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You've probably noticed that different people relate to money differently- some folks can walk around with cash and not spend it, while other people seem unable to carry a credit card with them without coming home with another pair of shoes.  Some people account for every penny they have, while others avoid the question entirely.  Some folks would do just about anything to get more of it, while others regard it as base, tainted, beneath them, or even as evil.  Some folks are happy with just a little, while some get nervous if their bank account doesn't have many thousands of dollars in it.

We all relate to money, to a degree, in an emotional way, and this in turn affects how money enters and leaves our lives. In effect, our attitudes and habits about money constitute a blueprint for just about every aspect of our financial lives- how much we earn, how much we spend, save, squander, etc.  Once you realize how it works, (it's pretty simple) it's not uncomplicated to begin to make changes in your financial blueprint- after all, it's just your attitudes and habits.

This article will discuss how we learned what we've learned about money in the past, and it'll go over 4 typical financial personality types.  These types represent extremes, imbalances in our financial selves.  It's probable that you'll recognize bits of yourself in all of them- I certainly do.  This article will also suggest simple and effective ways to address these imbalances without requiring you to become someone you're not.

Modeling

The world is mostly invisible, in a sense.  You experience it through your own senses, and in the context of your beliefs, attitudes, and habits.  It's your beliefs, attitudes and habits that to a large part govern your external behavior, the stuff other people can see and hear.  A simpler way of saying this is that your (inner) experience shapes your (outer) behavior.

At the same time, you had to learn by observing other people's outer behavior. We learn, for the most part, by modeling the behavior of others around us- especially our cultural, social, and financial attitudes- that is, absent formal education on a particular subject, we learn by imitating.  In many households, particularly where money scarcity is an issue, the subject isn’t discussed, so most of us have had to figure it out for ourselves, modeling the behavior of our parents, the media, clergy, or our teachers… but the problem with this method is that if you learn by modeling, you often don't get the chance to question it and also, if you don't have access to lots of details about another person's inner process, you've only got their outer results to work with- in order to make another person's behavior your own, (or alternately, in order not to be like someone you don't want to model) you've got to do some guessing in order to create your own internal process- and it's the guessing part that can lead to interesting results.  An old allegory teaches us about this conundrum- it's the one about the three blind men who are describing an elephant.  The first, who has a hold of the trunk, declares it to be like a snake, while the second, who has it's leg, declares it to be like a tree, while the third, who has it's tail, pronounces that an elephant is like a thin rope.  All three, operating from limited information, have described their own experience with the elephant, and all three have arrived at wildly different conclusions about what 'elephant' means.  To each, it is something different.  Because their observations were limited, their conclusions differed wildly from each others'.

In a sense, because our role models' inner experiences are often obscured from us, most of us have jumped to a conclusion or two in our lives about a thing or two.  I know I've acquired some beliefs and habits based on conclusions I've jumped to- and I also know that some of these beliefs didn't help me out very much.

Habits and 'Normal'

Why are some people easy and comfortable with money and others tormented by it?  Why do some people attract it effortlessly while others work harder, longer for less of it?  What is it about money that makes us equate it with personal worth, virtue or lack thereof, responsibility or lack thereof, etc?  Why is it so personal?

If you accept that your inner experience shapes your outer behavior, you can see how after a while your beliefs turn into habits and what you habitually do becomes 'normal'.  'Normal' is just another word for how things are, according to your perspective... and although we all tend to relate to our reality in the context of what is 'normal' for you, it's easy to forget that it's a personal view, and that not everyone shares your sense of 'normal'.  Still, it's an incredibly powerful and motivating thing that shapes your reality.  Have you ever noticed how wealthy people who lose all their money tend to get it back, and how poor people who get a large chunk of money tend to lose it all?  This is the power of habit and beliefs- if your habit and belief system is set to make you wealthy, you'll become wealthy just by responding to your habits and beliefs.  If your sense of 'normal' is set to make you poor, poor you will be.

The problem is that these habits are small things, they often work in little ways, and they're so simple that you wouldn't believe that they work... but they do.  Probably the only thing that all millionaires have in common is that they spend a little bit of time every day managing their money.  That's it.  That's all they've got in common.  It's that simple.  It's a thousand little things that add up.

Most of us, for whom life is much more complicated, fall into a variety of traps.

Four different 'Money Types'- Spender, Hoarder, Avoider, Ascetic:

• Spender- The spender has no problems enjoying their money- they can think of a dozen ways to get pleasure out of it, right now. Spenders may or may not have a good track of how much money they have, and they're generally unburdened with the idea of money or it's ethics.  Spenders tend to relate to their money in terms of enjoyment, and tend to use money to regulate their happiness- look for a spender to fix a bad day by getting a massage or a new pair of shoes as a pick-me-up.  Spenders want more money now, but their problem is in balancing their right-now emotional needs versus their long-term fiscal responsibilities.  They're good at enjoying themselves, but tend to spend money in order to build a facade to cover up inner game issues they're uncomfortable with, but often end up in money trouble as a result.  The spender is terrified of being bored, alone, uninteresting- and uses money to avoid overcoming those fears..

• Hoarder-  The hoarder believes that it's more important to have more money in the future than it is to enjoy it now, and often feels guilty when treating themselves to simple pleasures.  The hoarder often keeps good track of how much money they have on a day-to-day basis, but not necessarily.  The typical hoarder is good at accumulating, but may be motivated by fear of being caught without enough, whatever 'enough' means. (generally 'enough' is more than they have, whatever that number is at any given time).  Often enough, the hoarder falls into the trap of resenting all the self-denial and splurges on something nice, but then the 'fear of not having enough' cycle becomes exceedingly punishing.  The hoarder has good credit, but is afraid to use it, is terrified of not having enough, of needing to borrow, of needing to admit they need financial help, etc. The hoarder uses money to avoid dealing with inner game issues of scarcity and security.  In brief, the hoarder tends to be financially well off, but often is not the happiest of people... the hoarder ultimately doesn't own his or her money, but is rather owned by it.  

• Avoider- The avoider believes that their life should not be about their money, and so chooses to focus their attention on anything else they possibly can.  The avoider doesn't balance their checkbook, they don't read their bank statements (hey, the bank must know what it's doing, it's probably all right) and they tend to be subject to a few surprises here and there from overdue bills or expenses they thought were taken care of.  The problem here is that they give up their power over money, when what they wanted was for money to not control them. Avoiders tend to have excellent people or technical skills and often make a lot of money, but they are almost pathologically bad at controlling their money.  Avoiders are afraid of the consequences of exercising their control over money- they'll pick up the tab at a restaurant rather than figuring out who shorted on the check.  They will throw money at a problem rather than resolving it in a way that might be unpopular or difficult- they use money as a means of not dealing with some of the inner game issues they may be struggling with.  Sales people and creditors love avoiders almost as much as they love spenders.

• Ascetic- The Ascetic believes that money is an unwholesome thing and is very inventive about creating ways to avoid dirtying themselves with it. Ascetics will barter for value and are deeply suspicious of money and the influence it can have over them and over other people.  Ascetics will tend to focus on simplifying their lives, and to the Ascetic, that often means getting rid of what money they can't live without.  Ascetics tend to be pretty passionate about the evils of money and corporations and corruption and such, and in an effort to live a life free of these evils, they impose a harsh austerity upon themselves.  They tend to blame many problems on money, tend to choose not to learn how it works, and tend to live their lives on the short end of the financial stick, but tend not to realize that this choice puts them in an un-empowered, punishing relationship to money.  In essence, they've chosen to be poor 'and spiritually whole' in order not to become the rich people they despise- but in the end, they're avoiding money in order to avoid dealing with some of the inner game issues they may be struggling with.  They're afraid of what they might become if they were wealthy or powerful, or tempted.  They are also loathe to invest in something 'against their ideals'- they want control more than they want abundance.

So, which one(s) are you?

If you're like me, you recognized bits of yourself in several of the above types, but you identified with one more strongly than the rest.  Understanding this one type, celebrating the strengths of it, and acknowledging the problems of it, is going to be key in your quest to getting from where you are now to where you choose to go from here.  At the same time, it's important to understand that none of these types represent a 'right' or a 'wrong' position- each represents a set of choices, that is all.

The purpose of asking you which type you identify most strongly with is not to make you feel bad about your problems or failings- rather, it is to allow you to step away from yourself and to view a model, an idea distinct from yourself.  The purpose is to help you see yourself without judging or assigning a positive or negative value to what you see- I urge you to avoid judging, that's just a path toward arguing endlessly with yourself.

The truth is that not many of us are really emotionally balanced when it comes to money- and this affects the way we spend it.  If you think of money as a tool to give you security, take a look at your budget- it's a good guess you're spending money in order to feel secure.  If you think of it as a source of pleasure, you'll probably be able to spot unnecessary spending for fleeting pleasure, and you're probably wrapped up in guilt over that, etc.  If you think of it as a font of power, you might be spending in order to demonstrate your power, or if you relate to power in a negative way, you might avoid exercising your financial power and all of these things will color just what parts of your spending you think of as 'necessary', how you approach or recognize opportunities, and how you relate to yourself in the context of your finances.  ...so if the problem is a lack of balance, and the lack of balance is a function of your habits and beliefs, does it mean you have to go against your old beliefs?

...no, you don't.  It's simpler than that.  The easiest way to balance your finances is to choose and create financial habits that take your personality type out of the equation.  I'm not asking you to magically quit being who you are- I'm not sure that's possible and even if it was I'm not sure it would be a good thing.  I'm suggesting a much, much easier thing than that.

Where the rubber meets the road

now that you have some idea of what direction you may be financially imbalanced in, how do you get over it without falling into the same habits and processes that got you where you are now?

1) Financial Balance-

A good way to get out of your imbalance patterns is to adopt a financial plan that takes your personality out of the process- for me, that meant allocating fixed percentages of my income for specific purposes every time I get money, and watching how the simple process of sticking with an arbitrary system changed my life. For a complete rundown on the method, click here- what follows is a brief summary.

Use containers (I use jars) to represent physically the division between these accounts, and open several bank accounts to allow you to manage money in the following areas:

• 10% savings - use this fund for long-term large-ticket items.  You can also use this stream of your income to service debt, pay a car loan, etc.  As the name implies, this will be a savings account.
• 10% Retirement savings - This is the money that will be your retirement- you can never spend this money except on things that can make you more money- like investments.  Your goal with this money will be to grow it until it has it's own revenue stream equal to or greater than your expenses.  This can be in the form of an IRA, a brokerage account, an interest-bearing savings account, a 401(k), etc.
• 10% education- use this fund to feed your brain, to learn and grow.  If you're not learning, you're not growing.
• 10% pleasure- use this fund to nurture yourself.  This is money you must spend every month, but it's important that you not waste this money!  This money needs to be spent on something you will value, something indulgent, something all about pure pleasure.
• 55% necessities- food, shelter, basic clothing, utilities, insurance, that sort of thing.
• 5% giving- This is an important one.  Use this part of your income to develop your generosity- give gifts to friends, give to your favorite charity, support public radio, pick a good cause and support it.  If money is tight, give your time.  This is money well-spent- it will help you avoid the trap of feeling bad about making money, while at the same time helping you to positively experience the power of your growing wealth.

...now, you've noted that I've put percentages next to each of the categories- these are your starting points, but they're only recommendations, they're meant to give you a place to work from.  If your necessities budget is over 55% of your income, start from that necessities budget number and divide whatever discretionary income you have left over among the remaining ones. If it's less than 55%, increase the percentages of the other accounts accordingly.  Regardless of where it is, over time you want to see that number get proportionally smaller and smaller, so the amount of money going into your other accounts can go up... and there's 3 ways to do that- a) simplify your 'necessities', b) increase your working income, and c) increase your passive income.

The purpose of this system is to give you guidelines to follow and habits to create so that you don't run into your old patterns- if you're a spender, you know that once your pleasure account is done for the pay period, you can't go for more- this will force you to be more discerning with your pleasure spending.  If you're a hoarder, you *have* to go find ways to enjoy spending your play money in regular, livable ways.  If you're an avoider, you have to deal with your money at least enough to pass it through this filter and into your accounts.  If you're a Ascetic, this system will help you give your money purpose in ways that you find acceptable.

If you make following this system a habit, it won't feel like work.  At the same time, you'll probably notice that a lot of the drama will have gone out of your financial life.   ...but that's only the numbers part.  The jars system addresses your need to be financially balanced.

 

2) Personal Balance-

If your inner game isn't balanced, sooner or later you'll get sick of any system, which is why so many debt reduction strategies and diets and 'self improvement' deals go by the wayside.  If your inner game isn't balanced, making the outer game, your money, balance will feel like work.  The trick is to get in touch with and understand how you relate to money emotionally, so that your financial life comes out of choice, rather than habit.  If you don't deal with your emotional attachment to it, you'll play the same scene over and over for the rest of your life until you do- our minds work like that.  You'll spend the rest of your financial life choking on the same emotional bone.  If you're spending or hoarding or avoiding money order to avoid dealing with a personal issue, eventually you'll get tired of it.  Deal with the emotional issue and it'll stop trashing your financial life.

 

Without taking care of the hard numbers *and* petting your emotional underbelly, you'll get tired of your financial situation, it'll feel like a struggle.  Without growing your financial acumen and your financial context, you'll be stuck making the same amount of working income for the rest of your life.  Without having fun along the way, what the heck are you doing?  We are whole beings, and if we don't take care of our whole selves, the parts of us that we neglect will themselves become our problems.  The solution is in becoming more whole, more balanced.