Understanding how personality affects your spending and money will help you make better decisions
We talk a lot about saving and spending on the channel and have gotten some great tips from a lot of very smart people but I still hear from so many of you that you just can’t seem to keep that budget or stop from overspending.
And it’s because we have so many psychological barriers and challenges to our financial health. Spending habits aren’t just a habit that’s hard to break but go even deeper into our personality. That’s why generic savings and budgeting tips don’t always work, because you need to understand how your own personality deals with money.
So I wanted to bring on Catherine Treme for our interview today. Catherine is a behavioral finance analyst, her job is to study how our personality and behaviors affect all those financial decisions so she’s perfect for helping us figure this out.
I'm loving the face-to-face interaction and the community we're building on YouTube. More than 400,000 people have tuned in to the show as we talk about busting debt, making more money and making your money work for you.
Catherine also faces all the same money and life decisions that we all do so she started her blog to share her thoughts on money, career and life. I've summarized the video below but it's not a complete transcript. Watch the video above for all the details or click through to the full interview on YouTube.
Catherine, thank you for being here with us today to share your expertise and insight into the psychology of overspending.
How Does Personality Type Affect our Spending Decisions?
You talk a lot on your blog about how our personality can affect how we spend or manage our money, can you explain this a little?
There are 16 personality types according to the Myers-Briggs Personality test and it really helps people understand their natural inclinations when it comes to different decisions. Self-awareness is really the key, because understanding your personality can help to better understand your financial decisions.
For example, I'm an ENFP which is an extrovert, intuitive, feeler, perceiver. Knowing this was important because ENFPs tend to look at the meaning of things rather than the use. What happened when I would go shopping was that I wasn't looking so much at a purchase for it's use but what it ‘meant' to me.
That led me to all kinds of purchases that weren't very useful.
Another example is that some people like to have things planned out and organized while others are more casual. Just understanding this part of your personality can be huge, especially if you're not inclined to do a lot of planning.
So the personality tests are usually obligatory for a job or in school but they can be so practical when trying to understand your financial decisions.
What are some of the Bad Decisions We Make Because of Personality?
What are some of those triggers that send different people into overspending or bad financial decisions?
A lot of people that might be in a job that maybe doesn’t quite fit with their personality might feel some emotional instability, that could cause them to use spending as an emotional balm. They seek comfort and emotional stability in something else.
One example of this could be people in jobs that require a high degree of control and organization but that might not naturally be a good fit with that in their personality. The tendency then would be to fight that degree of control with some impulse spending.
How can people avoid these triggers or at least minimize them?
This really starts with understanding your personal type and how it affects your life. If you don't naturally like that degree of control or maybe you are more introverted but thrust into a situation more appropriate for an extrovert for your job, then that could be causing you some emotional stress.
It comes down to what kind of stress you're feeling from this conflict and how you react to it. If your reaction is to overspend or make other bad financial decisions then that's something you're going to need to address.
Look at your natural inclinations to work and play and then the scenarios you’re forced into through your job or relationships.
Surviving Your Money and Personality
I know you have a money survival workbook on your blog, how does that work?
Money affects so much of our lives and impacts our decisions, so a good portion of my money survival workbook is the process of analyzing those bad financial decisions. When you ask specific questions around bad money decisions, you start to see them more easily and learn from them.
Some great ideas, some great information. I want to thank our guest Catherine Treme for her insight into how our personalities affect our financial decisions. Be sure to check out her blog and take that money personality quiz.
I also want to thank you again for tuning in to our interview series. I’ve got a lot of other guests lined up, some of the top names in beating debt, making money and making your money work for you so be sure to subscribe to the channel. It’s free and you’ll never miss a video.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.