Are you a saver or a spender, a money miser or a wastrel? There is nothing wrong with having a laugh with an online quiz or magazine questionnaire. It’s good to test your reactions to something you’ve not thought of before.
But such quizzes assume that money personality is fixed, and suggest you’ve discovered something useful if you find a label to stick on yourself. It isn’t and you haven't.
Being young is a good time for change, for experimenting. During a lifetime of managing money you will probably change a lot, sometimes quite rapidly. You may go through a period of having to be very tight with cash. Then you’ll feel like spending a bit more freely.
That is about adjusting to circumstances, not expressing your personality. For example:
- Your spending and saving choices will be influenced by other people—friends, a partner and others
- You’ll treat different pots of money differently—you won’t view your rent money in the same way as your weekend spending money
- Adopting one behaviour doesn’t rule out others—you can be generous with giving and still prudent about making sure you’ve got enough saved
- You’ll vary from season to season and maybe from day to day—when it’s warm and sunny you won’t feel the same as you do when it’s cold, wet, miserable and you’re recovering from flu
Four good reasons to spend money
Rather than thinking what your money personality might be, it makes more sense to think about the different things that money can bring. Which of these do you find most appealing, and how would you balance them?
Money as status
Sometimes you buy things because you really want them. Sometimes you buy things because you think they will make you look good in the eyes of others. Sometimes the two combine, but perhaps not equally.
Next time you think of spending money, on a gadget, clothes, or a night out, try asking yourself a key question. Are you doing this mainly for its own sake or mainly to impress others?
There is nothing weird or wrong about spending to impress others. It’s part of life. Advertisers know this and encourage it. But it is good if you are clear with yourself about it. And there are hazards too:
- it can become competitive within your social group—so you all get fancy phones that no one really wanted
- you can get into debt, which is expensive and worrying
- you can start to feel dissatisfied about the way your life is going because you’re spending hard-earned cash on stuff that really doesn’t have much value for you
Money as independence
Money can bring a sense of freedom and independence. If you’ve got the equivalent of three months’ salary saved, you don’t feel so trapped in the job you do. If you can afford your own place to live, you don’t have to live under anyone else’s rules.
You can also use money to get yourself temporary release from everyday cares. You can lose yourself in in sports or any absorbing hobby or activity. You may be a wage-slave while you’re doing your shifts, but you are free to explore something for yourself when you are not.
Independence doesn’t have to be expensive. You don’t need sky diving or yacht racing to feel a sense of freedom. Dancing, cycling by the canal or playing rugby for the local club doesn’t cost much. If it’s absorbing and enjoyable, it does the job.
Money for others
If you want to use your money to make yourself happy, there’s a useful piece of advice from psychologists. Spend it on other people.
Studies have shown that people who spend small amounts of money on other people reported greater happiness than those who spent the same amount on themselves.
Does this match your experience? If you give to charity, buy a Big Issue or get an unexpected gift for a friend, do you feel an increased sense of well-being? If so, you might want to include giving as part of your regular money management.
The sums do not have to be enormous, and while you are young, large donations may not be an option. But small acts of generosity can be a surprisingly healthy thing to do with your money—as it is with your time.
Money for security
Saving money can give you a sense of security—confidence that you have money available if something unexpected crops up. You can avoid the worries and sleepless nights that affect people whose commitments are greater than their income.
Identify a sum of money that makes you feel comfortable and have this as your target — your safety cushion. Depending on your circumstances this could be £100, £300 or some other sum that makes you feel relaxed and in control.
You can also develop other goals, depending on your medium or long-term plans. You might have a target for saving for a deposit for a flat rental, or to take time off and travel.
If your saving goals are realistic, you can save at the same time as you use money for independence, for others and for status. But saving can get out of hand. If every penny is a prisoner, you risk missing out on other things in life.
Getting a balance
None of these are contradictory. Any of us can use money for any of these purposes at different times. Or even at the same time. You can spend money on someone else, increase your status and experience some freedom all at the same time.
Some may appeal to you more than others. But probably, like most people, you’ll take advantage of all of them during your life. The secret is to get them in balance.
There’s no point in using money to impress others if you don’t have enough saved to replace your phone when it suddenly fails. That impresses no one.
Remember too that these different ways of getting value from your spending relate to the money you have left over when you’ve met all your other commitments.
Your priority, possibly the main part of your income, will be devoted to essentials. Commitments like your rent or your board and lodgings contribution and maintaining the payments on your phone have to come first.