“Are you a spender or a saver?”
Experts believe that our money habits are cemented around age 7 and are largely dictated by lessons learned from our parents or guardians.
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Personal Capital Dashboard User, February 2021
When I tried to answer the “spender vs. saver” question for myself, I struggled with such a black and white concept. I felt that it really was too limiting to describe myself as one or the other, and most of all, it wasn’t really helping me achieve my goals.
I came to the realization that it’s not really a question of if someone is a spender or a saver — we are all both. What sets us apart from each other is that we choose to spend or save based on different values.
Because our habits and values are instilled in us from such a young age, it’s likely your “money personality” has been calling the shots for a long time without you even realizing it — and it may be derailing more than you know.
Today, I’m breaking down five financial personality types to help you build a better roadmap to your goals and take control of your financial future.
The Financial Freshman
A Financial Freshman is a total money newbie — but don’t worry, no hazing here.
If you have an uncontrolled relationship with spending, little to no savings, mounting debt, or feel constantly stressed by your financial situation, you may be a Financial Freshman.
As a financial freshman, here are two things you can do immediately to get better control of your finances:
1. Start building an emergency fund
An emergency fund should be at least three to six months’ worth of expenses — and get bare bones with this. If you lost your job tomorrow, how much would you need to pay rent, utilities, insurance, transportation, and groceries? Calculate this number, and start putting whatever you can away in a high-yield savings account.
2. Create and stick to a budget
Find a way to start and follow a budget. What clients find most surprising after starting a budget is how much they are actually spending per month. I recommend using Personal Capital’s free money management tools to get a grip on your finances.
Accounting for every dollar you spend will help you determine where you could shave off spending in one area to put more in savings or pay off debt.
The Debt Defeater
As of January 2021, the average American has $90,460 in debt.
The numbers are shocking and only get worse when you begin to break them down by age, gender, and race.
I don’t bring up these numbers to cause you more anxiety, only to let you know that you are not alone if you’re in the stage of paying off debt.
Once you’ve saved your emergency fund (refer to the Financial Freshman), you’re ready to start tackling your debt.
Step 1: List all of your debts and their interest rates.
Step 3: Make it fun and celebrate the wins. Debt payoff can be a tedious process, but the joy you’ll feel when you pay off your first account? Totally worth it.
Finally, if you are struggling with credit card debt, I highly encourage you to stop using a credit card. This is why I recommend building up the emergency fund first. You won’t be as tempted to whip out your card whenever the smallest inconvenience comes your way.
Read More: Dear Tori: What Debt Should I Pay Off First?
Are you a driven, career-minded person who’s fallen a little flat in the past few years from burnout or even boredom? You’re what I call the Career Climber money personality. You had a clear trajectory you hoped to achieve as a fresh-faced entry-level worker, and it may or may not be working out for you.
If you’re a Career Climber in a rut at your current job, here are a few quick things you can do to check-in:
1. Consider a transition
Do you REALLY love this job, or was it just the best offer you got at the time? Millennials and Gen Z are changing the game when it comes to workplace longevity. The old rules of staying with a company for 5 to 10 years are outdated. If you’re feeling uninspired, disconnected, or constantly trolling job boards, it might be time to start hitting the pavement.
2. Negotiate, negotiate, negotiate
Often, the job we started with can quickly transition into something else entirely. Whether you’re taking on new responsibilities, switching departments, getting a promotion, or managing more team members.
If you otherwise love your work and want to stay with the company, these are great times to re-evaluate your compensation plan and start negotiating to make sure you’re being well compensated for your time and talents.
3. Make sure your goals are still relevant
You may have started as an aspiring copywriter ready to take the advertising world by storm but found that you loved the client interaction more than the actual writing. Suddenly, you’re jealous of the account managers and sales reps and resenting the blank page in front of you.
We go to college (or right into the workforce) at 18, and we grow SO much in our 20s. It is natural to get into the workforce and find a new passion.
Your burnout may be less about your workplace than about your job title. Take some time to evaluate if your original path is still in line with your aspirations. It’s never too late to change it up!
Hi, I’m Tori, and I’m a reformed Career Climber turned Commander-In-Chief.
Simply put, the Commander-in-Chief personality is the entrepreneur, the anti-nine to fiver, the financial nomad.
When you’re a freelancer, small business owner, or any other non-traditional worker, you have a completely different set of worries when it comes to finances.
Income can be non-existent one month, and the next, you’re rocking multi-five figure sales. You’re also in charge of paying yourself, controlling your schedule, figuring out your health care, and making sure you’re playing nice with the IRS.
Your financial playbook is going to be different than anyone else’s on this list. So how do you make sure you’re not in over your head?
1. Build a bigger net
Set yourself up for less stress, and boost your emergency fund as much as possible while you’re building your business on the side. You may be matching or making more than your current salary, but the wild wild west of entrepreneurship doesn’t have the same safety net as your day job. It’s best to be a little overly prepared if you can.
2. Just start
When I first started Her First $100K, I agonized over branding and websites and every tiny little detail thinking I had to be perfect to start. When it comes to entrepreneurship, done is better than perfect, especially if your perfectionist tendencies are keeping you from hitting “publish.”
Stock Market Scholar
If you’ve paid off high-interest debt, have an emergency fund, and a steady stream of income, it’s time to start investing. And I’m not just talking about maxing out your employer-matched 401k (which you should be doing regardless of what debts you have because it’s FREE MONEY).
If you meet the above criteria and haven’t started an IRA or any other investment funds, you probably believe one (or both) of these two things:
- You have to be debt-free to start investing
- Only wealthy people are doing it
I cannot tell you how many times I have heard these absolute lies. And they are lies, make no mistake.
And the second thing you need to do is just get started. With investing, time is on your side thanks to the wonders of compound interest. Even if you can only find $50 a month to put in an IRA, your retired self will thank you for it.
Read More: How to Handle Stock Market Anxiety
Knowing your money personality can help you create a better strategy for your short and long-term financial goals. Use these personalities to help guide you through the different phases of your financial life, and set the money goals that matter to you.
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