In previous posts we discussed how the wealthy use Pareto's Law , also known as the 80:20 Rule, to their benefit. Being able to make the right decisions 80 percent of the time can make a big difference.Just as getting stuck in "analysis paralysis" can hinder you.
Another part of this equation is knowing your attitude towards money. In order to find financial freedom you need to know what your financial dysfunction is.
Steven Marshall, founder of Mortgage Planner Magazine and Cobalt Mortgage discusses the different personality types when it comes to money.
The key to financial freedom isn't merely finding the right investments. According to veteran financial advisor and author of "Facing Financial Dysfunction" Bert Whitehead, there are various ways that people can lose their financial freedom. By identifying and correcting these financial dysfunctions, Whitehead contends that people of any income level can move forward and build a strong foundation that leads to financial independence.
Whether or not they realize it, most people are suffering from some form of financial dysfunction. We're talking about the financial choices and strategies that people believe are effective but which actually impede their financial decisions. These dysfunctions can lead to intense financial stress, which surfaces in a multitude of problems, including anger and quarreling, insomnia and depression. In most cases, financial problems are caused by factors that aer under the control of the individual. By facing your financial burden and moving toward financial freedom.
If you have any financial dysfunctions, and chances are you do, you must acknowledge and address them before you can successfully handle your finances. The cornerstones of recovery are knowledge and education, starting with understanding the top financial dysfunction that plague most individuals.
KNOW YOUR FINANCIAL PERSONALITY-One of the top financial dysfunctions is being unaware of your financial personality. Knowing who you are and how your financial personality can aggravate your financial situation is key to developing a strong financial foundation. Two main emotions motivate people financially: fear and greed. The degree to which each person responds to these two emotions determines his or her financial personality.
The list below describes four extreme financial personalities, along with their solutions:
THE "SCROOGE"- is motivated by a strong desire to create great wealth and also has a strong propensity for saving. They generally hate to pay taxes, are typically very controlling, and tend to avoid too much diversification when investing. The Scrooge can definitely improve their attitude with some strong effort on their behalf.
THE "GAMBLER"- has propensity both to accumulate great wealth and spend it. When tings go bad for the Gambler, they are particularly vulenerable to get rich quick schemes and white collar crime. Gamblers on the extreme end don't usually seek the advice of a financial advisor, and should treat their addictive compulsions as part of their financial recovery.
THE "MISER"- is strongly motivate by fear and has a natural inclination to save. Misers are typically fearful about investments and have very little to show for their strong saving abilities. They need to overcome their fear of investing before they can prosper. Usually, witha healthy dose of education, misers can shed their investment fears in a relatively short period of time.
THE "SHOPAHOLIC"- is motivated by fear and has a strong propensity to spend. Shopaholics on the extreme end are usually beyond the ability to accept help from a fiancial advisor and should seek outside therapeutic help. Less extreme Shopaholics can often be helped by understabding the basics of their dysfunction.
THE MOST COMMON PERSONALITY TYPES-
Most people don't fit into the extreme models just discussed. More than likely, they are a blend of two or more of these personalities, like those listed below.
ENTREPRENEURS- are motivated by a strong desire to make money. Their biggest fiancial challenge is often inadequate liquidity, and many only want to invest in their businesses. Entrepreneurs should establish lines of credit before they need them, and create a diversified base that can be sustain them through the slower times.
NESTERS- are very good at saving but tend to put everything into their homes. They tend to over improve their homes, placing great emphasis on paying off their mortgages. They often invest in time shares and vacation homes.
BON VIVANTS- are the workaholics of the group. Concerned about status, Bon Vivants love brand names and tend to have a very bad investment programs. THey often succumb to high pressure salespeople and tend to confuse hobbies with ninvestments, purchasing boats, photography equipment and other hobby items as investments.
TRAVELERS-prefer to spend money on experiences, rather than things. Non-materialistic and simple, they avoid anything that's going to cause a lot of stress or worry.
Each of these personalaity types has its advantages and disadvantages. Before you can take the steps to becoming fiancially fit, you must understand who you are and know your personality propensities. Take the time to learn about your natural inclinations. The More you know about yourself, the easier it will be to tackle the difficiluties that have held you back to this point.
Next up...7 Sypmtoms of Financial Dysfunction.
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