What kind of financial personality are you?

Are you a risk-taker, a compulsive saver, or somewhere in between? Your financial personality plays a big role when it comes to how you manage your money.

“Once you have an understanding of your financial personality, and how this evolves, you can manage your money more effectively based on your type,” says Funmi Olufunwa, a financial coach at Hoops Finance.

Here’s our rundown of the main types with tailored tips for how to max your money.

The different financial personalities

There are several distinct financial personalities, says Greg Davies, head of behavioural finance at Oxford Risk. “Personality types like savers, spenders, risk-takers and avoiders are ones I recognise from my work, as they reflect common patters in how people manage money.”

The compulsive saver

If you’re focused on seeing your balance grow but feel unable to treat yourself, even when you’ve plenty of spare cash, you might be a compulsive saver. But while saving gives you a sense of security, it can also lead to anxiety if you feel you never have enough set aside.

The big spender

Do you frequently make impulse buys or enjoy splurging? You struggle with saving because you live in the moment. While this can be exciting, you may sink into the red and find you’re unable to meet financial goals.

The risk-taker

If you typically take risks, such as piling all your spare cash into the most volatile stocks and shares, you might be a risk-taker. While this approach could give you higher returns eventually, it also increases your chance of massive losses and leaving you without an emergency fund.

The avoider

If you shy away from making financial decisions because you’re afraid of making mistakes, you’re probably an avoider. This means you put off planning for a comfortable financial future and might therefore fail to meet your life goals.   

What shapes your financial personality?

Several factors shape your financial personality, including your parents’ approach to money, life experiences, and your job. However, as Davies explains, your financial personality isn’t fixed. “Your personality is mostly stable, but major life events can change your approach. Big shifts, like becoming a parent, might increase your need for security, for example,” he says.

Think about your life. Has building up savings over time boosted your confidence? So you’ve become a risk-taker? Or did a financial setback make you more cautious? While it’s important to understand your tendencies, being flexible and adjusting your approach as life changes can lead to more balanced financial behaviour. “With experience, you can work with your financial personality, adapting it to new stages in life without trying to change who you are,” adds Davies.

Making the most of your money based on your spending style

• Savers: While it’s important to have savings for emergencies, it’s equally important to enjoy life. Set aside a small part of your budget for things and experiences that bring you joy. “Don’t let Fear of Running Out (FORO) stop you from enjoying what you’ve earned,” says Davies.
• Spenders: Olufunwa says: “Have a look at your bank statements. What do they say about your spending habits?” This process should help you to spot triggers, such as places or particular retailers, that lead to impulse buys. “Waiting 24 hours before buying something and using budgeting apps can help you to curb impulsive spending,” adds Olufunwa. Setting spending limits can also help you find a balance between spending and saving.
• Risk-takers: “Balance potential gains with security,” stresses Olufunwa. So this means you’ve tackled debts and have some cash saved before doing anything else with your money.” Ultimately, if you’re trying to build a substantial pot by taking risks, make a plan to achieve this without risking your financial stability.
• Avoiders: Break down financial tasks into smaller, manageable steps, and seek specialist support when needed. Speaking to a professional financial adviser may also boost your confidence and help you take control of your finances.

Five tips for better money management

Whatever your particular financial personality, these tips can help you better manage your money. 

1. Make a mindful budget

Start by listing your monthly income after tax, followed by major outgoings such as rent or mortgage, council tax, utilities, broadband, and debt repayments. Taking the time each week or month to write everything down on paper can make you more mindful of your finances. You’ll be able to see what cash you have leftover at the end of each month, so you can figure out how much you can afford to save up or potentially borrow to reach your goals.

2. Use cash

Physically handing over cash can also make you more aware of how much you’re spending, particularly if you usually use credit and debit cards  without much thought.

3. Set financial goals

Think about goals that make you happy and consider your options, even if that includes affordable borrowing if saving enough isn’t quite possible or you don’t want to dip into your nest egg. This may include booking a holiday, say, or kick-starting a home improvement project.

4. Avoid spending triggers

This could mean avoiding sales of flash deals that encourage impulse buys, though there’s nothing wrong with enjoying your money as long as you’re spending mindfully and within budget Unsubscribe from retailer emails and notifications on social media too if you’re trying a spending detox.

5. Practice good money management

It’s important to repay any debt you do have on time, to keep your credit report in good shape. Not only will this help you keep your finances on track, but having a good credit history could put you in a better position if you wish to borrow money in the future.