We are passionate about financial education and avoiding financial jargon. There are core principles we value: access to good information that is clearly explained, and information that is backed up by research. What we don’t like are oversimplifications, generalisations and reductive statements. You know the type, that starts with “people always…”.
In this article, we present the findings of comprehensive research conducted by the University of Auckland in New Zealand in collaboration with Te Ara Ahunga Ora (the New Zealand retirement commission). The findings are so interesting we want to share them with you and explain how they are relevant to expats living in Europe.
The first observation they made, which resonated with us, was that when it comes to managing our money, people don’t have a lack of access to information, indeed often there is too much. It is how to distil the vast amounts of commentary, data, observations and predictions and apply it specifically to your situation. The other critical point this research uncovered is how you interpret and respond to information.
The research conducted an extensive review of personality traits, values and attitudes as well as a broad survey. Their new research has identified five distinct money personalities that drive how we manage our finances and how we spend money.
The research found that the people they surveyed were good with what they called the basics of financial capability, things like budgeting.
We are in a high inflation environment and many expats in Europe and noticing a tightening of their cost of living, making prudent money management more important than ever. Understanding how you respond, a personality type in relation to managing money can help you understand the decisions you make. It can also help how you work with your financial planner and investment advisers, like Black Swan Capital.
They identified 5 key money personalities. See which one you best identify and then how it might help you when you make money decisions.
The 5 money personalities
A financially confident, future-orientated planner who enjoys looking after their finances and is proud of being money savvy. Their strengths include self-control, financial knowledge and making their money work for them.
An enterpriser is unlikely to make impulsive or emotional purchases. However, their aspirational approach – viewing money as a priority and a symbol of success – may pair badly with materialism, causing them to spend money to gain status rather than for value or utility. Enterprisers benefit from learning about investing and planning for the future.
The minimalist is frugal, confident with their saving ability, and on top of their financial situation. Minimalists value a simpler life, scoring low on materialism and are not prone to impulsive or emotional purchases.
Their weakness is not always making their money work as hard for them as it could, as they are less likely to take financial risks – even where there is a potential for higher investment returns. Low-cost, passive investment strategies may appeal to minimalists.
This classification is a joyful risk taker, outgoing, and confident with their money handling. A generous extrovert, they are more likely to be materialistic than other personality types and tend to live for today rather than plan for tomorrow.
Their high tolerance for risk suggests some socialites may take on unwise levels of financial risk. Those in this group who are also impulsive or prone to emotional purchases may find themselves overspending or vulnerable to over-extending themselves with consumer debt.
Socialites may like to explore active investment strategies and riskier investment classes, however. Taking calculated risks and building financial resilience is an important focus for them.
This type doesn’t enjoy managing their money and they lack confidence when it comes to financial matters. They are likely to say they’re a spender despite being less materialistic than others; living for today, they tend to engage in impulsive emotional spending and are generous to a fault.
For contemporaries, the focus is increasing financial resilience by paying down debt and building an emergency savings fund, enabling them to share their wealth with others without affecting their own financial well-being. Working on their money mindset and general financial knowledge may allow them to build confidence and savings, then take a passive or “set and forget” approach to their financial life.
A future-focused, very conservative with risk, and values money highly. But they are not confident with their money handling, despite paying close attention to their financial situation.
The most introverted personality type, a more aspirational realist may be materialistic but is unlikely to make impulsive or emotional purchases a habit. This suggests building confidence and encouragement to take appropriate investment risks is important. Given they do not like making money decisions, automation of bill payments and savings may appeal.
Understanding your financial position is central to achieving your goals, and have more knowledge about why you react the way you do can also help you to make better decisions.
With independent advice Black Swan Capital can help you to achieve your targets, please contact us at [email protected].