When it comes to money, most, if not all people, have a personality or type. And the key to managing your money better is to know yourself and your “money” type, according to FPA member, Deborah L. Price, founder and CEO of the Money Coaching Institute.
According to Price, it’s important to take into account your cash flow and your net worth when building a financial plan. Your income and asset cash flow are vehicles to help you reach your goals, be it retirement or something else. However, it’s just as important to learn why you want to reach those goals or destinations. You want to understand and resolve any of the ‘potholes’ — patterns of beliefs or behaviors that you have — that may prevent you from arriving at your destination, Price said in a recent issue of FPA’s Journal of Financial Planning.
What are some of the common money types and, more importantly, what is your money type and what can you do about it? The following are abridged definitions of the eight money types developed by Deborah Price, Founder of the Money Coaching Institute:
Innocents often live in denial, burying their heads in the sand so they won’t have to see what is going on around them. They are easily overwhelmed by financial information and rely heavily on the advice and opinions of others. Innocents are perhaps the most trusting of all the money archetypes because they do not see people or situations for what they are. We all start our journey in life as Innocents.
Victims are prone to living in the past and blaming their financial woes on external factors. They are often passive-aggressive (prone to acting out their feelings passively rather than directly) and may appear powerless in order to get others to take care of their needs. More often than not, Victims have been abused, betrayed, or have suffered some great financial loss. Until the Victim faces their pain and releases the past, they may experience life as a self-fulfilling prophecy.
The Warrior sets out to conquer the money world and is usually seen as successful in the business and financial worlds. Warriors are adept investors, focused, decisive, and in control. Although Warriors will listen to advisers, they make their own decisions and rely on their own instincts and resources to guide them. Warriors are great caretakers who are frequently paired with the Innocent or Creator-Artist Money types, who are perfectly happy to allow the Warrior to manage the financial details.
Financially speaking, Martyrs usually do more for others than they do for themselves. They often rescue others (a child, spouse, friend, or partner) from some circumstance or another. However, Martyrs may give with attachment and can feel let down when others fail to meet their expectations. Martyrs tend to have a history of self-sacrifice and suffering and sometimes find it difficult to receive from others. They can be perfectionistic and have high expectations of themselves and of others. This makes them quite capable of realizing their dreams, but often at a great price to themselves and others.
The Fool is really a combination of the Innocent and the Warrior (but without the discipline!) Like the Innocent, the Fool is often judgment impaired and has difficulty seeing the truth about things. The primary difference between Fools and Innocents is that Fools are relatively fearless in their endeavors and remain eternal optimists regardless of the circumstances. The Fool lives very much in the moment and is quite unattached to the future and therefore not prone to planning. Fools are gamblers by nature, financially adventurous and impulsive.
Creator/Artists are usually on a spiritual or artistic path. They often find living in the material world difficult and frequently have a conflicted love/hate relationship with money. Creator/artists most fear being inauthentic or not true to themselves. The Creator/Artist is constantly struggling for financial survival. This is not because they lack talent or ambition but due to their inner conflict about money as either bad or lacking in spirituality.
The Tyrant hoards money, using it to manipulate and control others.Although Tyrants may have everything they need or desire, they never feel complete, comfortable, or at peace. The Tyrant’s greatest fear is loss of control. Tyrants are often overdeveloped Warriors who have become driven by their internal need for safety and control.
The Magician is the ideal money type. Magicians are fully awake and aware of themselves personally and financially. Magicians are armed with the knowledge of the past, have made peace with their personal histories, and understand that their power exists within, in their ability to see and live the truth of who they are.
You’ve determined your money type. Now, what should you do? “Awareness is the first step,” Price said. “You need to discover your relationship with money. If you don’t know your system, you are making decisions from an emotive and reactive place. You might be losing or wasting money because you are not fully informed about your needs. Or you might find that you don’t have any strategy around your financial decisions.”
Once you know your money type, you will then be able to develop a strategy to counter the negative aspects of your type. For instance, she said Fools and Innocents typically avoid issues related to money. To counterbalance that behavior, she said those types need to become proactive about their money, setting a goal to review, for instance, their 401(k) balance, or checking account, or credit card balance once a day for 10 minutes. “They need to become proactive about their money, more like the Warrior type,” she said.
And while it’s possible to do some of this yourself, Price suggests that you can either work with a financial planner or money coach or both to help you address your money type.
FPA member Neal J. Solomon, CFP®, CLU, ChFC, CASL, managing director of WealthPro, said money personality quizzes can be useful in several ways, especially when used with clients. For instance, Solomon said money personality quizzes can:
- Help a planner engage a client in figuring themselves out. “The planner may gain insights into the client’s openness, sophistication and behavior patterns,” he said.
- Help clients become aware that everyone does not approach things the same way that they do. “Believe it or not – clients often think that everyone views things the same way that they do,” he said.
- Be helpful when working with couples. “It assists in bringing understanding of differences and then the planner can move to establishing common goals,” he said.
Learn more about money types. In addition, you might consider doing some of the exercises in Price’s book, Money Magic: Unleashing Your True Potential for Prosperity and Fulfillment and Money Therapy: Using the Eight Money Types to Create Wealth and Prosperity, as a way to better educate yourself about your money type.
December 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Frank Kelly, CFP® , a local member of FPA.