Everyone approaches their finances differently, but there are common mistakes that certain money personalities make. The following highlights five different money personalities, the mistakes they make, and how they can improve their financial picture.
Entrepreneur
Because they put all their financial resources and energy into their business, entrepreneurs may make mistakes such as cashing out their retirement plans to fund their business, holding too much debt, or even getting behind on self-employment taxes.
Entrepreneurs would be best served by developing a business plan with income and expense projections to ensure they use debt wisely to fund their business. They should also make contributions to a retirement plan annually, even if it’s only a few thousand dollars. And finally, entrepreneurs should work with a tax professional to help reduce their taxes as much as possible,
while making sure quarterly tax payments are made.
The Saver
This is the person who follows all the rules and does it just right. They fully fund their retirement
accounts each year, don’t carry much debt, and have plenty of savings in the bank for any unexpected expenses. While this money personality may get to retire early, they may want to stop and smell the roses once in a while.
The High-Income Earner
Professionals, such as doctors and lawyers, fall into two groups: savers and spenders. Those who
fund a large lifestyle may find they have trouble funding their retirement because they’ve spent too much.
Big earners need to develop a financial plan so they understand how much money they will need
to fund their retirement based on the lifestyle they want to live. They should also pay themselves first with a predetermined amount to
saving, before buying nicer cars or bigger houses, as well as considering setting monthly spending limits.
I Need to Save?
This money personality spends their paycheck as soon as it hits their account, and in some cases, live beyond their means. They have no savings if an unexpected emergency comes up, and they are likely carrying too much debt. To be able to retire, this person needs a financial plan with a strict budget to help pay down debt and develop both long- and short-term savings.
Doing Fine and Enjoying Life
This person saves and spends. They want to enjoy life experiences along the way to retirement, such as vacations, maybe a boat or
cabin. While they contribute to their 401(k) plan, they may not have a financial plan that includes short-term financial goals and how much they need to save for retirement.
While it is great that this money personality saves, they need to ensure that their spending isn’t outpacing their savings. By developing a solid financial plan, this money personality can create a more balanced approach to saving and
spending.
What’s Your Money Personality?
You should determine where you fall on the spectrum of money personalities so you can develop a financial plan that suits your personality, but also helps you secure your future.
Please call if you’d like to discuss this topic in more detail.
