Bad at saving? You can blame your “money personality”.

There is no one-size-fits-all strategy for how best to manage your money, despite what some personal finance gurus may claim. After all, personal finances are in person. Each of us has unique values, personality traits and life experiences that shape our relationship with money, meaning that creating an effective personal financial plan is often less about understanding finances and more about understanding yourself.

“We all think we need to learn more about money, and we could, but most of us kind of know what to do,” Lindsay Bryan-Podvin, a financial therapist, told Big Think.

The intuitive goal of personal finance is simple enough: manage your money in such a way that you can achieve future goals. What’s more complicated is figuring out how to modify the behaviors and emotions that keep you from focusing yourself on financial success.

So, how can you improve your personal finances? For financial psychologist Dr. Brad Klontz is one of the first steps in recognizing the nature of your relationship with money.

“You have to dive into your psychology,” he told Big Think. “You have to understand why you think the way you think about money, and how that manifests in your life, to change it.”

Watch our full interview about money personalities:

Identifying common beliefs about money

In a 2011 study published in The Journal of Financial Therapy, questioned Dr. Klontz and his colleagues asked more than 400 people about their views on money. The participants were asked to rate their level of agreement with statements such as:

  • Money is what gives life meaning
  • People get rich by taking advantage of others
  • People have to work for their money and not get financial handouts
  • You should always look for the best deal before buying anything, even if it takes more time

The study, along with subsequent research, led the researchers to discover four broad belief patterns people have about money. The researchers called these beliefs “money scripts.”

“Money scripts are often at the root of money disorders, and when associated with emotionally charged or traumatic events, these belief patterns can be highly resistant to change,” the study said.

The scripts include:

Avoid money: This pattern describes a common belief that money is bad. People who score high in this category may believe that it is virtuous to live without money, that wealthy people are greedy or otherwise immoral, or that they themselves do not earn money. This group may also struggle to overspend and stick to a budget.

“It’s no surprise that if you have a negative association with money, it will negatively impact your financial results,” Klontz told Big Think.

Worship of money: As the opposite of money avoidance, money worship is where people place money on a pedestal, believing that it fuels happiness and solves most of life’s problems. People in this group tend to be younger, have relatively low incomes and net worth, and have credit card debt.

Money vigilance: This is usually the money script of the ultra rich. People in this group appreciate a bargain. They usually do not spend beyond their means and emphasize protecting their capital. But while saving and thrift can be positives, excessive vigilance can lead people in this group to develop financial anxiety or a reluctance to ever spend it.

“What’s the point of all that if you’re still living a life of deprivation?” Dr. Klontz told Big Think. “You don’t deserve that – no one deserves that.”

Money status: Here, people equate their self-worth with their net worth, Dr. Klontz to Big Think. People in this group like to show off their wealth, and are more likely to overspend, gamble, and be financially dependent on others.

“Trying to find a balance around all of these beliefs is very, very important, not only for our mental health, but also for our financial health,” Dr. Klontz to Big Think.

Personality Traits and Financial Behavior

It can be tempting to explain someone’s financial behavior by pointing to their morals or their level of financial literacy. But while those factors are important, research suggests that our personalities and even our brain structures play a huge role in determining how we make financial decisions.

For example, a 2022 study published in the journal NeuroImage discovered that it is possible to reliably predict a person’s risk tolerance by examining an MRI of their brain.

“We see structural differences in the brain, especially in the areas […] of the brain that are important for decision-making, as well as functional differences in terms of how those brain areas are connected,” Dr. Joseph Kable, a neuroscientist who worked on the 2022 study, on Big Think.

Other studies have linked certain personality traits to certain financial behaviors. For example, research has consistently shown that the personality trait of conscientiousness is strongly associated with healthy savings, timely debt repayment, and a lack of financial distress.

Building a personal financial strategy

You can’t choose your personality traits, but you can choose to better understand your relationship with money. One solution is to consult a financial planner who is willing to help you develop a custom strategy.

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“We’re diverse in so many ways, so when we think about financial advice, it has to be unique to the person, to their background, to who they are,” Dr. George James, a financial therapist, on Big Thinking. “I think really good financial planners, they actually give personality tests to really check to see who you are, to see where you are, how you deal with risk, and from there they adjust their advice or the information they share with you share.”

Lindsay Bryan-Podvin suggested outsmarting bad money habits through automation.

“I’m a big fan of automation,” she told Big Think. “I automate paying my bills, save money in savings accounts and invest in retirement accounts. If it were up to me to move money manually every once in a while, I just wouldn’t do it, or I would do it much less often than I should.”

Like other types of relationships, our bond with money can be very emotionally charged. That’s why it’s critical to honestly assess how your unique personality shapes the way you manage your finances.

“What are the tasks you put off and what are the feelings that get in the way of doing that task?” said Lindsay Bryan-Podvin. “Start there.”