the near future.

In general, this profile either doesn’t truly understand the value of money or is mistaken about how they can create wealth.

Gamblers can put their money at risk in several different ways. There’s the conventional form of gambling that usually takes place at a casino or racetrack. There’s also speculative or high-risk investing. Gamblers who place bets on the stock exchange tend to make impulsive investing deposits, often following trends in the media. Those types will jump in compulsively and exit investment positions when their bets aren’t paying well or when the crowd says it’s time to get out.

Gamblers often slip into patterns of buying high and selling low, which inevitably result in an overall loss. Their investment philosophies aren’t compatible with a long-term buy-and-hold approach. Instead, they tend to prefer get-rich-quick schemes. These schemes could take the form of gambling an entire paycheck at the poker table, to cashing out large portions of their 401(k) to invest in cryptocurrencies.

Sometimes this gambling cohort opts out of higher education opportunities, limiting their earnings potential. (Again, they prefer short-term potential rather than implementing a long-term plan.) Rather than adapting to their income with frugality, gamblers bet their limited disposable income in hopes that they can win big and overcome their perceived earnings deficit.

Gamblers often struggle to transition from the class of “borrowers” to “asset owners.” Whether they use the stock market or not, they tend to fixate on achieving quick, effortless profits. Furthermore, the lack of discipline when it comes to using their disposable income often interferes with their ability to participate in extracurricular activities with friends, and they are known for becoming a financial liability to their inner circle.


Financial Personality Types

The Spender puts away little to no income and uses all of their earnings to cover day-to-day expenses and other discretionary purchases.

The Spender is actually a more financially functional individual than the Gambler. While the Gambler typically generates a negative return on investment (i.e., gets nothing in return for their money), the Spender spends all of their money but at least receives a minor benefit despite their lifestyle of hyper-consumption.

Your average Spender has an excess of consumer artifacts. They also tend to “spend” their paycheck before it even hits their checking account. Spenders usually inherit their spending habits from their parents. While financially independent, their lack of an emergency fund or long-term financial plan often means that they’ll need financial assistance from their support system. With their lack of savings, Spenders are bound to finance any large purchase they make. They’ll usually have an average credit rating with minor delinquencies.

Although they might have uninspiring financial habits, that doesn’t mean that Spenders can’t be high-earners. Many Spenders are successful in their careers and have incomes that increase as they climb higher in their field. Unfortunately, Spenders will undermine this progress by consistently raising their standard of living to match their increased income.

Having given little to no thought to retirement or investing, minimal automatic contributions into a 401(k) plan can be the sole saving grace for Spenders’ long-term prosperity. Lifelong Spenders can expect a delayed retirement date and extremely minimal resources to live on during their golden years. A lifetime of accumulating consumer goods may result in nominal personal property equity and maybe even real estate equity, but likely little to no liquid assets.


Financial Personality Types

The saver fervently stashes away some income (often in a basic savings account), while using the rest for basic living expenses.

At the very least, Savers are moderately frugal and financially self-sufficient. Savers rarely, if ever, require financial out-patient care from their parents and are never a financial liability to their inner circle. In general, Savers will have a long-term financial plan and an understanding of basic financial concepts. Savers typically have high credit scores, as they always meet their debt obligations. Despite their financial responsibility, Savers hold almost all of their wealth in their savings account. While their account balance may appear massive to Gamblers and Spenders, their account balance is only a fraction of what it could be as its value is diminished by inflation.

Savers are likely to take part in their employer’s 401(k) plan but usually have only a nebulous understanding of the stock market. Savers know that participating in a 401(k) plan is a good thing but they don’t fully understand the immense benefits of compounding interest. Similarly, they don’t grasp the meaning of investing according to their risk profile or based on different stages of life.

This lack of appreciation for the stock market and compound interest tends to lead to a microscopic investment returns during their lifetime. Nevertheless, Savers will point to bear markets and atypical stock market slumps as validation for their decision to avoid more sizeable investments during their lifetimes.

Savers tend to have repaid their mortgage before reaching retirement and have a modest sum of money to live on in their golden years. Having only a modest nest egg may require them to find part-time work after reaching retirement age, but they’ll manage to achieve satisfactory standard of living during “retirement.”


Financial Personality Types

The Motley Investor invests his or her income erratically without a system or defined strategy and uses the remaining income to cover for day-to-day expenses.

The Motley Investor is highly curious about finances. Motley Investors typically have long-term goals and recognize the importance of having their money in the stock market. These individuals place great value on maintaining control over their finances. This type of control often corresponds with interfering with investments which can lead to unnecessary tax burdens that coincide with frequently entering and exiting the market.

The Motley Investor tends to be under-diversified in the beginning stages of their investing life, but eventually the eclectic nature of their investing appetite will result accumulating many different asset classes that behave differently.

The long-term outlook for the Motley Investor is generally more favorable than that of the Saver. Although the Motley Investor’s curious nature often leads to financial inefficiencies, those mistakes will also educate them and compel them into becoming more balanced investors as they mature.

A Motley Investor’s portfolio tends to hold more individual stock picks than analysts recommend. Nevertheless, Motely Investors will eventually build a well-diversified and functional portfolio with time. Motley Investors benefit from their ambition and natural financial curiosity, as they strive to raise their earnings capacity and funnel their income into diverse investing opportunities.

Motley Investors are more inclined to leverage money when they feel they can beat interest rates involved. Although their appetite for risk would probably terrify Savers, Motley Investors are likely to retire with a significantly larger nest egg. This is due in large part to their willingness to embrace the potential of the stock market, even if their strategies are imperfect.


Financial Personality Types

The Wise Investor contributes a substantial portion of his or her income to carefully selected, prudent investments and uses the remaining income to cover basic living expenses.

The Wise Investor has spent time developing a well thought out, clearly defined financial plan that features milestones with corresponding timelines. The core of the Wise Investor’s portfolio is based upon low-cost index funds with riskier satellite investments making up the rest. More likely than not, Wise Investors are keenly aware of the ill effects of instant gratification and have made tremendous sacrifices in an effort to build wealth.

Of the five personalities I’ve listed here, the Wise Investor is least likely to panic during a financial bear market. Wise Investors are prepared for market downturns and have a plan in place these inevitable dips in the stock market.

The Wise Investor is duly familiar with the power of compounding interest and makes every effort to get place their money into the stock market. The wisest of Wise Investors started doing so at the earliest age they could manage.

Though the Wise Investor has wide-ranging financial interests, they are unlikely to make any drastic or impulsive changes to their core investments after implementing a long-term plan.

The Wise Investor will leverage money when it makes too much sense not to, but has a strong aversion toward most unnecessary debt obligations. These types of individuals are usually secure enough with their financial standing that they rarely become infatuated by expensive consumer goods, status symbols, or other depreciating assets that illustrate their wealth.

More likely than not, the Wise Investor will bolster their financial standing by maximizing their use of tax-advantaged accounts. They also tend to buy and hold most of their investments for at least seven years.

Wise Investors usually have the option to retire before the age of federal benefits and will likely have residual income throughout their golden years.

Let’s Talk About It

Which of these financial personalities do you identify with most today? Has your approach to finances remained consistent throughout your life or have you grown and matured over time? Share your thoughts in the comment section below. We’d love to hear what you have to say!

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