There are a number of strategies you can make use of to find out what your “financial” personality is like, so that you can get out of debt and start learning some responsibility. Statistics show that household debt is skyrocketing, reaching new and new heights year after year. Consumer debt comprises around 30% of the total debt.

Market Principles vs. Individual Principles

We live in an age when supply is almost endless. We can buy practically anything we can imagine, and in wondrous variety at that. When you think of the traditional supply and demand graph, you would expect demand to plummet. Perhaps this can be seen as a challenge to the age-old economic principle. Not only is demand not plummeting, it is rising and rising and the state of debt testifies to this. It seems we want things so much that we no longer care that we can’t afford them. However, we should be careful when we assume that macroeconomic principles transfer to microeconomic ones. In other words, market principles do not always reflect individual ones.

Personality Balance Sheet

Experts advise debt-ridden consumers to create what they call a personality balance sheet. The idea is to make a list of your personality traits as they relate to your behaviour as a consumer and define them as advantageous or disadvantageous. What motivates most of your purchases? Granted, this is a difficult question to answer. There are many factors that motivate purchases apart from personality traits, such as age, sex, even location. Naturally people in sparsely populated areas will have a whole different set of criteria when it comes to purchasing goods or services compared to people from big cities.

How Commercials Influence Behavior

Before you can understand how your personality may be driving you into debt, you have to understand the psychology of advertising. What are producers actually going for when they advertise their products? You may have wondered how they possibly get returns on commercials, what with there being so many. Advertising’s main function is informative, true, but it also serves to educate. By advertising expensive luxury products, they work on your system of values, artificially creating demand for something costly and prestigious that you don’t need. If you are especially vulnerable to that sort of “propaganda”, as would be someone with low self-esteem who wants to be respected and admired, you’ll fall for this. You may take out a loan to get the latest BMW or Mercedes model instead of sticking with your trusted Volvo or Pontiac.

If you tend to be on the impulsive side, make sure you stay far from temptation. Take all your credit cards out of your wallet, do not go into stores if you don’t actually NEED anything, and even curb window-shopping. This is not going too far. Do you want to get out of debt or don’t you?

Main Money Personality Types

According to experts, there are several money personality types – the spender, hoarder, avoider, and amasser.

Spenders tend to buy on impulse and buy things they don’t need, whether jewelry, groceries, or anything else. They find it difficult to prioritize and save for a rainy day. Spenders are often knee-deep in debt.
Hoarders, on the other hand, usually have a budget and prioritize their purchases and long-term and short-term financial goals. For hoarders spending on travel, dining out, magazine subscriptions, and entertainment is a waste of money (and time). Hoarders usually have an emergency fund and prefer to save for college education, retirement, or just in case.
The avoider tends to put off things like paying bills on time or doing taxes. He has a hard time saving, planning, budgeting, and dealing with financial matters. This money personality type has a nonchalant attitude towards financial planning and things like retirement income, investment, or insurance. If you are an avoider, it is a good idea to talk to a professional to get in control of your financial life. Always shop with a list, create a budget, and stick to it.
The amasser is a different story – for him money means power and enhanced self-esteem. Lack of money, on the other hand, may result in depression and poor self-esteem and feelings of worthlessness and failure. The money monk is the exact opposite, feeling that money and consumption are the root of all evil. A steady paycheck or inheritance money will actually make him feel insecure.

There are three more personality types – the flyer, security seeker, and risk taker. The risk taker, for example, tends to make risky investments such as real estate investment trusts, options, currency trading, and high yield bonds. Risk takers aren’t too worried about financial matters and details. They actually get excited about potential returns, risk, and possibility. Security seekers, on the other hand, prefer low-risk investments such as bonds, savings accounts, and certificates of deposit. They like to be prepared for anything, be it a natural disaster, depression, or apocalypse and humankind vanishing from the Earth. Security seekers usually have an emergency fund for a rainy day. For them, life is about careful planning, budgeting, and saving for the future. The flyer also has a distinct way of thinking. He feels content and happy with life as it is. The flyer has a nonchalant attitude toward financial matters and as long as he is independent, free, and making his own choices, that’s all that matters.

A Final Word to the Wise

At its core, consumption is a social habit. We buy what others buy or encourage us to buy, even though we may not realize it. It follows that you should surround yourself with positive people who realize that there is more to life than shopping.

It is so easy to overspend during this time of the year now that everyone is excited about Christmas and spending quality time with family and loved ones. This said, you may want to create a realistic budget to meet your daily expenses, pay bills, buy presents, and have fun with your family and friends.

How to Make a Holiday Budget

The first thing to do is to set financial limits and make a list of your spending goals and categories. List your regular monthly expenses such as groceries, rent or mortgage, utilities, outstanding balances, and so on. Then list your income, including wages, salaries, and additional income you may have. This will help you to find out whether you have surplus income to spend on presents or you have to rely on cash in your savings account. If you don’t have enough cash for a rainy day and no surplus income left, there are low-cost borrowing solutions to look into. Back to spending categories, you can make a list of Christmas expenses such as post-Christmas sales, holiday clothing, travel, Christmas tree and décor, entertainment, and holiday meals.

Holiday Gifts

You may include expenses such as kitchen and baking gifts, service gifts and tips, and holiday photos. Other items you can list include Christmas cards, shipping and postage, gift wraps, stocking stuffers, and of course, gifts. Shop around and calculate how much you need in total. If you want to have a more detailed list and plan, think of everyone you will meet and give a gift – grandparents, siblings, cousins, spouse, kids, uncles and aunts, etc. Other people on your list may include coworkers, bosses, partners, church staff, neighbors, and service providers. List all names on a list and divide them into categories, for example, “no gift”, “gift made”, and “gift to make”. This will give you a good idea about the number of people you can afford to give a present. Focus on the “gift to make” category and assign the amounts you plan to spend. Then assign amounts for the “gift made” category (the amounts you have already spent). Calculate how much you have in total. If the total amount is less than your budget for holiday gifts, then you can move names from the “no gift” category to “gift to make”. This is a great way to ensure that you are able to give presents to more people. If you want to, you can also make a gift list and list each gift in addition to gift amount. Alternatively, you can use the envelope system for holiday-related spending.

Think of the types of gifts that are suitable for colleagues, neighbors, and friends. May be Christmas treats, cookies, or anything else? This depends on your budget. Once you do this, have a list of all expenses, and a good idea of how much you need, you may want to start tracking your ongoing expenditures. After you paid for gifts or anything else, make sure you record all expenses to keep track of your spending. This will give you a good idea of the cost of the holiday season.

Other Considerations

To make things run smooth, it pays to prioritize expenses, especially during the holiday season when you have additional expenses. Priority expenses include things like your rent or mortgage, outstanding balances, and utilities. It is important to pay these first, along with council tax, payroll and income tax, spousal and child support, etc. Other expenses to meet include student and personal loans, medical bills, and credit card debt. It all depends on your financial situation, whether you have debt and how much you owe, and other considerations. Finally, there is one golden rule to follow, whether during the holiday season or any other time – live within your means and don’t overspend.

On a Tight Budget

If you are on a tight budget, there are great ideas for free gifts – you have one valuable resource to use, and this is your creativity. If you have enough time, you can think of gifts such as personalized CDs, repurposed old frames, homemade cookies, etc. You can create a scrapbook, album, or photo collage or you can knit or crotchet a sweater, table cloth or anything else. There are plenty of gift ideas such as homemade bread, good reads and books on your shelf, an encouragement jar, and so on. Whatever comes to your mind, really, is best because you know your loved ones well. And if you are short of time and have a tight budget, look for Christmas sales and discounts, promos, and online sales. Online retailers save on rent, salaries, and other expenses and offer exclusive discounts and hot deals.

Money and Motivation: Is Your Consumer Behaviour Driving You into Debt?