Tag Archives: behavioral finance

What Is Your Financial Personality (and How Can You Use It To Become Wealthy)?

Ever wonder why two people can make the same amount of money, but have very different financial situations? It might be due to their financial personalities and how psychology is influencing the decisions they make.

Let’s say Josh and Jake make the same amount of money and are given the same retirement plan by their financial advisor. Josh is able to stick to the plan while Jake never seems to have enough money left over at the end of the month to meet the retirement budget.

Josh and Jake clearly have different money management styles, styles which are often determined by their financial personality. But just because Jake is unable to follow the budget doesn’t mean he’s doomed to never retire. If he and his financial advisor fully understood his financial personality, they could make a customized financial plan.

Let’s look at the different financial personalities and how each type can use its advantages and disadvantages to create long lasting wealth.

Where did these personalities come from?

Before we dive into discussing the different personalities, where exactly did they come from? They were developed back as part of the Moneymax quiz.

The Moneymax quiz was formulated as a part of a research study in the 1990s. It’s been retested two times since and had the same results, making it a timeless quiz you can use for years to come. Moneymax measures where you fall on a scale of 1-100 for 13 characteristics. Based on your results for those 13 characteristics, your will be assigned one of nine personality types.

Entrepreneur

Moneymax entrepreneurs tend to think outside the box, consider career achievements a priority, and will take risks to achieve their goals. While some follow the typical image of an entrepreneur and run a large company with many employees or own a small business, others are “intraprenuers”, salaried workers who carve out an entrepreneurial niche within corporations or businesses. Others work a full time job and have a side hustle outside the office.

Hunter

As one of the most educated and ambitious Moneymax personality types, hunters should be set up for financial and professional success. But, this type does have the tendency to doubt themselves and emotionally spend. Hunters have the ability to play the money game, but they need to learn how and to develop the confidence to play on their own.

High Roller

Of the nine Moneymax personality types, the high roller is the biggest risk taker. They desire power, influence, and wealth and aren’t afraid to take big risks. They enjoy the thrill of risky money decisions and spending their money instead of saving it. While their risks can have high reward, their emotional decision-making can sometimes get in the way of their financial success.

Safety Player

Safety players tend to see financial success as a matter of luck or being at the right place, at the right time. They are less likely than other Moneymax types to believe their individual actions control their financial future. Because of this, they tend to make safe financial decisions with minimal risks. Safety players are also more passive in their money management than other types.

Achiever

The achievers are frugal with their money, believe in the value of hard work, and are interested in protecting what they earn. They tend to mistrust others and want to play an active role in their money management. Achievers are tied with Hunters for being the most educated and goal oriented personality type. Unlike hunters, they tend to make more analytical decisions.

Perfectionist

Moneymax Perfectionists tend to be overly critical and are afraid to make mistakes when it comes to money management. They often avoid decisions and put off work until they are sure they can do it just right. This type also tends to be frustrated with their financial situation as it’s never perfect.

Money Master

Moneymax Money Masters tend to be just that–masters of their money and lives. While they are third in income, they are first in assets and are strategic in setting up a good financial future. This group is highly involved in their money management and proud of their achievements.

Producer

The Moneymax Producer is one of the hardest working types and tends to be altruistic. However, their assets and income do not reflect their hard work and they’re often frustrated with their financial reality. By changing their negative view of money, they could change their financial future.

Optimist

The Moneymax Optimist tends to have a positive money mindset. They are proud of the way they handle their finances and have high expectations for future financial success. The optimist can sometimes overspend on things that bring short term pleasure. Despite their spending habits, they are overall confident and proficient in managing their wealth.

Your Type and Next Steps

Curious which type you are? Or maybe you have an idea but are wondering how you can use your money personality to create long lasting wealth. The best way to achieve either of these goals is to discuss your money personality with a financial advisor.

An even better step is to try out the Money Master Method, which allows you to take the moneymax quiz and to consult with a trained financial advisor in Northeast Ohio about your results. Click here to learn more.

What to Do During Stagflation: Emotional and Practical Ways to Cope

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If you’ve been keeping up with the market in 2022, you know it’s been anything but calm and tranquil. The stock market is dropping as fast as inflation is rising, a deadly combination for many Americans’ wallets. But what exactly can you do about it?

“There’s no question that the current state of the economy is causing a lot of stress and anxiety for people,” Tali Raphaely, the President and Managing Member of Armour Settlement Services, LLC reflected. “Inflation is on the rise, the stock market is volatile, and many people are worried about their financial future. However, it’s important to remember that these economic conditions are beyond our control. What we can control is how we choose to react to them.”

In this article, we’ll dive into the best coping mechanisms, tips, and tricks to deal with the current economic state.

The Current Market and Inflation Rates

Currently, the stock market is in a bear market. But what exactly does that mean? A bear market is one where assets are steadily declining. The opposite is a bull market, where assets are rising in value. We were in a bull market the last couple years, but since the beginning of 2022, most stocks have been depreciating in value and we have entered a bear market.

At the same time, inflation is rising faster than it has over the past 50 years. This means the money in your bank is also depreciating in value. When the money in your bank and your stock portfolio is decreasing in value, it can be easy to panic. This state of stagflation–when inflation is increasing and the economy is shrinking–can be frightening, but there are some practical and self care tips to help you weather the storm.

Stay Informed

During a volatile economic period, it’s important to stay informed on what’s happening in the economy and the potential impact it could have on you and your family.

“This will help you to understand what is driving changes in prices and how it may affect your personal finances,” said Max Benz of Banking Geek.

To stay informed, but not overwhelmed, choose one or two financial media outlets you trust and see what they’re saying about the stock market as well as the greater economy.

Increase Your Cash Flow

“Finding other sources of income is one approach to complement your current income,” advises Sam Willis, financial writer for Rain Catcher.

With the internet, you can start a side hustle and make some extra money on the side without leaving your home. Try to utilize a talent you already have and build a business around it. Great at design? Offer your services as a freelance graphic designer. Love shooting videos? Start a TikTok.

Additionally, you could start a business in your local community. If you’re artistic, you could sell ceramics at the community farmer’s market. The coffee aficionado could set up a coffee stand at the local farmer’s market. If you don’t want to monetize a hobby and have a larger amount of savings, you could get into real estate or start an AirBnB.

Willis added, “If you believe your current income is insufficient, think about diversifying your sources of income. The majority of successful individuals have advised diversifying their sources of income to avoid risk on all levels.”

Create a Stricter Budget

Along with increasing your cashflow, it’s important to have a stricter budget when the economy is not doing well. You can’t control the price of groceries or gas, but you can still control aspects of your income, such as how much you’re spending on unnecessary goods and services.

Jenna Carson, Financial Partner at Money Lucid, recommends people limit their spending where they can. Some of her recommendations to lower your spending include:

Reducing on treats
Canceling subscriptions
Creating money monitoring excels
Exploring cheaper recipes

“These actions add up and the more positive actions a person takes, the better they will feel emotionally – knowing they are doing everything they can to ensure they don’t have to feel guilty. -Jenna Carson, Financial Partner at Money Lucid, said.

Spend Less

Now is not the time to make a giant purchase or drain your savings unnecessarily. Instead, make sure you have some backup savings in case the economy gets worse, there’s more lay-offs, or for other unexpected emergencies.

“That vacation you had been saving up for or a house upgrade that you dreamed of? Right now is the time to put those plans on hold at least until the picture gets clearer. Spending your savings right now wouldn’t be a great idea and will only lead to more stress. Having some backup savings can help you put your mind to rest,” said Jason Porter of Scottish Heritage.

Practice Self Care

Along with taking a practical look at your spending, the larger economy, and side hustles, it’s also important to take care of your emotional health during this time.

Isla Asibana, a cybersecurity Specialist at Privacy Australia, said, “We need to integrate our lives with calming exercises and practices. Take a portion of your day to let go of the worry for the future and be thankful for your health and ability to earn in the present.”

Here are some calming exercises you could integrate into your daily routine:

Yoga
Meditation
Walks in nature
Journaling

Develop a Resilient Mindset

Luke Lee, founder and interior designer at Everwallpaper, has three steps he takes in times of economic hardship to develop a resilient mindset and come out stronger on the other side:

“It can be tempting to focus on the negative aspects of our lives and ignore the positive. However, research has shown that this can lead to feelings of depression and anxiety. Instead, it is important to focus on our personal strengths and abilities. This can help us to feel more in control of our lives and better able to cope with difficult situations.

“Additionally, maintaining social connections is crucial during times of economic hardship. These connections can provide support and reassurance during times of financial difficulty.

“Finally, it is important to remember that economic hardships are often temporary,” said Lee.

In the best of times, money can be overwhelming. In the current state, it can be impossible not to feel some panic. However, through acting logically, practicing self care, and building a resilient mindset, you can weather the storm. Remember, at the end of the day, the current economy is temporary and will change again.

How Financial Advisors Can Utilize Psychology with David Fowler

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The secret tool to success as an advisor is one most advisors don’t want to use: financial psychology. Even the word psychology probably draws up images of therapists discussing feelings with their clients in sessions. And if you wanted to do that, you would have gone to school to be a psychologist.

Luckily, financial psychology doesn’t have to be that involved. With the right tools, strategies, and mindset, you can utilize financial psychology to make better wealth allocation decisions based on your clients’ specific needs.

To learn more, we sat down with David Fowler, an independent fee-only advisor and the founder of High Mountain Financial Coaching. He is a CFP®, a ChFC®, and has been in the business for 16 years. David started in financial services in 2006 with a large, easily recognized financial services company. In 2008, he decided to go out on his own on the insurance side. After a few years, he felt he could better serve my clients while reducing potential conflicts of interest by being fee-only advising practice (no longer selling any commission based products). In January of 2021, he started his fee-only independent investment advisory and financial planning firm, High Mountain Financial Coaching.

What does financial psychology mean to you?

When I hear the term financial psychology my thoughts immediately turn to the field of behavioral finance. As human beings we are wired successfully for survival, but not so great for investing! Interestingly the instincts, behaviors and biases that humans developed to help us thrive as a species are the very things that make us lousy investors. Survival mechanisms such as fear and greed that once helped us to run from a predator or gorge ourselves on a berry patch don’t translate well to our ability to stand firm in the face of the whipsaws of financial markets.

How does your clients’ psychology impact your advising relationship and their financial decisions?

One of the best things an advisor can do for a client is to help him or her become more aware of the very real danger of our innate psychology and its potential to destroy one’s wealth – thereby hampering our ability to achieve our hopes, dreams and goals for the future. One of our primary objectives as an advisor should be to educate our clients and help them see the very real danger we pose to ourselves and our portfolio’s success. Managing behavior successfully leads to managing money successfully.

What strategies do you use to navigate your clients’ different personalities?

There are two main pieces of the puzzle to how we work with our clients to help manage their behavior.

First – the investment strategies we use are built with strict adherence to Nobel Prize winning academic research in the field of investing. We help our clients to select a portfolio where we seek to maximize their potential return while ensuring they take on no more risk than they are able to handle.

Once we have assisted our clients in choosing a portfolio where they are comfortable with the risk/reward profile – the next step is education. Ultimately we want our clients to understand why the portfolios are structured the way they are, have some knowledge of the underlying academics, and have their eyes opened to some of the cognitive biases and blind spots that typically cause investors problems. We hold regular education events and workshops where we seek to over time increase our clients knowledge and confidence.

Ultimately with these two pieces we seek to empower our clients to enjoy the rewards that come with a lifetime of disciplined investing.

Is there anything specific advisors can do to help manage their own financial psychology?

When I was in high school I was an athlete, and my favorite sport was wrestling. My coach impressed upon me the concept of leading by example. He would do everything we did during the workouts, side by side with us. He always said ‘Never ask anyone to do something you aren’t willing to do.’

While it is vitally important for clients to have coaching from their advisors to manage their behavior (because they are human and make mistakes on their own), it is equally important for advisors to have coaching to manage their behavior (because advisors are human too!). Just as we act as a safeguard against our clients destructive behavior, High Mountain Financial gets coaching from Matson Money, Inc. to ensure we stay disciplined. They have our backs, and we have our clients’ backs.

On a side note – if an investor discovers their advisor doesn’t have any guardrails in place on their own behavior – that could be a red flag worth considering…

What is the best piece of advice you could give about getting new clients as an advisor?

The best piece of advice I have for getting new clients is just as our clients thoughts and emotions are the biggest obstacle to their long-term success, an advisor’s thoughts and emotions are the biggest obstacle to gaining new clients. Fear of rejection, fear of failure, and our perception of self-worth all can hamper our ability to grow our practices. The space between our ears is both the key and the obstacle to getting new clients.

Takeaway

At the end of the day, understanding your clients’ financial psychology comes down to managing their expectations and understanding their specific financial goals so you can best allocate their resources. Your advising practice should be about serving your clients in the best way for them with tools like Moneymax, not using cookie cutter financial advice.

7 Advisors Explain How They Use Financial Psychology

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Financial psychology is a term which can be confusing and off-putting to many advisors. After all, you didn’t get into this industry in order to become a therapist! Yet, mastering financial psychology can also be one of the best ways to advance your advising practice.

But what exactly is financial psychology? We asked seven financial advisors for their definition and how they use it in their own practice. Here’s what they had to say:

Financial psychology boils down to mindset.

“Financial psychology is your money mindset. This should develop before any action is taken to make sure you form healthy habits and behaviors that are reflective of that money mindset. Ensuring advisers understand clients financial psychology is critical for building trust, instilling predictive money habits and working together in a long lasting relationship. Clients should always inquire about their adviser’s money mindset, belief system around financial planning, and overall philosophy to ensure they are aligned.”

–Craig S. Johlfs, CFP®, MBA, Johlfs Financial Group

It makes your job easier.

“Financial psychology represents the crux of being able to understand the mind regarding money spending, saving, and investing decisions. People who specialize in this theory apply their practices and knowledge to areas of personal finance and financial planning. Understanding what the client wants and trying to comprehend their thinking process means that as a financial advisor, your job would become easier. When you recognize the clients’ spending habits, it gets easier to advise them on strict financial matters and helps open up the best ways for them to succeed.”

–Alex Williams, an ecommerce business owner, Certified Financial Planner, and the CFO of FindThisBest

Financial psychology is your greatest ally or enemy.

“As a female CEO, I have a unique view on this. Psychology is the greatest ally or enemy in investing. The person in the mirror is hardwired to flee a burning building and sell when the market is tanking. Knowing that one behavior (fleeing) is life saving and the other (selling at market lows) is harmful is only half the battle. I tell all of my clients, good investing feels bad. And it does. Success in investing requires a mastery of your psychology.”

-Elle Kaplan, CEO of LexION Capital

It impacts all your clients’ financial decisions.

“Financial psychology is the study of how human psychology influences a person’s spending patterns and saving and investing decisions. A client’s psychology has a great impact on their financial decisions and the advising relationship I have with them. The most important emotions that affect a person’s financial decisions are greed and fear. Greedy investors tend to lose a lot of money, as they take greater financial risks for a greater return, while investors who are afraid, do not make money. This is because they have a fear of losing their money, and do not invest it in risky portfolios.”

-Jessica Chase, Loan and Finance Expert at Premier Title Loans

Financial Psychology plays a big role in advising sessions.

“Financial psychology is the branch of psychology that studies the beliefs about money that influence people’s financial decisions. My clients’ psychology plays a big role in determining their financial decisions. A large chunk of our sessions is spent on me advising them to be more rational in their spending decisions and not let their emotions dictate their spending patterns.”

-Frank Chase, Business Development & Finance Expert at Oxford Gold Group

It helps retain clients and builds trust.

“For me, financial psychology is the psychology and behavior of people that go into making a financial decision. What drives people to make small decisions such as purchasing a sweater or more significant decisions like buying a house. The economics and social science behind these decisions are what financial psychology means to me. Knowing my client’s psychology helps me understand their behavior and reasoning when it comes to making a financial decision. It helps me see things from their perspective, and I can better advise them. This improves our relationship and helps build trust, which is very important for retaining long-term clients.”

-Janet Patterson, Loan and Finance Expert at Highway Title Loans

Understanding financial psychology producers better outcomes.

“Essentially, financial psychology is the study of mind and behavior that influences one’s behavior to save, spend and invest money. This psychology is mostly applied to personal finance areas. Understanding the client’s psychology helps in producing better financial outcomes. The use of technology has provided an opportunity to build deeper relationships with clients and help them make effective financial decisions. The psychology and personality of the client is important to understand because it reflects on their spending, saving and investing habits. It makes it easier to formulate financial advice for them to aid their decisions.”

-Adam Garcia, CEO of The Stock Dork and Financial Consultant

After interviewing these advisors and working with even more who use our MoneyMax tool, we can say with confidence that understanding financial psychology produces happier clients, better client relationships, and less work when it comes to retaining clients and landing new ones.

If you’re a financial advisor, are there any other insights about financial psychology that you would add to this list?

How to Work with Clients Who Value Financial Safety and Hate Risk

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While financial risk takers can be tricky to work with, safety players are sometimes just as difficult. Safety Players tend to see financial success as a matter of luck or being at the right place at the right time. They are less likely than other Moneymax types to believe their individual actions don’t control their financial future. Because of this, they make financial decisions with minimal risks and can be more passive in their money management.

Because safety players distrust risk so much, it can be difficult to get them to invest enough to create real wealth and they are the first to call, panicked, in a nervous market. However, if you understand these five distinctive personality traits about safety players, you can better serve them.

Trait 1: Safety Players are deliberate decision makers

Safety players often take their time to make decisions, especially when it involves money or risk. They want to fully evaluate the situation and learn more about it before they decide whether to invest or not. When safety players first come to advisors, they often have little experience in wealth management, but as they learn more, they will become more confident in their decision making.

Trait 2: They can be more passive in their money management

Because they question whether their individual actions lead to greater financial success, they tend to not put much value on them. This can lead to passivity and a lack of action when it comes to managing their money. One of the most important things safety players can learn is how their individual decisions impact their financial health.

Trait 3: Tendency not to trust

While they are passive in managing their money, they are also slow to trust, which can be a real catch 22 for advisors. Because they are suspicious of risk, they don’t like to trust others with their money. To safety players, it feels scary to pass some of their hard-earned cash over to someone else. That’s why relationship building is so important with this group.

Trait 4: Safety Players seek “sure-things”

Because they are so risk-averse, they prefer structure and certainty when it comes to their finances–as well as other areas of their life. They often want to preserve what they have instead of trying to aim for more. Safety players want to avoid the risk of losing what they already possess.

Trait 5: They like to be informed

Education is key with this group. In order to fully understand the risk of investing–and the risk of not investing–this group needs to be informed. Helping clients who prefer safety find educational resources can also start to build up advisor/client trust.

Have you ever worked with a safety player? What other advice would you give to help financial advisors with this client type?

ABOUT FINANCIAL PSYCHOLOGY

Financial Psychology provides services and tools for Financial Advisors to add some personality to their advising. Their signature tool, the Moneymax Personal Profiling System, reveals someone’s financial psychology in less than fifteen minutes and enables financial advisors to give customizable advice. Located in Ohio, Financial Psychology has empowered advisors over the last 30 years in the United States, Canada, Europe, Japan, Australia, and beyond.

How to Provide Better Results for Your Financial Advising Clients with Financial Psychology

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While every client comes to you for financial guidance, some clients need more hand holding than others. We all know those clients who call every time there’s a dip in the market or who show up in your inbox every week. But what if there was a way you could identify these clients faster and give them the guidance they need, all while respecting your own boundaries and free time?

By understanding your clients’ financial personality types, you can give them the guidance they need without taking too much time out of your day. Knowing your client’s financial personality type offers a variety of benefits including:

Identifying their pain points faster
Understanding their financial motivations and approach to money
Determining where they fall on a scale for 13 personality types
Giving advice tailored to their strengths, weaknesses, and motivations

Each personality type will approach money differently, but financial advising clients won’t always tell you their money mindset, strengths, and weaknesses. The Moneymax quiz, however, allows you to discover someone’s personality type in less than 15 minutes. From there, you can give the right type of advice, especially to those who need more guidance.

Moneymax has nine personality types and of those nine, some need more guidance than others. By knowing what type you are dealing with, you can give the right guidance to each of your clients.

Entrepreneurs

Moneymax entrepreneurs tend to think outside the box, consider career achievements a priority and will take risks to achieve their goals. While some follow the typical image of an entrepreneur and run a large company with many employees or own a small business, others are “intraprenuers”, salaried workers who carve out an entrepreneurial niche within corporations or businesses. Others work a full time job and have a side hustle outside the office.

Entrepreneurs won’t need as much guidance as other types. However, because entrepreneurs and business owners have different financial concerns than regular employees, these clients might need extra guidance on how to manage their finances as a business owner.

Hunters

As one of the most educated and ambitious Moneymax personality types, hunters should be set up for financial and professional success. However, this type does have the tendency to doubt themselves and emotionally spend. Hunters have the ability to play the money game, but they need to learn how and develop the confidence to play on their own.

Hunters could need more guidance because of their lack of confidence. This type might ask more questions and might not be able to stick to a savings plan because they are emotional spenders. To give hunters additional guidance, consider setting up a stricter savings plan that plays into their ambitious spirit (such as a tracker or smaller goals to hit along the way to a bigger savings goal). You might also help build up their confidence by telling them when they did something right with their finances and encouraging them to take a more active role in managing their money.

Optimists

This type probably won’t need as much guidance as other types. But similar to the hunters, they may need some guidance on how to spend their money. If you scaffold their financial plan right and allot some wiggle room for their spending tendencies, this type should be easy to manage and need little guidance.

Perfectionists

As a procrastinator, the perfectionist might need more hand holding than other types. While they’re not as likely as the hunter or safety player to ask for your advice, you could find yourself following up with them a few times before they take action. When dealing with perfectionists, make sure to have a plan in place to curb their procrastination and take any needed actions as soon as possible.

High Rollers

Of the nine Moneymax personality types, the high roller is the biggest risk taker. They desire power, influence, and wealth and aren’t afraid to take big risks. They enjoy the thrill of risky money decisions and in spending their money instead of saving it. While their risks can have high reward, their emotional decision-making can sometimes get in the way of their financial success.

As the biggest risk taker, the high roller can be a tricky type to manage. They can be great if you’re looking for clients willing to make riskier financial decisions with a potentially bigger payoff, but these clients aren’t as fun to deal with when those decisions don’t pay off. If any of your clients are high rollers, keep in mind that you may need to make extra time for when their risk taking gets in the way of their financial success.

Money Masters

Money Masters usually don’t need a lot of guidance. When they are first starting to build their assets, they could ask more questions than other types, but overall they tend to be more involved in their money management and will need less hand-holding along the way.

Achievers

The achievers are frugal with their money, believe in the value of hard work, and are interested in protecting what they earn. They tend to mistrust others and want to play an active role in their money management. Achievers are tied with Hunters for being the most educated personality type and are also goal oriented. Unlike hunters, they tend to make more analytical decisions.

Due to their mistrust of others, you either won’t see as many achievers in your practice or these types will ask more questions and be more skeptical than other types. When working with an achiever, expect more questions than usual about your financial practices.

Producer

The Moneymax Producers are one of the hardest working types and tend to be altruistic. However, their assets and income do not reflect their hard work and they’re often frustrated with their financial reality. By changing their negative view of money, they could change their financial future.

The producers usually need a lot of guidance due to their negative view of money and their financial frustrations. This type could email or call you frequently for extra help with their finances. However, if you guide the producer to start building up assets which compliment their hard work, you might be able to better manage this type.

Safety Players

Because of their perceived lack of control over their finances, safety players may need more guidance than other personality types. This type will be more passive with their money management and expect you to do the bulk of the work managing their finances. To help guide safety players, remind them of how much they can control their future and work with them to create a safe, less risky financial plan.

While some types may take more time and attention than others, you can better manage all nine personality types when you understand the strengths, weaknesses, and motivations of each. When you walk into a meeting with a client not knowing their personality type, you are often guessing about their approach to money. When you enter the meeting armed with their money personality type, you can more effectively attend to their questions and needs, saving you time and providing customized financial advising to your clients.

13 Psychology Traits That Impact Money Decisions

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Money decisions might seem objective on the surface and some are. Don’t spend more than you make, save for retirement, and consider saving up for a home are generally good pieces of financial advice but to truly understand why someone makes the decisions they do–good or bad–you have to understand how they approach their finances.

In order to understand this, you must learn more about their financial psychology. Financial Psychology is an interdisciplinary field that studies how principles from psychology impact our financial decisions. 13 financial personality traits in particular influence many of our money decisions.

Involvement

This trait measures how involved a client likes to be in their money management. The more control they want over their money, the closer their score will be to 100. If one of your clients likes is constantly checking their stock portfolio and emailing you, they probably have a high level of involvement.

Pride

This trait measures how proud a client is of their money management skills. The closer their score is to 100, the more pride they have in their money management skills. If a client constantly criticizes their ability to manage money, they have a lower level of pride.

Emotionality

The more guided their decisions are by emotions, the closer they’ll be to 100 while the less guided they are by emotions, the further their score is from 100. A client who’s an emotional spender would score higher for this trait.

Altruism

If a client believes others are financially generous, their score will be closer to 100. In contrast, someone who thinks everyone is greedy and conniving in financial transactions would have a lower score.

Confidence

Confidence reflects how comfortable a client is with their money management skills. The greater their comfort level for managing their own money, the closer their score will be to 100. Someone who feels they are doing a good job managing their money and is comfortable talking about finances with a financial advisor would score higher for this trait.

Power

Power measures a client’s interest in using their money for public recognition. The more your client wants to use money for public notoriety, the closer their score will be to 100. Someone who invests their money in running for a local political office would highly value power.

Work Ethic

Work ethic encompasses how likely a client is to believe hard work will bring success. The closer they are to 100, the more they believe in hard work. Someone who believes corruption and luck, not hard work, brings about success would have a lower score for this trait.

Contentment

The happier they are with their money situation, the closer their score will be to 100. A client who is miserable and always complaining about how they wished they had more money would score lower.

Risk-taking

The level of risk a client is comfortable with when it comes to investments is one of the most used financial psychology traits by financial advisors. A client who is eager to invest in new startups or in crypto currencies with high risk and reward will fall closer to 100 while a client who is scared to invest in safer mutual funds will be closer to 0.

Self-determination

If a client feels their own actions determine their wealth, their score will be closer to 100. If they feel luck plays a bigger role in their money situation, their score will be closer to 0.

Spending

Spending encompasses if a client enjoys spending or saving money. A score closer to 100 means they enjoy spending money more than saving while a client who is frugal and hardly ever spends money would be closer to 0.

Reflectivity

Reflectivity refers to how reflective and analytical a client is in their money decisions. The more reflective a client is, the closer their score is to 100.

Trust

If a client’s level of trust in the integrity of others’ dealings with money, their score will be closer to 100. Those who have less trust ion how others deal with money will have a score closer to 0.

Often, it can take confidence, time, and the right questions to discover where a client falls for these 13 financial traits.

But not with the Moneymax quiz. This tool measures where your clients fall on a scale of 1-100 for 13 characteristics in less than fifteen minutes. Based on their results for those 13 characteristics. If you’re interested in trying out the Moneymax quiz at a special discounted rate, consider subscribing to our newsletter. When you subscribe, we’ll send you a free gift and a discount code.

How To Mindfully Manage Your Credit Card

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Credit cards can offer peace of mind, but more often than not, they create undue stress. We talked to credit experts and mental health professionals, who say you can bring tranquility into your financial life by following these five strategies to mindfully manage your credit card.

1. Clear away credit card clutter

Have you ever stood at a cash register, shuffling frantically through a stack of plastic to find a specific retailer’s card? Trying to keep track of and manage too many cards can be overwhelming. So, if you have more than a few cards, experts recommend that you pare down your collection.

“You need to lighten your load,” says Catherine Williams, Vice President of Financial Literacy for Money Management International, a credit counseling firm with offices in 22 states. She recommends keeping two multi-use cards.

One should be a rewards card to use instead of cash — to buy items such as groceries, gas and monthly yoga classes — that will make it easy to track spending and prevent worrying about cash getting lost or stolen. Never carry a balance on a rewards card, because they have high interest rates.

The second card, Williams says, should be a very low-interest credit card for unexpected big-ticket purchases — such as a new household appliance or car repair — that you might have to pay off over a few months.

If you have too many retail credit cards from clothing, electronics and home improvement stores, Williams recommends paying down your balances and closing one or two cards every three to four months. “It’s a slow and steady way of changing a habit,” Williams says.

2. Use plastic for self knowledge

The maxim “know yourself” applies to finances as well as other areas of life — and a credit card can serve as a valuable tool for gaining self-knowledge and clarity, experts say.

“I love the idea of using a credit card to understand your budget — you can get a lot of peace of mind from it,” says Kit Yarrow, a consumer psychologist at Golden Gate University in San Francisco, who recommends learning about yourself by putting all your purchases on one credit card for a month. “You can come up with real data and new insights about how you’re managing your money,” Yarrow says.

Hard numbers can be useful, Yarrow says, because consumers tend to underestimate the amount they spend on routine purchases — which can blur together in the mind.

“A lot of people have no idea how it adds up when they spend on gas, tolls, coffee, cookies or that organic arugula they decided to throw in the cart at the grocery store,” Yarrow says.

And, consumers sometimes fool themselves on luxury purchases — such as new designer shoes — to convince themselves it’s OK to splurge. Yarrow says: “They might tell themselves, ‘Oh, I haven’t bought any shoes lately,’ when, in fact, they bought three pairs this month.”

3. Clarify your financial priorities

One key to financial peace of mind, experts say, is figuring out how to use credit cards in harmony with your values and priorities. “We often get caught up in routine and fill our lives with the small things and then there’s no room left over for the big things,” says Elisha Goldstein, a psychologist and co-author of “A Mindfulness-Based Stress Reduction Workbook.”

He recommends taking time alone to reflect on your priorities, then thinking about how they relate to your finances.

Once you’re clear on priorities, you can sit down at the beginning of each month and decide how you will spend and use your credit cards in a way that reflects what’s important to you.

When you’re trying to cut down on credit card spending, it’s also important to take small steps. For example, you can decide not to put anything on your card for 30 days to cut down on spending. Making small, specific commitments to yourself provides peace of mind and better control over your behavior.

4. Practice mindfulness with money

If you’re trying to change your credit card habits — especially if you’re caught up in a cycle of spending now and regretting it later — mindfulness can help, experts say, by helping to make you aware of habits that longer work for you.

“You might normally walk by a window and see a sweater and, before you know it, you’re walking out of the store with the sweater and have thrown it on the credit card,” Goldstein says. So, if you wanted to practice mindfulness rather than just reacting impulsively, you would take deep breaths, pause and become aware of your body, your emotions and your thoughts, Goldstein says.

“The foundation of mindfulness is being intentional, paying attention to what’s happening in the moment,” Goldstein says. “And when we pay attention to cravings, we realize these are just thoughts and not things we need to necessarily act on.”

5. Accept your financial reality

A downside to credit cards, experts say, is that they allow you to pretend you have more money than you actually do — so it’s important to practice acceptance of your actual financial reality.

One of the biggest stresses you can create in your life is not understanding or admitting what you can actually afford. Not knowing your financial reality causes stress in your wallet and emotionally.

Knowing — and accepting — what you can actually afford isn’t just a matter of hard numbers. It involves your priorities, your wishes and your emotions, too.

For example, maybe some friends want to go to a pricey restaurant — and technically you could afford it, but you know you’d be eating ramen for the rest of the week. If you go, you won’t enjoy it as much as if you could afford it or budgeted for it. That sense of regret will create an emotional price when the check comes as well as a monetary one. By being honest with yourself and your friends about what you can afford, you will have greater peace of mind.

If you practice these healthy habits, you can expect to feel calmer, more in control and more balanced about your credit cards — and the rest of your financial life.

What’s Your Comfort Level with Taking Financial Risk?

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If you’re puzzled in how to honestly respond, you’re not alone. Most people find out their true comfort with risk only after the fact—after they’ve lost money. Then, and only then, do they really know how much they can financially and emotionally afford to lose.

Your risk tolerance is your ability to make decisions, trading the known for the unknown, and to be comfortable with the decision once it is made.

Before you can begin to understand how to gauge your comfort level in taking risks with your finances and investments, think about how you feel in general about giving up something you know now without being certain of what your return will be in the future. The possibility exists that what you get will be less than your investment.

There are several reasons that risk is mystifying and elusive:

Tolerance for risk is difficult for most people to accurately gauge because it is a socially desirable trait, at least in the United States. The USA was founded by brave individuals who risked their lives and ventured into an unknown land for a greater sense of freedom and independence. Ever since, entrepreneurial behavior has been revered and rewarded. So, people like to believe that they’re higher risk takers than they truly are. They want to believe that they’d step up to the plate if they saw an opportunity for significant financial gain..

The truth is that most people would rather not gamble and take the financial risk because they would regret the potential loss in the process. They are not certain they will reap a just reward for the risk they’d take.

When you search your minds and hearts for your own sense of what risk means to you and how much risk you can comfortably tolerate, keep in mind that you, too, may be swayed by what you’d like to believe. Ask yourself how much money you can financially afford to lose. And then ask an equally important question—how much can you emotionally afford to lose? How will you weather the financial and emotional loss?

So what’s beneficial? Should you aspire to be a low, medium or high risk-taker? There’s no right answer or one-size fits all when risk-taking is involved.

Here are some guidelines that may help you in trying to gauge what’s appropriate for you in achieving your goals and objectives:

– Impulsive risk-taking usually pays off with buyers or sellers remorse.

– Calculated risk is always the preferred strategy and surest bet to make.

– Don’t risk more than you can financially or emotionally afford to lose.

– Look at what you may lose from risking as well as what you may gain.

– Experimenting with risk is more costly with age.

You can increase your comfort level with risk slowly and consistently over time—taking small but consistent steps which will eventually lead to bigger gains than a one-time gamble on the risky move paying off. Your confidence in yourself will also increase in the process if you succeed over time.

Take a look at this brief video with three financial advisers describing how they speak to their clients about risk and how to gauge what it means to them: http://www.cnbc.com/id/102397145

Stay tuned for Part 2 of “Gauging Risk” by understanding the money personality traits which play a big part in how you relate to risk.

Know What You Can Emotionally and Financially Afford to Lose

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So often, investors react impulsively to bad news and a volatile market selling shares of perfectly good stocks or changing their asset allocations in anticipation of a significant downturn in the market. Had they held on, history reinforces staying the course if the allocation makes rational and financial sense and the stocks deemed to be good stocks over the longer term.

But many investors, react with their emotional money minds rather than their rational ones.

Why is it that some investors make rational decisions, stick with their choices and strategies while others act out their emotions and make bad investment decisions?

The field of Behavioral Finance has given insight into the mental miscues investors make that sabotage and crimp their returns. One of those miscues or mental mistakes is the fear of losing money.

This is how it works: Psychologically, people give greater weight to a past loss than they do to a future gain. In fact, some investors find losing money so distasteful that they psych themselves out of investing altogether.

Investors don’t make reasonable tradeoffs. The drive to avoid loss really sabotages any future gains or opportunities. Rather, investors rationalize their feelings and walk away from being an involved and active investor in the market. Some work it out and choose a strategy of a more passive approach investing in index funds and stay the course.

From where I sit as a psychologist specializing in money management and investing, I tend to experience investors or would-be investors who are frozen by indecision and the fear of losing their money.

Solution: Determine ahead of time exactly how much you can “emotionally” afford to lose as well as “financially”. They are often very different.

If you feel that a financial loss will be a significant emotional and financial loss, then choose the more conservatively balanced approach of investing. If you feel you can handle the emotional and financial upset of a loss, estimate just how much of a loss that should be for you to continue to feel and be secure.

The point is that investing is by nature an emotional as well as financial business. Your heart and wallet go hand in hand.

With spending some time upfront reflecting and gauging your comfort level, you will be better equipped over the long-term for whatever happens in the market.