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Feature: YOUR MONEY PERSONALITY
Financial Approaches to Money
Everyone approaches money differently. We all know someone who’s extremely frugal, and we probably have a friend who’s always ready to swipe their card while shopping. There’s a good chance we’ve also encountered someone who always seems to have their budget in order. People may approach money the way they do due to their upbringing, career choices, current financial situation, and many other things – all of which form their subconscious beliefs about money. For better or worse, everyone has their own relationship with money. Yes, even you!
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The Klontz Money Script® Inventory
The Klontz Money Script Inventory measures your relationship with money in four categories. Every person has a score within each of these categories. By determining which ones best describe you, you can gain insightful information about your relationship with finances. Why is this important? Knowing why you interact with money the way you do helps you pinpoint actions to improve your financial health.
Money Status
Those who score high in Money Status equate their self-worth with their net worth. They may have grown up in a lower socioeconomic class or a household where outwardly wealthy people were highly regarded. Money Status folks tend to wear their wealth on their sleeve, preferring to make it obvious how much money they have. They are more likely to overspend and hide their spending habits from their spouses.
ACTION ITEM:
If you think that Money Status might fit your money personality, consider each purchase you make carefully before making that spend. If it’s not a necessity like gas or groceries, ask yourself why you are making the purchase. Do you need it, or is it just for status?
Money Worship
People with high Money Worship scores think money equals happiness and that one can never have enough money. To them, money is the solution to any problem. Money Worshipers are more likely to have debt, and their pursuit of money never seems to satisfy them.
ACTION ITEM:
Money Worshipers will benefit from finding activities that bring them joy that do not cost a significant amount of money. Whether it’s baking, reading, or hiking, look for ways to have fun and enjoy life without spending too much money. Money is nice to have, but it doesn’t buy happiness!
Money Vigilance
A high score in money vigilance typically points to someone who keeps a watchful eye on their finances. This is likely someone who budgets well, doesn’t overspend, tends to be frugal, and already has a solid foundation of financial wellness. Those who score high in this category also save well and think money should be something people work for, rather than a handout. They make good spending choices and typically find it improper to talk about finances with anyone other than their spouse or partner. One downside to a high Money Vigilance score is that it indicates someone may be anxious about their finances and unable to enjoy the money they earn.
ACTION ITEM:
Try not to get caught in a cycle of constantly worrying about money. If you identify with Money Vigilance, set aside a small sum of your budget to treat yourself now and then. It could be as simple as a nice meal out, or as extravagant as a weekend getaway. Allow yourself to responsibly enjoy those funds that you worked so hard for.
Money Avoidance
Money Avoidance tends to be higher in those who are already wealthy. These people believe money is inherently bad, that they don’t deserve money, and that rich people are greedy. They frequently give money away and try not to think about money if they can help it. Sometimes, people’s professions also reflect Money Avoidance. Psychologists and social workers tend to score higher in Money Avoidance, while those in business tend to be lower in this category.
ACTION ITEM:
Although it seems counterintuitive, avoiding money can cause more problems with money. Those who deal with Money Avoidance should check their bank accounts regularly to make sure they still have enough to cover their own expenses. Then, if you have some disposable income left over, pick some of your favorite charities to donate that money to.
Which category sounds the most like you?
Take some time to understand these four categories, and see if they help you better understand your relationship with money! Want to dig more into your money personality? Check out Mind Over Money, written by Ted and Brad Klontz (fatherson duo), who’ve pioneered the field of financial psychology. Also, complete the Your Money Personality quiz online at yourmoneymatters.spero.financial.
Ready to take the quiz?
What is a Certificate of Deposit, and What Can It Do For You?
Because of the rapid changes in today’s financial market, many folks are realizing the impacts on the value of money. Simply put, as inflation increases, the value of the dollar decreases.
Inflation hits our wallets by increasing the prices of goods and services (think: groceries). Inflation also means that interest rates increase. For example, if you take out a loan today, you will pay more in interest over the length of the loan than you would have a year ago. However, on a positive note, inflation also means that banks and credit unions often raise the interest rate on savings accounts (the amount of money they pay you for putting your money in an account with them).
That’s where a certificate of deposit (CD) comes in! If you want to see your money make money, a CD may be a great option. A CD is a lot like a savings account. It is an account that earns interest – usually at a fixed rate – on a lump sum of money for a set period. Almost every bank and credit union offers at least one CD option.
Although CDs are similar to savings accounts, there are a few key differences. First, the money in the account must stay untouched for a set period. Otherwise, you may have to pay a penalty for pulling out the money before the period ends. Terms and interest rates vary based on the financial institution, so it’s always important to get the details before opening your account.
There are a variety of terms that CDs offer. The best one for you depends on your financial goals. Some CD terms are as short as 90 days, while others can be up to five years. If you can let your money sit for a while, a longer term may be best because you will earn more money over time. If there’s a chance that you will need those funds in the near future, then a shorter term may be better for you.
There are a variety of terms that CDs offer. The best one for you depends on your financial goals. Is a CD Right for You?
Are you close to retiring? If so, a CD may be a good option for you. Why? If you are currently invested in mutual funds or the stock market, you may have noticed the ups and downs of the market, which has direct impacts on your earnings. However, with a CD, your rate is fixed, so the money you earn is not tied to the market's volatility. It is a less risky retirement savings option for your money. Also, many financial institutions allow you to use your IRA money to fund your CD.
CDs may be a wise choice if you are saving for a large expense, such as a down payment on a home or a big family vacation. Many people prefer CDs over investing the lump sum in other ways because it is safe, the rates are fixed, and they are federally insured up to $250,000 – meaning you get your money back in the unlikely event that your bank or credit union goes under.
CDs can also be an excellent option for those who want to set aside and grow an emergency fund. The point of an emergency fund is that the money shouldn’t be used unless it’s absolutely necessary. CDs add a level of accountability because there is a penalty if money is taken out before the term ends – hence, you’ll think twice before pulling out funds. Plus, you’ll grow that fund over time and improve your financial well-being. If you would rather have an account that gives you more access to the money you’ve deposited, a traditional savings account may be a better option – though you will more than likely earn less in interest.
