In part 1 and part 2 we discussed getting to know your financial personality. This is a very important key to wealth building. There are eight main financial personalities: Scrooge, Miser, Gambler, Shopaholic, Entrepreneur Nestors, Bon Vivants, and Travelers.
In part 3 we conclude are series with symptoms of financial dysfunction. According to Bert Whitehead, author of "Facing Financial Dysfunction," there are seven symptoms of Financial Dysfunction.
Although there are numerous symptoms that indicateA financial dysfunction, seven symptoms present themselves most often. By identifying these symptoms in your own financial life, you can be positioned to move toward a solution and start achieving financial health and freedom.
MORTGAGE AVERSION: Mortgage aversion is common among nestors and entrepreneurs. This symptom surfaces among those who earn significantly yet keep low mortgages, often at above market rates. The best prescription is education. By seeing the benefits of repositioning their equity, and understanding how positive leverage and tax benefits relate to holding a mortgage, these individuals can begin to move toward a financially healthier model. Individuals can always take incremental steps to desensitize themselves to mortgage shock. Start with an additional $50,000 and invest it in a separate brokerage account. If you panic, you can sell your investments and pay off the mortgage.
RISK AVERSION: Risk aversion is revealed through reluctance to invest and diversify, as well as excessive risk exposure. At he cognitive level, these individuals need to understand the basics of investments and how they work. At the belief system level, some need to address deep seeded fears of being punished for appearing greedy. As part of an advanced education program. Whitehead has advised some clients to begin investing with small, less risky experimental accounts that they manage on their own.
COMPULSIVE SPENDING AND EXCESSIVE DEBT: Debt has nothing to do with income. While people may think their credit is the result of not making enough money to pay their bills, the truth is there are people making hundreds of thousands of dollars each year getting deeper and deeper in debt, and others who make only tens of thousands of dollars who are putting money aside on regular basis. The first stage of solving this issue is education. Individuals must learn the costs of buying things on credit, track their spending over a period of time and devise a spending plan.
POVERTY MENTALITY: Those who earn substantially below their capability and are always broke need to employ benchmarks to measure how they're doing. Research compensation for your profession and see where you rank according to industry standards. People will values your services based on the price you command. If you have more business than you can handle, it's a clear sign that you're under priced. Start by raising your rates only for new clients. Once you see people acknowledge the value of your services, it will be easier to raise rates with existing clients.
MISER MENTALITY: Those with miser mentalities have more money than they need, yet they still can't bring themselves to spend. This problem isn't how much money you have, it's how much money you spend in relation to what you have. The solution for miser mentality is education and behavioral adjustments. Understand that spending investment income doesn't deplete savings. Some misers may benefit from controlled splurging, like flying first class for just one trip or investing in a memorable trip with children or grandchildren.
ACUTE FINANCIAL PARANOIA: People who are constantly afraid that their money will be taken away or that they'll be sued may be suffering from financial paranoia. This fear usually stems from a sense of eventual punishment for success. The solution for this fear is learning the realities of financial planning. Financial planning is a process, not a one time occurrence that solve everything. The truth is, you can never rule out the risk of unforeseen events, but ongoing financial planning can certainly keep you prepared.
WINDFALL WOES: When the source of the windfall is an inheritance, windfall woes often surface as feelings of guilt, fear of death, and increased sibling rivalry. For those who win large sums of money or acquire their new found wealth through company stock options, divorce settlements or lawsuits, it's not uncommon to fear becoming the target of exploitation. The solution is a cooling off period of six months to two years after the windfall, during which time the individual focuses on financial education. Sometimes there is nor cure for the ailment.
SELF EXAMINATION: If you are committed to achieving better financial fitness, it's important that you conduct a certain degree of self examination. Understand your own financial personality. Learn the different symptoms of financial dysfunction an identify which symptoms have been holding you back. Armed with this knowledge, you will be positioned for action, and one step closer to achieving financial freedom.
I found a piece of me in all these personalities and mentalities. I feel the key to preventing financial dysfunction is education and then learning balance.
No comments:
Post a Comment