Every human is wired differently. Your fears, dreams, and passions are different. You may also have different thoughts and emotions about money. By understanding why you spend money the way you do, you can get a better handle on your finances.
Let’s start by discussing what the psychology of money is.
The psychology of money studies one’s behavior with money. When it comes to managing your money, it doesn’t matter how knowledgeable you are, or how high your IQ is. It’s about your behavior.
Depending on what your tendencies are, your thoughts, and your will, you can change the way you handle money. Different tendencies affect how you spend your money and in this article, we will be discussing that.
How Different Tendencies Can Affect How You Spend Money
Everyone is different and has different tendencies. None are necessarily right or wrong.
Here are three main tendencies that you need to know about:
1. Saver vs Spender
It is easy to determine whether you are a saver or spender.
The first instinct of a saver is to not spend their money. They feel better knowing that they have money tucked away. They are more patient and can wait to buy the things they want.
Spenders, on the other hand, have creative ways to spend their money. When they have money in their pocket, they can’t wait to spend it.
While both tendencies have pros of their own, issues arise when they are at an extreme level. If you spend every penny you make, you will end up broke. Likewise, if you save everything you earn, you might miss out on fun experiences.
2. Free Spirit vs Type-1
Free spirited people are the ones who like to enjoy their life and are not bogged down in the details. They don’t like to budget for anything and consider entertainment and shopping as their love language. They want to live their life to the fullest.
Type-1 personality people want to see where they are spending their money and figure out a way to make it work better.
Both personalities need each other. Free spirits need type-1s to have a realistic budget and type-1s need free spirits to have some fun.
3. Status vs Safety
People who measure success with status want their lifestyle to showcase how much money they have. This includes the home they live in, the places they go for vacation, and the activities they do.
People who prefer safety want to know that they have enough money saved up to withstand a medical emergency, job loss, or any other major life event.
Just like with saver and spender, problems arise when they go to extremes. A safety person can’t spend their life living in fear of losing their money and a status person needs to have a realistic view of life—and not something that is based on superficial things.
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Factors that Influence How You Spend Money
There are a lot of factors that can influence the way you spend your money.
1. What was your childhood like?
One’s attitude towards money is developed at an early age by listening and watching the way their parents handle money. While this might not define your mindset, it will surely influence it.
2. Are you solution-oriented?
If you are a solution-oriented person, you would consider money as not something to be kept, but as a means to end problems.
If you think that money is the most efficient solution to a problem, you won’t hesitate to spend it. However, if you don’t have control over it, you might end up spending money, even when you don’t need to.
3. Are you susceptible to advertising?
There are some people who like to walk around with branded products. Even though it’s a part of life, buying things that you don’t need just for the sake of the brand serves no purpose.
People who are susceptible to advertising are taken advantage of by advertisers who convince them to buy products they don’t need. If you are one of these people, you might end up spending a lot of money on new and trendy products, just for the sake of their brand.
4. Have you been conditioned to spend money?
You might be conditioned to spend money and not even know it. Imagine this, you have won $50,000 in the lottery. What do you do with this money? Unless your answer is invest it or save it, you have been conditioned to spend.
5. Are you trying to make yourself feel better?
People often try to fill their life with spending. They might not have a lot going on in their life and they get a thrill out of spending money. If you are one of such people and take this to an extreme level, you might even start looking for a reason to feel bad so that you get an excuse to spend some money.
Shopping does truly bring some people happiness—and that’s okay! But shopping bags aren’t the only good thing in life. Think about what else you enjoy besides spending money.
Identify the real need you’re trying to fill. You may want to consider talking with a professional therapist if you find that spending money is the only way you find joy.
Whether you’re a spender or a saver, your family’s financial future is perhaps something that keeps you awake at night. Buying an affordable term life insurance policy now can give you peace of mind.
Life insurance helps ensure that your loved ones are protected if you die unexpectedly.
At Quotacy, we understand the impact your life has on your family. Life insurance is essential to keep your family’s life in balance and save them from having to leave behind the future you’re helping them shape today.
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About the writer
Quotacy is the country’s leading broker for buying life insurance online. We are obsessed with making it easy for everyone who has loved ones who depend upon them to have life insurance.