Illustration by Robert Rodriguez
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What’s Your Money Style?
By Jordan E. Goodman, September & October 2006
Find yourself stymied when it comes to saving? Then find yourself! Take these six money types out for a spin
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Complete the following sentence: "If I had a lot more money, I would..."
Thousands of folks I've advised have filled in that blank, and it never ceases to amaze me how varied their replies are:
"...move to Vegas and play the tables every night."
"...fund medical research and start a business."
"...buy a house for my parents and another nearby for myself."
"...go back to school for the education I never got."
Their statements share just one thing: deep emotion. People imagine fulfillment for themselves and their loved ones, a sense of security, exciting new possibilities. It's not any particular dollar amount that makes their hearts leap—few people even ask if I have a number in mind. What counts is the answered prayers and vanquished fears that a pile of cash instantly conjures.
But then money usually comes freighted with emotion. Ever splurge on a gift? Fret over a phone bill? Feel good handing some down-and-out soul a dollar? Even with long-term efforts that we'd like to think are levelheaded—like paying for a home or saving for retirement—our fears and dreams shape our behavior. Everyone has a financial personality. That's something it took me a long time to learn.
Over more than two decades as a commentator on radio and TV, I have advised thousands of people—some successful, some struggling—on how to solve their money problems. For years I was surprised at how many individuals would come to me time and again to ask a question they'd asked me before. At first I tried to provide more clarity and detail about, say, payment schedules to control debt or asset allocation when diversifying investments. But eventually I realized that the practical matter I was addressing with such optimistic fervor—"What do I do now?"—wasn't the heart of the problem. To understand what was really going on, I had to supply the unspoken part of the question: "...given how I feel about money."
The more closely I listened, the more clearly I heard other emotional subtexts, too. Things like:
"I'm so afraid I'll end up on the street, I can't do anything."
"I just know if I give stock picking one more shot, I'll hit the jackpot and have everything I ever wanted."
"I'm comfortable...but I don't dare to wish for more."
"I don't know a thing about managing money, and whenever I try, I feel like a moron."
As I listened with new ears, the real challenge became obvious to me. Money management may be outwardly rational. It's about income and outgo, budgeting and saving, insuring against disaster and investing in the future. But inwardly it's utterly emotional. Your decisions are influenced by attitudes about money you acquired growing up and the experiences since then that have made you more cautious or confident.
In short, what money means to us is always bubbling just under the surface. It shapes our day-to-day spending, our appetites for risk, and whether we can stand to think about money matters at all. It reflects the emotions we've attached to money—for good or ill—that equate having enough with being respected or happy or even loved. Why do my regulars repeatedly ask the same questions? Because they keep reacting to money in the same way—the only way that feels real.
If you never established a cordial working relationship with money—if you find investing decisions too scary or can't stick to a budget or are somehow always putting off saving—it's time to take a long, gentle look at yourself. I say gentle because nobody's perfect or anywhere near it. We all can learn to do better.
To help you out, I've identified six basic financial personalities—money types—from the thousands of personal stories in my files. I dubbed these types Ostriches, Strivers, Debt Desperadoes, Squirrels, Coasters, and High Rollers. Each is described below. As you read, you may recognize aspects of yourself in all of them, but in my experience one or two will stand out. (Me, I vacillate between a risk-hungry High Roller and a go-with-the-flow Coaster. Yes, I'm a Roller Coaster!)
When you find your type, you'll be on your way to making more of your money, because simple self-awareness is half the battle. When you know who you are, you can acknowledge your weaknesses and set goals based on your strengths. Mastering your money type doesn't mean becoming somebody else. It means knowing which traits are fundamental to your personality, making peace with them, and then taking a few concrete steps to help yourself.
YOU'RE AN OSTRICH IF...
You're baffled, intimidated, or embarrassed by money, or just too dreamy to tend to business. So you stick your head in the proverbial sand, feigning indifference. But this
doesn't mean your finances are down a hole. Found in every walk of life, Ostriches are stubborn survivors who like to think they have better things to do than mind their money.
Common Problem A late start on saving. Shaken awake from a financial slumber, Ostriches need to play catch-up.
Case in Point Ken and Janet began building up assets in their late 40s. Before that, every dollar went to supporting themselves and their two girls. After job-hopping through the building trades, Ken went back to school to get a degree in engineering. He still has $20,000 in student loans that have been deferred more times than he'd care to count.
Backstory Investing was long an elusive concept for Ken, whose parents were children of the Depression. "They never helped me understand what to do with money to make more," he says. "They gave me a lecture and wrote out a check."
The Challenge Take that self-protective streak and turn it to productive use. Get over your embarrassment about what you don't know and tackle one financial need at a time.
What to Do Automated money management was made for you. Pay bills online or let regular payments tap your checking account. Direct-deposit your paycheck and send as much as you can straight into savings, an IRA, or 401(k) plan. If the choices among mutual funds are daunting, buy all-in-one funds that diversify your holdings for you.
Words to Live By If you believe you can't, you're right. Believe you can.
YOU'RE A STRIVER IF...
You're a status seeker. For you, life's about acquiring stuff and showing it off. You may have the energy and drive to succeed, but you're prone to overspend, and that can get you into debt and interpersonal clashes.
Common Problem Bad cash flow. You're not broke, but you're living off the future by running up credit card debt and neglecting to save and invest.
Case in Point Valerie and her husband, Don, just put most of their life savings into buying a grand three-bedroom home in an upscale suburb. She's 39, a sportswear executive. He's 60, a part-time golf pro at a country club. He didn't want the new house; she did. "I haven't slept well since we moved in," Valerie says. "I never thought I'd be this confused about getting the house I always felt I deserved."
Backstory Her parents were rich as children, then her grandparents' investment losses brought them low. Valerie grew up in a small apartment, and her mother went into hock to provide Valerie with fancy clothes. Though Valerie calls the tension back then over money "brutal," she has held on to her mother's sense of entitlement.
The Challenge Harness your considerable will and put it toward matching income and expenses.
What to Do Pick the luxuries that mean the most to you and let the rest go. Begin by figuring what you really spent in the past year. Be sure to include all the biggies—insurance, tuition, repairs, gifts. Then start cutting. Once you're living within your means, set a short-term savings goal and make sure you meet it.
Words to Live By Self-worth is the gift you give yourself. You are not your possessions.
YOU'RE A DEBT DESPERADO IF…
You're a spending addict who's in denial about your habits, or you're a desperado of circumstance, overwhelmed by medical costs or other personal catastrophe. Either way, you aren't used to admitting that you need help—and quick.
Common Problem The slippery slope. Little by little you fall further behind by opening new loans to pay off old debts coming due.
Case in Point Bob and Jane were a lender's dream: they always paid their bills and never cleared their debts. By relying on credit cards instead of trimming spending, they got by after their two kids were born and Jane dropped off the career track in favor of part-time work. Then Bob's job was eliminated by a merger. Jane took a second job and reached a point where she couldn't talk about the situation. For a while they paid the minimums on $65,000 in credit card debt, until even that became too much.
Backstory "We both had good credit, but we couldn't get ahead," Bob told me. "Every single cent we made went back out." Embarrassed by his plight, Bob was also wary of debt-relief programs, fearing—incorrectly—that signing up for one would forever mar his credit ratings.
The Challenge Holding on to your ability to take a punch and keep going. It may have put you in trouble before as the setbacks mounted; now, it'll help you get out of debt—and let's hope, avoid bankruptcy.
What to Do First, don't ignore your problems. Face your creditors and, no matter how hard they press you for full payment, put your own survival first. To work out a repayment schedule at lower interest rates, get professional help from a credit-counseling service you've checked out with the Better Business Bureau (find your local office in the white pages, or online). One national service that you could try is Debt Relief Solutions (800-433-2843).
Words to Live By The past is past. You can't change it, and it isn't coming back.
YOU'RE A SQUIRREL IF…
Saving is what you do, clipping coupons and pinching pennies to keep your spending in line with income. Bravo for that! But many Squirrels learned these habits during past adversity, and when your lingering fear of losing everything takes hold, you can turn into a miser who lives way below your means. Fear also keeps you in the least risky, and least rewarding, investments. You're only cheating yourself.
Common Problem Like people, money that sits doesn't age well. Inflation steals value. Savings accounts and mattresses don't offer the best return.
Case in Point Alan, recently retired, worries not for himself but for his daughter, Sally, who doesn't save. He says he's satisfied with his life—vacations are across town, baby-sitting the grandkids—but would like to earn more. He calls the stock market "too risky."
Backstory Alan's father died young. His mother passed on both her resilience and her caution. Alan gave up on becoming an architect at 17, convinced the profession would be too unstable. His wife, Barbara, "was interested in keeping up appearances," Alan recalls. "I don't have to have the biggest and best, but Barbara did." Her boutique went bust; they lost their home and savings and ultimately divorced. "I lived my fears," he says.
The Challenge Don't relive them. Temper your instincts and see that money isn't by nature a source of pain.
What to Do While you're the most patient of personalities, you're missing out on the superior gains that have been the rule for patient long-term investors in mutual funds. Remember the saying: no risk, no return. Diversification is all about moderating risk without sacrificing return by spreading holdings among different investments. Stocks that pay dividends (like blue chip and utilities), immediate annuities, and short-term bond funds are low-risk investments that can do more for you than most bank savings accounts. Moderate risks worth your consideration include stock-and-bond mutual funds, rental real estate, and corporate bonds rated above junk. The more you have to invest, the more open you should be to a range of risk.
Words to Live By A penny saved...isn't much. Live a little. You owe it to yourself.
YOU'RE A COASTER IF…
You're focused on stability and—congratulations!—you've achieved it. You're likely to have decent insurance coverage and some retirement savings. But you're complacent about working out what you'll really need in later years, and that could cost you in dollars or dreams.
Common Problem You're overinvested in your current comfort—and maybe a little scared of admitting you still have unfulfilled ambitions.
Case in Point Ready for retirement from the Small Business Adminstration at 50, Nancy would like to open a restaurant. She's skilled enough and will have a federal pension as backup, yet indecision is "hanging her up," she says. Going into business means taking risks. "My parents would play it safe. I worry that I'm too close to retirement."
Backstory Her dad, a career Army officer, steered Nancy toward the security of government service. Nancy married an Army officer, divorced, and is seeing her two daughters through college. "I'm grateful to my father," she says, "but I'm not sure if I should keep doing what my parents do."
The Challenge Use that firm foundation to launch yourself toward a higher goal.
What to Do It's time to crunch some numbers and project exactly how much you'll need and when you'll need it to ensure a comfortable retirement. Do you have disability insurance? Can you afford long-term care? Once you know how you're doing, factor in your ambitions. Review your portfolio, and see if you can get a better return by holding investments with a wider range of risks. A financial planner may help.
Words to Live By Time to dream big. Your savings can get you there.
YOU'RE A HIGH ROLLER IF…
It's the gambler's life for you. But casinos aren't your only hangouts. Your biggest thrills come from investing yourself in an outcome, which is why entrepreneurs often belong under this heading. You tend to think you're smarter, faster, shrewder—and invincible. Staking everything on yourself, you're in it to win it.
Common Problem Money and heated emotions seem to go together for you. You've got something to prove to yourself—over and over—and you tend to underestimate the potential for bad results.
Case in Point Ben, 60, says that as a businessman he was like a cartoon character—he'd run right through walls and emerge unscathed. But as a book publisher, record producer, and luxury-goods maker, he made the mistake of relying on his own money for ventures. After a few high-cost projects tanked, Ben declared bankruptcy. "After all my success, I had to face the fact that I wasn't smart enough with money," he says.
Backstory Following early success as a stockbroker, Ben decided to bet on his own imagination and salesmanship. "I went along making money but never really thinking about it," he says. "It's hard to believe, but it's true."
The Challenge To be bold—yet no bolder than you need to be. Laying it all on the line every time is a sure-fire loser of a strategy. You need to get out of overdrive.
What to Do Establish a safety net so you can pursue your high-wire act and live to play another day. Set goals for any investment, deciding in advance on a definition for success, i.e., when to take your profit. Entrepreneurs: bring in a business manager, and use other people's money—a great reality check. For some of you, joining Gamblers Anonymous can help.
Words to Live By I fought the odds, and the odds won.
Jordan E. Goodman was a member of the editorial staff of Money magazine for 18 years. He is the author of Everyone's Money Book (Kaplan Business, 2002) and provides financial advice to millions of people through regular TV appearances and 50 call-in radio shows each month. He also hosts a website, MoneyAnswers.com.
From the book Master Your Money Type: Using Your Financial Personality to Create a Life of Wealth and Freedom by Jordan E. Goodman. Copyright © 2006 by Amherst Enterprises Ltd. and Lyn Sonberg Book Associates. Published by Warner Business Books.
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