Now, we all have a different relationship with money and sit at varying levels of being financially savvy, but according to Clare Framrose, Head of Savings at Atom Bank, there really are six distinct types of money personalities and these can say a lot about how much you’re optimising your savings.
Even if you’re not someone that’s looking to gather a substantial nest egg for property or any other larger investments, it’s worth understanding your money habits and getting ahead of any of the more problematic tendencies that may come back to bite you in the future.
Getting to know your money personality means looking at the role money plays in your life and using those insights to inform the ways of saving that might best suit you and your lifestyle. To nudge us in the right direction, Framrose breaks down her advice on how each of these classic money personalities should go about saving, as well as the psychology behind it all.
“For people who like to hide away from their money problems, adopting fun spending habits that track any potential financial issues — before they catch up with them — is a great way to keep them interested and engaged,” says Framrose. “If that’s you, then you could try doing a no-spend challenge, which means minimising or cutting out your spending in a specific area.
“You could also try not buying clothes, eating out, or drinking alcohol for a week — then put the money you would have normally spent on these things into your savings. This can be an exciting way to challenge yourself, just be sure you don’t “no-spend” on any life essentials!”
For these worrywarts, Framrose recommends leaving it to the professionals. “Worriers will benefit from more open and positive discussions around money, especially with a financial advisor,” she says. “If the issues are impacting their everyday life, it might even be worth taking a financial awareness course or staying up to date with financially-focused podcasts. To avoid unnecessary doubts, I would suggest that someone who worries about money, store their savings in an instant saver account — so that they can be secure in the knowledge that they can access their funds at any given time, should they need to!”
Mario Weick, a psychologist at Durham University, delves deeper into how looking to the future can help compulsive spenders reign in their spending splurges.
“The benefits of saving money materialise over time, so focusing on a future goal can make it easier to save money. If you focus on the here and now, you may encourage further spending. The key to strengthening your savings is to make the process easy, sociable and fun.”
For these spenders, Framrose recommends a hard spending cap in the form of an untouchable account. “For those of you who feel like you compulsively spend and who want to gain a sense of control, I suggest that you put a percentage of your income into a fixed savings account — as, that way, your money won’t be as readily available for you to whip out on a whim. That invisible barrier will stop you from making unnecessary deductions to your bank balance without proper thought and consideration.”
Framrose’s financial advice is all about accounting for ‘fun’ spending. “Moderation, and finding harmony between spending and saving, is vital for a compulsive saver. I’d advise setting aside a bit of a budget for ‘fun’ each month — a lump of cash that is purely used to indulge in yourself and work on your internal happiness. I know what you’re thinking — money can’t buy you happiness — but treating yourself to the things you enjoy every now and then can!” And trust us, there are plenty of ways to spend money that can instantly boost your mood, whether that’s a delicious end-of-week dinner, that bag you’ve been eyeing off, or even just an indulgent cocktail.
Dr Gee explains that these people tend to run on temporary highs. “Their behaviour is motivated by the production of dopamine from neurons in the brain’s reward circuit, which creates a sense of pleasure and thrill at the concept of risk and reward.
“Short term gain should never win out against long term pain, so these personality types need to set boundaries around their financial risks, define these with a financial advisor and get therapeutic support if their sensation-seeking behaviours are becoming an issue.”
To curb these tendencies, Framrose echoes Dr Gee’s advice. “If you often find yourself making financial decisions with little to no forethought, it’s vital that you stay aware of your tendencies and be mindful of how much money you need to set aside to retain financial stability.,” she says. “A fixed saver account is paramount for this type of personality, as it sets a clear ‘stop’ point for spending.”
After all, you may think you’re not in a bad position with money, and therefore get a little lax around skirting the budget, but a budget only works if you stick to it!
Framrose recommends taking a micro approach to your budgeting. “Whilst most of us that get paid on a monthly basis plan out our finances each month in line with that, this may not be the most viable route for a saver-splurger. I would recommend saver-splurgers still having a monthly budget but then splitting that up into weekly spending pots so they don’t lose track as the month goes on and don’t find themselves struggling in the run-up to payday.”
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