February 13, 2020
We often talk about personality types in the context of the workplace and how personality preferences impact how we work with others, but personality preferences have a far-reaching effect on various aspects of our lives.
A particularly interesting area to study is how individuals with different personality preferences approach money management. Everyone deals with managing finances, but it’s rarely talked about in casual conversations, and some even consider discussing it taboo. Many people approach money management with very little outside information and feedback from others. They simply learn as they go.
There’s no one personality type that is naturally better or worse at managing finances, but there are certain strengths and areas to focus on for different personality types.
The knowledge of your personality type and preferences and understanding areas that may require more focus and attention can help you formulate the best money management strategy for yourself.
Extraversion Vs. Introversion
The Myers-Briggs Type Indicator instrument (Disclosure: my company publishes the MBTI personality assessment) breaks down personality type into four pairs of personality preferences, represented by four pairs of letters.
The first letter, either E or I, references how an individual is energized. In simplified terms, people preferring introversion (I) will get energy from alone time, while those with extraversion preferences (E) are more likely to feel “recharged” after time with groups of people or doing social activities.
The myth that having introversion preferences mean that an individual is antisocial or not good with people is just that: a myth. Rather, this part of a personality profile will shed light on how an individual may make certain decisions when it comes to socializing.
How might people with introverted or extraverted personality types approach money management differently?
They’ll likely encounter different challenges in formulating and sticking to their money management strategies. Those preferring extraversion are more likely to discuss their ideas with others, even if not fully thought through. They’re more likely to receive feedback from friends and family on investments or other money management ideas that they’re looking into. Bouncing ideas off of others is often an important step in the decision-making process for extraversion-oriented individuals, so if they feel that they can’t discuss these topics with others, it might be difficult for them to come to a decision.
People who prefer introversion, on the other hand, are more likely to overanalyze and delay making decisions on spending. They’ll tend to look for a lot of information before moving forward with big decisions and may discuss with close friends after deliberating on their own. They may benefit from consulting a financial planner. Having a trusted outside resource with whom to discuss these topics might eliminate some anxiety introverted types can have about bringing up serious topics, like finances, with friends and family.
Sensing Vs. Intuition
The second letter in a four-letter type refers to how an individual learns. Individuals with a preference toward sensing (S) will prefer to take in information in a specific, organized and sequential way. Those with a preference for intuition (N) will prefer “big picture information." They’ll want the general information around a subject so that they can decipher for themselves what it means.
When looking at how parts of personality play a role in the approach to money management, it’s not only the individual letters in a type that matter, but how these parts of a person’s personality interact with and impact one another. Extraverted sensing individuals will likely have a different approach than introverted sensing individuals. Introverted sensing types will tend to sit on information for later use, filing it away mentally until it’s needed, whereas extraverted sensing types are more likely to use the information they receive right away and focus on the present rather than the big picture.
Alternatively, intuitive types are more likely than sensing types to struggle putting long-term plans into action to achieve future goals. They might know what their goals are, but they feel overwhelmed with the possibilities of how to achieve them. These individuals might benefit from regularly writing down their goals and then road-mapping potential ways to achieve them. For every long-term goal, have three to five short-term goals that will put you on track.
Knowing one’s preferences for either extraversion or introversion and either sensing or intuition will help you develop and stick to a money management strategy that’s the right fit.
In general, having greater self-awareness and knowing one’s personality preferences can help shed light on your motivations and approach to risky behavior, planning and organization, and other relevant money management habits.
This is Part 1 of a two-part examination of money management and personality preferences. Part 2 will cover the final two letters in a four-letter personality type thinking vs. feeling and judging vs. perceiving.