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13 traits that influence personal finance

13 Psychology Traits That Impact Money Decisions

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.

13 traits


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. 


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. 


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.  


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 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 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. 


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. 


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. 


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 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 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. 


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. 

People, financial papers, and coffee

How to Separate Money and Emotions For Better Wealth Management

To know and understand the motivating forces behind investing, to know and understand why one investor becomes tense about losses, why one becomes greedy about profits, and why one either overreacts or fails to react is, perhaps, more than half the investment battle. Money and emotions aren’t always an ideal pairing. If your emotions are managing your wealth, you may not be setting yourself up for success.

There is a high price to pay for the kind of innocence many investors bring to their investments and the way they interact with their investment advisors. Unfortunately, in many cases, to help maximize your financial returns, you must first help yourself master your emotions.

Often, bull markets are like blinders. Investors begin to believe in the fantasy that their stocks will always take good care of them and never disappoint them. But, when reality hits and the bull market turns bear, investors can be faced with challenging decisions and their gut emotions may take over.

There are certain important relationships which we must understand before we may be able to achieve a consistent degree of success in the world of investing and in the marketplace.

The first and foremost of these is that the majority of losses in the marketplace result not from poor trading decisions but rather from emotional and attitudinal causes. Investing by its very nature is an emotional business.

Few investors have the self-knowledge, emotional stamina or self-control to make rational, intelligent and profitable decisions, particularly in times of stress. So often, investors react wildly to bad news, frequently selling shares of perfectly good stocks–reacting with their emotional money minds rather than their rational ones.

Why is it that some investors may tend to make rational decisions, stick with their choices and strategies while others seem to act out their emotions and make investment decisions that may not lead to profit?

The field of behavioral finance has given insight into some mental miscues investors make that might sabotage and crimp their returns:

Fear of Losing Money

Psychologically, people give greater weight to a past loss than they do to a future gain. In fact, some individuals find losing money so distasteful that they talk themselves out of investing altogether. Some investors don’t make reasonable trade-offs because the drive to avoid loss sabotages any future gains or opportunities.

But when you make decisions out of fear instead of rationality, your decisions are seldom ever good. A 2019 study on entrepreneurship found entrepreneurs who made fear based decisions instead of rational ones were less successful financially.

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

Worrying About the Wrong Risks

Investors are held captive by events that could be conceived as unpredictable or frightening events. People are traumatized by dramatic events. They can’t tolerate the anxiety that accompanies them.

This can be seen in a modern day context where, for the past 3 years or so, even successful business leaders have been predicting an economic collapse worse than the great depression. While there have been adverse negative effects due to COVID-19, it has not been on the scale of more dramatic predictions.

Investors often become blind and deaf to others’ advice in these times and tune out advice from others, including their financial professionals. They exaggerate current crises.

What’s worse is that they forget the wisdom of lessons from the past. They overlook the fact that people who stayed fully invested during previous crashes recouped their losses.

Help yourself base your decisions on what you can control, not on those factors you can’t control. Review the rationale for your current strategy and ask yourself and your financial professional if it still makes sense. If it does, review why the strategy still makes sense from time to time so you can help regulate any impulsive and emotional reactions that may bring you off course.

Educate Yourself

Smiling woman holding money

Knowing thyself isn’t just for characters in Shakespeare’s plays. It’s also a great way to better manage your finances. Since emotions play such a big role in financial decisions, it’s important to educate yourself on psychology as well as investing in financial education.

If you are a financial advisor, you most likely have strong financial literacy and have studied personal finance for quite some time. However, you might not have studied the psychology behind it.

Oftentimes when we look at just the finance side of wealth management, we can get confused by our clients actions or ideas. However, if we studied the psychology of finance, we would better understand our clients.

One of the best ways to educate yourself on financial psychology is with the Moneymax assessment. This assessment not only allows you to know your clients’ and potential clients’ personality types, it also reveals where they fall on a scale for 13 financial characteristics.

If you understand the psychology of your clients as well as the principles of personal finance, you are better able to manage wealth.


As you evaluate your investment strategies and individual situations, whether with your financial professional or on your own, consider these points:

Investors are more prone to make or lose money as a function of their emotions and attitudes than on the basis of their stock selection or trading system.

The best system can be rendered a losing proposition by inappropriate implementation due to emotional and behavioral limitations.

Appropriate or successful investor behavior can be learned to a large extent. Education is essential to helping investors stay in control and continue to grow, particularly in learning self-regulation and self-control.

Acknowledging and understanding your emotions is an important step in staying on track with your long-term financial plans when challenging economies become the everyday reality.

Likewise, learning to control your emotions even when the market turns upwards is equally important.

Finally, remember, if you find yourself questioning your decisions, talk to your financial professional, they are there to help you when you have to make the tough decisions.

Investors Flight from The Market May Indeed Be A Rational Defense

Some experts are calling the recent mass exodus of small investors from the market an irrational reaction to unfound risk; others are hypothesizing that small investors need cash and their home values no longer support equity loans to survive so they are using their 401k investments to pay bills.

Personally, I feel small investors are feeling a tremendous level of anxiety and are having difficulty managing it. Their high level of anxiety and their inability to tolerate it precludes them from keeping their money in the market for the long-term and continuing to believe that they will be okay. The true definition of a suitable investment strategy is whether investors can maintain it over time – even anxious and volatile times.

Apparently, these investors are incapable of managing the stress of being in what they deem to be a risky strategy. But even sophisticated investors and professional money managers are anxious and unable to predict current and future risk in the market. So why should the small investor be any different. The difference may lie in unrealistic expectations and inappropriate risk taking that led the small investor into the market in the first place that is the real problem. If they weren’t diversified; if they didn’t understand the downside and determine whether they could withstand it, then they are feeling much greater stress and lack of tolerance in coping with their current feelings of anxiety and distrust.

There are a myriad of reasons why investors have reduced their exposure to securities and gravitated to what they perceive to be less risky investments like bonds, cash, and other fixed income vehicles. Perception is a subjective reality that is difficult to alter with objective facts. The problem is compounded by the volatility of today’s market and objectivity being illusive. You just have to listen to CNBC for a while and you’ll hear experts hypothesizing, and disagreeing whether we’re out of a recession or just heading into another. So how is the small investor to feel confidence or a sense of trust that the market will be kind to them if they stay? At least by doing something, they feel they have taken some action in their best interest rather than remaining frozen from fear.

I have empathy for these small investors who fell into the trap of feeling that they would be saved by the boom in house prices, stock market rallies and the optimistic view that kept all of us believing that the good times were here forever. For those who did not save some of the rewards from those flush exuberant times, or diversify to manage the potential downside of such a upside for the market it is a particularly stressful time. It is a time of reflection to learn valuable lessons for the future as well as a time to take an inventory of what can be done to manage personal financial insecurity and stress.

What my work has taught me is that the ability to tolerate anxiety and fear, manage stress and take small and consistent steps to control what can be controlled is often a defining difference between achieving a successful solution and optimistic financial future or sinking further into financial stress and insecurity.

Needed for Our Time: A New American Dream

Do you find yourself thinking about your expectations for financial well-being and how they’ve changed? We hear about this subject daily and we are all left with that puzzling question of what our future will hold? Americans are known as the eternal optimists always finding hope and feeling like we can fulfill our dreams to have the “good life”. However, in talking to many of our regular community members on www.kathleengurney.com, I’m finding a very different sentiment. Instead of optimism; I hear fear, anxiety, uncertainty, and even pessimism.

How soon might we find a crystal ball? Wouldn’t that be great? We all want reassurance that we’ll be okay. Of course, as adults we know that we can always do something in our own behalf to empower ourselves, but I find that there’s a desperate desire for the road map of how to get there from here.

So, in this state of distress. we can all follow the prudent advice of the rehabilitation programs that advocate day-by-day planning and focusing on what we can control. For me, I know that I can manage my anxiety about the future by having a concrete plan for my priorities. I try to make my goals reasonable, realistic and rewarding. My clients tell me they use those three descriptions and use them to manage their financial behavior and feelings. Clients find that my advice to take small steps consistently and purposefully help them achieve big gains over time.

So, maybe our new dreams will evolve and become clearer as we all start to focus on what’s most reasonable and rewarding for each of our individual situations.

Boomers Willing to Wait to Get What They Want and Say They Need

The quest for “the good life” continues to drive Baby Boomers to sacrifice today, so that they can enjoy the finer things tomorrow according to a MainStay Investments’ Boomer Retirement Lifestyle Study. A majority (76 percent) of Boomers surveyed say they are willing to spend less now to invest for a more comfortable lifestyle in the future.

When it comes to lifestyle, Baby Boomers are redefining what constitutes a basic need and what they consider a luxury. They have clearly expanded beyond the three traditionally thought-of necessities – clothes, food and shelter.

An interesting pattern that emerged in the research was that as Boomers age, things that were once considered luxuries are more likely to be considered basic needs–thereby reaffirming that Boomers essentially want it all.
The lesson for us, in my opinion, is to be clear about what gives us a sense of peace and safety and pleases us most. We need to understand our priorities and their price. It’s also important to clarify and understand the difference between want and need.

Money for needs can be classified as survival money and safety money while money for wants can be classified as freedom money, gift money and dream money perhaps. Our hierarchy of financial needs and wants can then be ordered so we may plan suitably for our survival and safety first. Only then should we incorporate our wants for a sense of freedom and self-actualization.

Because time can never be regained, it’s vitally important to understand the cost – financial and psychological – of putting off until tomorrow what might satisfy us today in moderation. It’s a difficult call to make whether we’ll be successful in affording our wants and wishes in the future. If we have a moderate and realistic plan understanding our needs and wants with timelines for accomplishment, we will always know where we stand. Then we can be certain that we know what we can afford and when. It’s impossible to get back precious time once it’s gone.

Money Management – What Women Want

The Boston Consulting Group just conducted a study showing women’s discontent with their money management services. The study’s bottom line was such old news, yet there’s a renewed interest in female wealth because women are growing in numbers and wealth.

As someone who is both a client and consultant working in wealth management most of my work-life, I can say that I totally empathize with women as frustrated consumers of wealth management services. For the most part, wealth managers have not learned how to adequately customize their communication and wealth management services. Their job description is wealth management and that’s their primary responsibility. It becomes complicated when they have to match that wealth management to our complexity of personal dynamics. That’s not their primary competence. So, it takes two to make a satisfactory relationship. We have to educate ourselves as to what we need to have to feel satisfied so we can communicate our needs and expectations. We have to become more assertive wealth management clients and perhaps teach the industry the competencies they need to develop and nurture.

There are a few guidelines which I’ve learned over the years both as a client and consultant in money management communication consulting:

1. Know thyself – be clear about your individual wants, expectations and needs for financial comfort and security;
2. Don’t be judgmental of who you are and what you want – there’s no right or wrong;
3. Don’t expect your money manager to care about your money more than you do – after all, it is your money and not theirs;
4. Be clear and verbalize what it is you expect and check whether your adviser feels that this is reasonable and will deliver; and not least
5. Make sure that you really understand and feel comfortable with both the strategy you’ve chosen and what you can expect in how to keep informed about how you are doing.

In the end, what we want is to feel that we’ll be okay and this comes down to what that means to each and every one of us as individuals. Your wealth manager can only try to empathize with what that may mean second-hand. It’s up to each of us to know what that means financially and how that feels.

Emergency Money Talks

A Couple’s Guide for Managing Financial Stress While Building and Strengthening Relationship Skills for Financial Success: Emergencies require exceptional skills in coping with financial and emotional conditions deemed out of individual control. Developing healthy coping skills is paramount to managing emergency conditions that could otherwise create havoc for families. 1. Organize regular “money meetings” to discuss your financial situation, issues and goals. Use this time to brainstorm creative solutions to problems and generate ideas to improve your future. 2. Time your financial discussions carefully. During the morning rush, late at night or after a bitter argument are not good times to discuss financial topics. A lazy Sunday afternoon, a quiet weekday evening, or a leisurely walk are better choices. 3. Set realistic goals for the discussion. You cannot change the past, or miraculously change the conditions that created the situation but you can change the way that you react and manage your current situation. Be clear about what you want to achieve. 4. Work with your partner’s personality, instead of against it. One of you makes financial decisions instantly, while the other one deliberates for days. One of you hates paperwork, while the other has anxiety if every blank is not filled out completely and perfectly. Focus on a positive outcome, not the method of traveling. 5. Avoid blaming your partner. Think about differences in money management as differences in perspective instead of moral failures. In most cases, the person you love is sane, reasonable, and healthy. Treat your partner with the respect deserved. 6. Cultivate a healthy respect for reason. Don’t become so emotionally attached to your position that you ignore reality. Seek the solution that best fits the situation, whether or not it fits your preconceived notion of how the problem could be solved. 7. Expand the pie. Creative solutions can ensure that both of you “win.” Instead of clinging to your position, try to find a way to satisfy your partner and yourself in how you approach your finances so that you achieve your individual and joint

Is “strategic default” for your clients? Would they walk away from their home and mortgage responsibilities?

Moral dilemmas are not easy. They make us get in touch with what’s most important to us and how we will make choices based on our values of right and wrong.

As a psychologist specializing in money management, I have worked with children and families on this issue and have been fascinated with how people of all ages justify what they do. The psychologist that is the grandfather of psychological studies on morality and moral judgments is Kohlberg. What he learned over the years is that there are stages of moral development and critical thinking which allow people to make appropriate decisions for themselves, their needs and causes in relation to what’s good and appropriate for society at large. He learned that there were people who made decisions based on the absolute of right and wrong, but many others who used their own barometer of what was right and wrong for them. People will do what they feel they need to do and justify it according to what was most important in their individual situation, but not all. So just like so many other variables in life, we humans differ on the morality scale as well.

So for those home owners who are walking away from their financial obligations to their banks and choosing “strategic default”; i.e. not to continue to pay their mortgage payments because their home is no longer worth what it was even though they can financially afford to do so, it fits. For them, the greater good is to make the right financial decision for their needs and let the bank deal with the loss of value and principal.

Public reaction to this new herd strategy of “strategic default” has been mixed with some aghast at the moral corruptness of such an act while others are in perfect accord and can empathize with the personal situation. In fact, they would do exactly the same thing even though they admit they never thought they would until now.

So what does this new trend say about how we think about what matters most? What would your clients do and why?

Recession lessons that will last kids a lifetime

I’m tempted to cover my baby’s ears while her father and I talk about luxuries to cut — should it be satellite TV or Internet? Cookies or ice cream?

The temptation to shield my child grows when Dan and I talk about curbing basic consumption: Is it worth it to get a broken boot heel repaired? Is rice or pasta cheaper (but which is healthier)? Can we learn how to cut each other’s hair without looking like a psychotic child attacked us with a pair of blunt scissors?

All of this mental haggling has me concerned that the financial stress Dan and I shoulder could somehow infect our child’s psyche.  While my seven-month-old is too young to understand that she’s growing up during one of the worst economies in decades, Dan and I do our best to remain upbeat around our baby. For families with older kids, experts say these tough times are a good occasion to teach children about financial realities, and these are lessons that can last a lifetime……

Lessons to last a lifetime

Today’s kids may end up with a more realistic view of money compared with previous cohorts as long as parents reinforce important lessons, said Kathleen Gurney, a psychologist and chief executive of Financial Psychology Corp., a Sarasota, Fla., advisory firm.

“We will have a whole generation of children growing up with healthy lifestyles, attitudes and behavior with money if we all make sure that this is not just a lesson for the Great Recession, but a lesson for a lifetime,” Gurney said.

To instill lessons, parents need to regularly talk to their kids, and keep up good spending habits.  “I don’t think the lessons will be maintained over time unless the family decides they want to keep these financial habits,” Gurney said. “Role modeling is very powerful.”

Parents can be honest about their own missteps to teach their children a lesson, Gurney said. “This is a great time for families to come clean and say: ‘here’s what we’ve been doing, here’s the trouble we are in now, and here’s what we have to do.'”

Kids can learn about money when parents let them contribute, Gurney said. “Feeling like we have some control over the situation is a phenomenal thing to learn when we are young.”

Kids can also learn about priorities from their allowance, especially if it’s been reduced. “Helping children understand what is most important to them is another really valuable lesson in these times,” Gurney said. “They can’t have it all, and it’s not realistic to think they can have it all.”

Personalized Service and ‘Plain Vanilla’ Products: A Winning Formula for Advisers?

In reading an article in the Wall Street Journal, “Economic Policy ‘Nudge Gives Way to Shove” it again became apparent that economic pain is substantially more relevant on an individual basis – for individual clients and their trusted advisors.

The Obama administration naively thought that institutions would feel consumer pain and alter their policies and practices so that the individual consumer would be able to make suitable and rational financial decisions. If only consumers could benefit from what the Administration proposed to be “plain vanilla offerings” consumers would not be victims of institutional lack of transparency and self-serving products and policies. To that end, the administration thought public shame and exposure of these self-serving practices would alter the institutions’ behavior shaming them into adopting the administration’s suggestion of “plain vanilla” offerings. Ah, such naïveté.

What Obama et al have learned is that “institutional decision-making” is not driven by emotions such as shame, pain, and empathy for others. Rather it is much closer to rational economics; i.e., profit is profit and there is nothing personal or emotional about it. Shame is not part of the equation for institutions, says the Wall Street Journal.
So if this is true, it seems more relevant than ever for individual financial advisors to set themselves apart and deliver services which enable their clients to understand what’s most suitable for them and their individual situations.

In this economic climate, consumers are highly anxious and are experiencing a crisis of trust. Some feel that they are over-reacting in their distrust and falsely accusing all financial professionals; i.e. guilty by association. So, advisors who have always been empathetic and ethical are guilty by association. This is unfortunate.

More than ever, it appears that consumers need ample time for understanding what products are suitable, building confidence and trust in the advisory process. Most importantly, they need a sense that their individual situation will be understood and that products will be transparent and tailored to their needs. This isn’t news.

There are plenty of financial professionals delivering such services but unfortunately many consumers don’t trust themselves in knowing when and whom to trust. When asked how they would know that they had found such a trusted financial advisor, most agreed that they’d know because their individual situation would be understood and that this advisor could work with people like them.

This is the central theme of my work, www.financialpsychology.com.