• Your attitude towards money heavily influences your spending habits.
• “Wealth is not earned instead it is created, if you learn the principles of wealth creation you will recreate wealth over and over,” Steve Down, a certified wealth coach, and CEO of Financially Fit Africa told The Financially Fit Africa Blog
• Your journey to attaining financial freedom has to be influenced by the way you feel, think, and act about money.
What is your money personality?
Immediately money is mentioned, 98% of the population think about spending. Steve Down argues money habits are directly influenced by our environment and understanding the psychology of money can redirect emotional spending to logic and decisive spending. We make hundreds of decisions each day without realizing they are influenced by our behavior towards money.
Recently, a friend was disposing of a pair of Michael Kors red bottoms at a throwaway price. Knowing too well another mutual friend has an undying love for big brands she was the first to get informed about the sale. She immediately bought the pair of heels. The mutual friend then called me to celebrate how she had gotten a fair deal, as a friend obviously I was happy for her, as a Financial advisor I knew she had too many pairs of shoes and the Michael Kors was an unplanned purchase that outlined her behavior with money.
What my friend suffers from is status anxiety, defined as the state of being perceived as ‘unsuccessful in financial psychology. Most of us have experienced this, do you feel the obligation to pick up tabs every time you are out with your friends, or do you believe shopping is the solution for a bad day? A popular Kenyan saying on the internet after making detrimental financial decisions “ You Only Live Once,” analogizes the effect of impulse buying that results from status anxiety.
The first step in changing the way you feel about money is identifying your financial personality and understanding why you spend or save the way you do.
What is your Money personality?
Attitude towards money: Saving guarantees financial security.
. Habit: They save without a solid plan.
. Social-life: They would rather save than reward themselves or they will save than spend the money all at once to reward themselves.
“I save a lot because my mother taught me how to, watching her do has shaped my relationship with money. I save and save; any money I get I save. My account balance cannot run low lest I get anxious and find a way of refunding the money spent. There was a time I saved up to 500,000 Kenyan shillings only to splash all of it in a week on clothes and shoes.”
“Investing is a gamble, I have always wanted to but courage fails me every time I try to.”
Like Maureen, money is equated to security. Hoarders save, fail to reward themselves, and shun away from investing opportunities.
Hoarders prefer saving accounts despite the low interest rates accrued.
Most hoarders have been raised in families where cash flow was limited and only allocated towards the necessity. money in these settings guarantees security against debt or any financial calamity.
Hoarders would rather save than invest. One cannot save their way to financial freedom and this personality type deteriorates your financial health.
. The Spender
. Attitude towards money: Spends when in emotional distress, believes more money will come, and often, after spending they regret it.
. Habit: Impulse buyer, believes in immediate gratification, shops when it’s convenient, experiences status anxiety, and will always want the latest pairs of shoes, dresses, suits, cars.
Social Life: Spenders are the life of the party, they are key influencers and are well known for their flamboyance and extreme generosity
Spenders often suffer from status anxiety when in large groups. They are inclined to compare their financial status with their friends and will spend on expensive and flashy dresses, frequent high-end bars and restaurants every weekend.
Spenders feel they will more acceptable in groups if they own the right things.
- The Investor
Attitude towards money: Apply the Wealth compass logical spindle when making money choices.
Habit: Investors are risk-takers.
Social life: investors associate with fellow investors; they look for opportunities to invest in their social circle.
Investors are risk-takers, unlike hoarders; they seek multiple streams of income by investing in lucrative ventures. Typically, investors pay their bills on time and their spending actions are driven by logic over emotions.
Investors are extremely future-oriented.
Attitude towards money: Impulse buyers, hardly budget for anything they want to spend on, may fall in the category of hoarders who save money then end up spending as they had no investment plans.
Habit: Are habitual spenders.
Social Life: Often want to fit in with the latest gadgets, clothes, and accessories. They easily bow to social pressure. If with the right group of friends they can easily make the right financial choices and invest as they are risk-takers.
Do you ever want to get a pair of shoes or jeans because they are in-trend? Everyone on Instagram is shopping at a specific store and because you do not want to miss out on the social media frenzy you decide to hop into the trend?
Shoppers have poor spending habits, they often fall into the emotional spindle of the wealth compass when they are anxious, sad, or angry.
If well guided, shoppers can also be investors as they are great risk-takers.