Don’t Let Your Money Beliefs Sabotage Your Goals
Self-knowledge is power. To avoid sabotaging your financial goals, particularly
in rough times, self-awareness and flexibility are essential. You’re
not likely to change your money personality, but by acknowledging your
strengths and weaknesses, you can change your tactics and achieve financial
success.
Know Your Money Personality (And the
Weaknesses That Come with It)
Some finance professionals may say, “Who needs a financial plan? All you
need to do is spend less than you make and invest the rest.” Sounds simple,
right? So why is it so difficult to execute? Most of us know how to get ahead
financially, but we’re handicapped by our own counterproductive ideas.
Everyone has a belief system surrounding money. Some people mirror the
beliefs of their parents, while others adopt completely opposite attitudes.
Identifying your money personality is the first step in understanding how
your beliefs may be affecting your bottom line.
Here are three basic money personality types:
- Spenders
- Savers
- Procrastinators
Don’t worry — no money personality is better than the others. Most people
have a little of each. But when facing uncertain times, idiosyncrasies can
raise their ugly heads.
Spenders
You’ve likely heard the saying, “Keeping up with the Joneses.” Well, spenders
are the Joneses. They live in the right house, live in the right neighborhood,
drive a shiny new car, and are most likely buried under a mountain of debt.
Spenders live by the mantra, “I deserve it.” They live in the moment and
consider money a measure of success. Ironically, spenders feel frustrated
because they have no money in the bank. And during uncertain times, spenders
may feel a crunch from their overexuberance.
Do you often reward yourself by buying new shoes or a new toy? Is there
more month left than paycheck? Do you vow each year to start a savings
plan?
Everyone splurges once in a while. But when spending undermines your financial
security, today or in the future, it’s time to get a grip. Consider the following
tactics:
- Freeze your credit cards — literally. Take your credit cards and freeze
them in a cup of water. It may sound silly, but waiting for your credit
card to thaw will take the spontaneity out of splurging. If you prefer a
less extreme measure, adopt a cooling-off policy; don’t allow yourself to
purchase a single item over a preset limit, say $50, without waiting 24
hours.
- Think about tomorrow. Preparing a financial to-do list will help prioritize
spending. Suppose your goal is to have $5,000 in the bank by yearend.
Set up automatic drafts from your checking to savings, and invest
in yourself. Before you make an expensive purchase, ask yourself, “Will
this purchase mean something to me in a year?”
Savers
The term penny pincher comes to mind when describing a saver. Savers clip
coupons, live on strict budgets, feel guilty when making major purchases,
and find great joy in watching their bank accounts grow.
Savers, unlike spenders, have a hard time living in the moment. A saver often
refrains from taking a vacation or replacing his 10-year-old car. The saver’s
motto is, “Safety is king.” A saver would rather bury his money in the backyard
than risk losing a penny. Negative economic news is particularly worrisome
to the saver.
Would friends and family describe you as cheap? Do you feel you’ll never
have enough money? Has it been years since you bought a new suit or gown
(after all, ’80’s fashions are coming back!)?
As far as financial security goes, there are worse things than being a saver.
However, in all things there must be moderation. If you’re a saver, try to
remember the following:
- Risk is not a four letter word. Take more risk with your money in
exchange for greater rewards. Investing your money in a diversified
portfolio will make your money work as hard as you do. Investing is a
long-term proposition. Don’t let hiccups in the market distract you from
your goals.
- Relax. Review your financial goals. After you establish your needs and
find ways to make your money work harder for you, give yourself permission
to enjoy the rest. Instead of researching bargain prices on toilet
paper, spend your time planning a much-deserved vacation.
