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    Financial advice for different money personalities

    Why can some people with modest incomes build wealth more quickly and easily than others who have a high-paid job, but who are constantly struggling with money? It becomes clear that the amount of money you make is not the main element of financial wellbeing. Discovering your money personality and understanding the fundamental needs of money are essential steps to fixing your money problems. There are four general types of money personalities, as are discussed below.

    Avoiders sabotage their financial success because they perceive a negative association between money and being a good person. They are not comfortable with the subject of money due to their lack of interest or understanding. They might not even know how much is in their bank account, and planning for the future is too hard for them. They are thus missing out on certain opportunities that would help them set foundations for a more financially secure future.

    Savers regard money more as a means of obtaining security than of buying desired assets and enjoying life. Savers are not concerned about following the latest trends and they derive more satisfaction from observing the balance of their savings account increase than from buying something new. They are conservative by nature and devote substantial time to analysing every potential risk, but then they don’t make any decisions at all. It is important to remember that no decision is still a decision, and that opportunities can pass by if you don’t take any action.

    There are two types of spenders: shoppers and status seekers.
    Shoppers often develop great emotional satisfaction from spending money. They cannot resist spending and purchasing items that they do not need. They hunt for bargains and are excited when they find them. However, if shoppers do not address their spending impulses, they could find themselves deep in debt or with crippling credit card bills.
    Status seekers tend to overspend money so that they can raise their social status. They wish to show the world in extravagant ways that they are important and successful, such as by driving expensive cars and living in exclusive neighbourhoods.
    Spenders’ problems can be linked to their pretence that they have more money than they do. They are consequently at risk of overspending so that they can convince people of their financial success. Therefore, they have a relatively lower net worth, even though some of them may make a high income.

    Investors are always consciously aware of money. They do not make impulsive purchases, like spenders do, because they know that the more money they spend, the less they invest. They also don’t just save money, like savers do, as they fully understand that savings at the bank won’t grow, so they try to make their money work for them by taking certain risks.

    Some of you may find that you have a combination of two or more money personalities. But what is your dominant money personality? Whatever you find, the way you think about money could significantly affect how much, or how little, you have. Money personalities typically operate outside conscious awareness and drive financial behaviours. The subconscious mind comprises certain ideas and beliefs that are formed primarily in early childhood, as the subject of money is taught at home, not at school.

    When you work with a trusted financial adviser to chart your financial journey, they act like a personal trainer and coach. Their goal is to convert spenders and avoiders to savers, then work with you over time and through struggles so you become an investor, with good investment habits.

    If you are an avoider, and you hate dealing with money, then deal with goals or dreams instead. You determine how much you need to fund your goal and then map the plans for achieving it with the help of an adviser. The desire to achieve a goal is a much more powerful motivator than the desire to avoid something else. When you understand that money can be a tool for building the life you want and accomplishing what matters to you, you will change your state of mind towards money.

    When we try to increase saving, we often consider cutting expenses. Every expense or liability can be mapped to a human need. For example, when you spend $10,000 on a car, you buy it to meet a physical need. However, if you buy a car with $100,000, your needs might be more subtle. It could be more about the needs for comfort, prestige and self-esteem.

    Unearthing complex needs for spending is important. Your adviser needs to connect the concept of advice with your underlying personal motivation, otherwise the plan won’t be sustainable. If you simply cut expenses without a meaningful intention, you won’t stick to the plan.

    Impulsive spending can also be an act that a person performs to compensate for other areas of his or her life that is found to be lacking. Spenders should thus seriously consider what these areas might be and work to change them. The solution to the spending problem should include alternative activities that offer the same feelings of accomplishment and self-worth, but without the expensive costs.

    Savers can deal with the problems of excessive wariness and anxiety, which could keep them from enjoying the benefits and sense of security that money can provide. ‘Moderation in all things’ is good advice for savers. Safe savings are indeed better than no savings or bad debt—but they will not increase your wealth. Exploring different investment options and taking calculated risks with the help of an adviser are the keys to your financial success.

    If life partners have different money personalities, money can trigger serious conflicts in their relationship. I have such a couple as clients: the husband is a saver and his wife is a spender, and they have different needs for money. While she considers money as a means to experience excitement and pleasure, he sees money as the way to meet his need for security and peace of mind. Hence, the more money the wife spends for her fun and pleasure, the more the husband feels his security is threatened. They learned to talk about their needs—pleasure VS. security—and I advised them of a strategy that meets both of their needs without jeopardising either person’s happiness.

    Here is a simple measure for you: if your financial situation is not turning out exactly the way you would like it to, there is obviously something you don’t know.

    Successful investment does not originate from what you know, but from what you realistically acknowledge that you do not know. Investors must learn before they can earn. Meanwhile, logically knowing what to do isn’t enough. Some investors know what is the right thing to do, but they are inconsistent about actually doing it.
    Another of my clients trades the share market frequently and is good at buying shares at a discounted price, such as a buy-in during the pandemic. But he asked me to change his asset allocation with his super fund to a more conservative option during in the pandemic as well. I explained that would mean that he needs to sell his growth assets, including shares, in a bad market, which is conflicting with his investment philosophy. A good adviser helps to reduce the risks of investing as they also take the emotions out of your financial decision making.

    We save, spend, and invest our money to meet our specific needs. Needs don’t change; however, the strategies can be flexible. Most of us are not always consciously aware of our behaviours and feelings about money. Like many other parts of our lives, we think that it is just the way we are. Advisers who help their clients understand their money attitudes, habits and dispositions—and who rescript self-limiting money personalities—can help you grow and protect your wealth more effectively.

    General advice disclaimer
    This information has been provided as general advice. We have not considered your financial circumstances, needs or objectives. You should consider the appropriateness of the advice. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned in this communication.

    Helen Nan, Principle adviser & Author of ‘Your Best Life’,
    Authorised Representative No. 1002520
    Plan for Your Future Pty Ltd Corporate Authorised Representative No. 1280880
    Alliance Wealth Pty Ltd |AFSL 449221 |



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