Differences around money is one of the number top causes of divorce. Short-term and long-term money management drives people’s day-to-day decisions on so many levels. If you do the research there are at least five different money management personalities balancing the dance of long-term and short-term and impulsive or compulsive behaviors. It is really important to understand your own money personality type not only as you are going through a divorce, but also as you consider moving into a new relationship. The more extreme versions of either side of the different traits can come out during high and low periods.
People can be compulsive about shopping or saving or even making money. Other people may save compulsively and then splurge. Some people may have high-risk tolerance and gamble or be comfortable in debt, while others are always afraid of losing money and not being able to replace it. In the middle of all these types is someone that does not think much about money. They have enough, don’t think about it often and money should not drive life decisions (lucky them).
Understanding generally where you are comfortable living most of your days is important to know, but there are some things to consider with any of these money personality types that might increase your quality of life:
Compulsive Shoppers: Shop a Little Less, Save a Little More
Seek long-term value and not just short-term satisfaction. How many uses are you going to get out of something? What memories are you going to create with whatever this item or experience is?
Compulsive Savers: Use Moderation
Ben Franklin once recommended “moderation in all things.” For a saver, this is particularly good advice. Don’t let all of the fun parts of life pass you by just to save a few pennies.
Compulsive Money Makers: Are you Living a Quality Life with Joy?
No one on their deathbed says, “I wish I worked more.” Really challenge whether you are getting a return on the next dollar you are earning in terms of joy and quality of life.
Compulsive Savers and Spenders: Moderation Over Time
Like binge eating and purging. Binge saving and spending do not yield a healthy bank account. Discover your comfortable minimum savings balance and growth overtime on that amount and manage your big purchases accordingly. Same as compulsive shoppers and savers use moderation, shop a little less and save a little more.
High-Risk Tolerance: Easy Come, Easily Gone
Why do you think casinos are so successful? The odds are in the house’s favor. Why are there so many credit card companies? Because they make a ton on interest payments from people who live outside of their means. Learn about investing and the true cost of money when you use high-risk investments, gambling or credit cards to float a lifestyle you may not be able to afford. A financial coach and/or financial adviser can help.
A few key takeaways:
- It is important to understand where you live most of the time and see if some adjustments are in order to live a well-balanced, less financially stressed life.
- Understand where you live when you are under stress because those two personalities might be like Jekyll & Hyde and wreak havoc on an otherwise well-balanced financial reality.
- Have conversations as you are getting to know someone about what their money management style is to minimize conflicts as you assess a life together.
