Did you know there are eight common money personality types? One of the most important parts of financial success is discovering your personal beliefs and attitudes toward money. In a two-part episode, Paul and Ira cover the common money personality types to help you identify your personality type and grow into a more confident person in this area.
Start relaxing about investing by scheduling a 15-minute call with one of our advisors here.
Paul Winkler: We are back here on “The Investor Coaching Show.” It’s Paul Winkler and Ira Work talking about the world of money and investing. Ira, you were talking about different types of investors and that intrigues me.
Is it different types of investors or is it the way people handle money? What is the deal with that?
Ira Work: Well, we all have different personalities, and we all have different personalities for every single facet of our lives. They say that opposites attract.
I’ve been intrigued for a very, very long time by behavioral finance—why people do what they do and what causes them to react. So, I’m always looking for different articles and books about the brain.
PW: I mean, the reality of it is, there’s so much going on in people.
IW: So, there’s this woman, Deborah Price, who wrote this piece about the eight money types defined. I thought it was really very interesting.
PW: Okay.
IW: So, the first one that she has is the innocent. The innocent takes—and I’ve met some of these people—the ostrich approach to money matters.
Innocents often live in denial, burying their heads in the sand so they won’t have to see what is going to happen around them. The innocent is easily overwhelmed by financial information and relies heavily on the advice and opinions of others.
PW: Ah, does she say more?
IW: Yeah.
PW: Okay. All right, I’ll hold back my thoughts on this.
IW: Yeah, and I figured you would find this very interesting. So, it would be a good conversation for our segment today.
They are not unlike small children in the sense that they have not yet learned to judge or discern others motives or behavior.
PW: Ah, okay. So, she went where I was going to go. Okay, all right.
IW: While this trait can be very endearing, it is also precarious for an adult trying to cope in the real world. We all start our journey in life as innocents.
Think about being a little kid, right? They’re very trusting.
However, as we grow and develop, the veil of innocence is lifted and replaced by experience with the outer world. That’s where she ends her explanation of the innocent.
What are your thoughts from that?
PW: Okay. All Right. Yeah, so my thought from the psychological perspective is that people want to believe certain things.
Typically what I tell them because it’s hard, when somebody has taken you down a road and you’re going, “Oh my gosh, I can’t believe I was that stupid,” and I’ll go and reframe that.
No, the reality of it is for the people that are taken advantage of quite often, they trust because they are trustworthy. You would never imagine that somebody would do something like that because you would never do something like that.
And quite often, what happens with a person when they’re super, super trustworthy and they’re innocent and they don’t necessarily think that there’s anybody out there that would do that, so hence they don’t even think about it.
Number two, a lot of times it’s a confidence thing. Maybe you’ve been beaten down so much by others in your life that your level of confidence in your ability to discern is shot because you don’t trust your own judgment because you’ve been told so many times that you’re not smart.
You’re not good at this. You’re bad at math, something like that. You really don’t have what it takes, and then therefore you start to believe that and you start to actually take that on and think, “I can’t even try. Why bother?”
It’s like a baby in the crib, and I was telling somebody about this yesterday.
We were having a conversation and I said, “It’s kind of like a baby in the crib.” The baby cries out and mom comes. But what if mom doesn’t come?
If the baby cries and cries and mom doesn’t come, eventually the baby will have the mindset that mom is not going to come anyway so it doesn’t really matter.
So, as this happens in adulthood, you basically shut down and think that it’s even worth trying anymore. Now, some people actually develop in a different way.
It’s interesting because what they’ll do is they’ll actually go, “Mom’s not going to come. I’m going to be self-sufficient.”
And I’m sure you’re getting to that personality too. But anyway, that’s innocent to me.
IW: So, the next one that she addresses here is called, which I think you can become this next personality type from being the first personality type. The victim.
Victims are prone to living in the past and blaming their financial woes on external factors. They may be passive aggressive and prone to acting out their feelings in passive ways, rather than through direct action.
In nature, victims often appear disguised as innocents because they seem so powerless and appear to want others to take care of them. However, this appearance is often either a conscious or subconscious ploy to get others to do for them what they refuse to do for themselves.
PW: Or they don’t think that they can do it for themselves. That’s how I would rephrase that.
IW: Because a lot of people don’t have the confidence because they haven’t been shown in their lives that they can actually rely on anybody.
So, they have an external locus of control. A victim has an external locus of control.
An internal locus of control means that a person thinks they are the master of my universe to some extent and that they have control over some things. But when a person has an external locus of control they think everybody else is more powerful and they can’t do anything about their circumstances.
And quite often it’s because they have basically been abandoned quite often and been left to their own devices. So a victim starts to recognize in their view that the world is a cruel place.
IW: Victims generally have a litany of excuses for why they are not more successful, and they’re all based on their historical mythology.
PW: The external, yes, absolutely.
IW: This is not to say that bad things haven’t actually happened to the victim. More often than not, victims have been abused, betrayed, or have suffered some great loss.
The problem is that they have never processed, they have never faced their pain, and so it turned on them. Victims are always looking for someone to rescue them because they believe they have suffered enough.
They carry a sense of entitlement. They think, “I paid my dues. Look at my battle scars. Where is my due?”
PW: Yeah, and when people have been through those circumstances, they don’t know who to turn to. They don’t have any place that they can turn.
So, what they often do is turn to themselves and they realize that they don’t have the resources, and many times what they’ll do is actually because of that pain, they can turn to alcoholism, alcohol, drugs, or money.
IW: Right, yeah.
PW: Or they could turn to work. People can become buried in their work. I don’t know who to trust and I don’t know what to do, so I’m just going to work until I work myself to death.
And that’s what they do is they go hide in their work, and it’s because of what you just discussed, right? Yeah, that’s interesting.
IW: Yeah, I see the innocent as that young person who starts a job and starts putting money into the 401(k) plan, and they blindly trust someone telling them what they need to do.
And so, they’re doing the right thing, but they could become a victim because their employer might not necessarily have good investments in the 401(k) plan because they’re just looking for a cheap way out and are only providing the benefit in order to get good employees.
PW: But then it’s interesting you say that because I think about at what point a person starts to get really, really upset and lash out. They do that when things don’t go the way they thought they should have, when they realize, “Oh my gosh, I can’t really trust these people.”
And when would that be? It would be during a market downturn.
And then what they do is they end up sabotaging the relationship with their investment portfolio. Think about it that way and then you can see things get messed up because of past experiences.
Not to mention, what’s less reliable than the market itself?
I mean, good grief. It’s up, it’s down, it’s back and forth.
IW: So, I’m curious to see what your comments are going to be on this next one. The warrior.
The warrior sets out to conquer the money world and is generally seen as successful in business and in the financial world.
IW: Warriors are adept investors. They are focused, decisive, and in control.
Although warriors will listen to advisors, they make their own decisions and rely on their own instincts and resources to guide them.
Warriors often have difficulty recognizing the difference between what happens to be an adversary and what is a worthy opponent. A worthy opponent should be embraced as an opportunity to recognize the potential for growth and transformation being offered in disguise.
Worthy opponents are most easily recognized as the person with whom you have the greatest conflict.
When we are willing to step back and recognize the lesson and truth someone has to teach, even when it is disguised as conflict, their presence is worthy of our attention.
PW: Now the opponent, in this particular case, in your mind, Ira is what?
IW: I look at the opponent as someone who is trying to actually educate the person to do the right thing.
PW: Okay, all right. That’s what I’m coming from. Okay. So, I want to see if you were thinking the same.
IW: The world is filled with warrior types who run the gamut from enjoying the sport of business and the skillful art of negotiating to those whose single-minded intent is simply to win at any cost.
PW: Right. Okay. So, there was actually a series of studies that found that people who have a little bit of information actually have more confidence than is warranted.
Especially when somebody starts to learn a little bit about finance, they become very, very self-confident—and especially a person who already has an internal locus of control anyway.
What happens is that people who do have experience might be seen as an adversary because they are intimidating because they know more and they know that they know more.
So, that can be intimidating for a person with an internal locus of control because then it challenges their perception of themselves, right?
So, what happens is, it’s interesting though, sometimes that opponent actually can be fooled. They can think, “Wow, this person seems to be very self-confident. They seem to know what they’re talking about,” and they may not ever step in in the first place because they actually perceive the person as being more confident than they are.
Typically, when that person really gets their head handed to them is when they lose a lot, and then they all of a sudden realize that they don’t have the confidence that they thought that they had.
But where it actually comes from many times is when they’re a kid, and the internal part of the brain, the medial part that actually runs the show—because that part of the brain is not connected with the frontal lobe, which is thinking and logic.
What happens is that a person runs from the medial part of the brain, and quite often, when they’re in trouble, they have learned to either run like heck or freeze. They’ll just freeze up and think, “I don’t know what to do,” or they’ll fight.
And that’s the person who has learned to engage in times of trouble. They learned at some point when they were faced with an adversarial type of a situation that they could fight and possibly get out of the situation.
They learned that in everything they engage in, fighting for what’s right is the best thing to do.
That’s what I thought of when you first said warrior because that’s an attitude of, “I’m going to fight.” So then a person might end up not seeing that they have a friend on their hands, and they miss the opportunity because of the ego that is involved.
Which part of that is when a person actually thinks, “I got this,” and doesn’t recognize that they don’t have it until it’s too late.
IW: Yeah, and I find out with a lot of people when they’re coming to our offices for the first time they’re almost looking at us as an adversary, not as an opponent, rather than an adversary who is really on their side and who really wants them to get it right.
Maybe sometimes there is a lack of trust.
PW: And that trust has to be earned.
IW: Well, I think the lack of trust when people come in to see us exists until they really get to see how much we care. They have that because they’ve kind of been burned before by other advisors.
PW: Right, and people develop a sense, and we actually call it an attachment, and there’s a type of attachment where people just don’t reach out and they just don’t let themselves be seen, and the reason being is they’ve been burned so many times.
I was talking to somebody about this today as a matter of fact. I made the comment, I said, “Really, I think expectations are a huge thing in life. What can I expect?”
And with counseling quite often, you go to the first counseling session and you don’t expect the world. If you do, you’re going to be sorely disappointed.
But literally the first several sessions you just get to know if the person in front of you is someone you can share yourself with and is someone you feel safe with.
PW: That’s what I like so much about the process that we bring people through, the educational process. It’s nothing fast.
People think, “Oh, I’ll just come in here, I’ve enlisted you guys. I’m just going to hand my investment portfolio over to you.”
And we’re like, “No, that’s not the way it works.” And the reason that I did it the way I did it when I started this business, which was little by little, is because I knew I had to earn people’s trust.
A person isn’t going to walk in here and hand over their life savings. They need time to get to know that they can actually trust the person they’re working with.
IW: Well, and there’s also another part of that. As advisors, we don’t know enough about you at first to actually make a recommendation that would be fitful for you.
PW: Right, absolutely. Well said.
IW: I mean, and I’ve actually started slowly reducing the risk of my portfolio now. I did that last year when I turned 60.
But just because I was in a 95% stock portfolio doesn’t mean that’s going to be right for everybody.
Just because you’re 70 years old doesn’t mean a 75% stock profile isn’t right for you. It might very well be.
Whereas someone else may say, “Well, you need to be in these guaranteed products that pay me a lot of commission.”
PW: Yeah, and it’s a slow process because to go in and tell somebody everything about your finances, which is a really sensitive area, takes some time to work up to.
So, the finance educational process, we do talk about that a lot, but in reality, it’s not just that. It’s the process of getting to know the people and getting to know if you can actually work with these people.
You get to a point where you can know that you’re not going to be taken down a bad road. And part of the reason for education is because the more you understand your investments, the more you understand what you are doing, why you are doing it, what to expect and what the real expenses are, the more confident you can be.
I believe that more confident investors end up being more successful investors.
PW: Hey folks, I want to tell you something I’m really excited about, my new book, Confident Financial Planning is finally out. It’s in paperback, hardcover, Kindle version, and I actually have an audiobook version of it.
Now, it talks about building your financial castle. I use that metaphor throughout the book.
When talking about your investments, your financial plan is kind of like a castle. You have your savings and your emergency funds. In the book, I talk about debt—good debt and bad debt.
I talk about special goal funds and how to set those things up, as well as how to invest for those special things that you might want to do in the future. I discuss types of retirement accounts and different types of taxation and investment accounts.
I talk about real estate investing and the pros and cons of that, how to protect retirement assets, and your moat. That’s how you protect your castle.
It’s the risk management aspect of a financial plan. If you want to find out more about all of that, go to paulwinkler.com/book to get it. I hope you enjoy it.
IW: Well, I’m just hoping that as we’re going through this, people are beginning to do maybe a little self check on themselves and see if maybe some things need to change.
Now for the next one, the martyr. Martyrs are so busy taking care of others’ needs that they often neglect their own.
Financially speaking, martyrs generally do more for others than they do for themselves. They often rescue others, a child, a spouse, a friend, or a partner from some circumstance or other.
However, martyrs do not always let go of what they give and are repeatedly let down when others fail to meet up to their expectations.
They have formed an unconscious attachment to their own suffering. The martyr moves between two distinctly different energies: one that seeks to be in control and control others, and one that is being wounded, often like a very needy child.
Martyrs tend to be perfectionists and have high expectations of themselves and of others which makes them quite capable of realizing their dreams because they put so much energy into needing to be right.
Like victims, martyrs often live in high drama. They experience a lot of highs and lows, and struggle with their attachment to negative experiences.
They see their glass as half empty instead of half full. Their focus on the negative often keeps them from realizing the deep wisdom that lies within their experience.
PW: So, that is with attachment, you have avoidance, and avoidance is going to be somebody that has been burnt a number of times, very much like some of the previous ones that we talked about.
IW: The martyr and the victim.
PW: All right. So, to some extent, it’s going to be some of the same things, and the reason being that they’ve been burnt, they become self-sufficient, like you said, perfectionistic.
Now, perfectionism is interesting because there’s a difference between perfectionism and excellence. Perfectionism is unrealistic, but many times people go for perfection simply because they are intolerant of their own mistakes and they’re intolerant of other people’s mistakes.
Sometimes when I’m talking to somebody with a perfectionistic bent, I’ll give them an assignment to go meet up with a friend and tell them about a big blunder they’ve had.
And I actually learned this from another psychologist who did this. So the person will dutifully go and do the assignment because to not do the assignment, to agree to do the assignment and not do the assignment would be lacking perfection.
The reality of it is that when we show our flaws, we end up being much more likable. If we are perfect all the time, we are not very likable because we make other people look bad, and people don’t want to be made to look bad.
But interestingly, one of the things that this guy also did was ask people to imagine a world where no mistakes are made.
Everything’s perfect. Everything’s done right the first time, and there’s no flaws anywhere.
If you were to describe such a world, it would be sterile, cold. There would be no humor or fun.
Perfection can be an ugly place. When I learned this story I thought, “Wow, that’s what we’re shooting for so often when we’re shooting for perfection.”
They’re going to be anything but perfect, and for a person that is really self-driven and avoidant that can be difficult.
It makes for a hard financial planning conversation when a person can’t share. In a lot of our conversations with clients, we’ll tell war stories about our own situations, and we do that to help them because then they can see that we’re human too.
So that hopefully people don’t have to make all of their own mistakes in order to learn, but rather can learn a little from the mistakes of others.
Ready to meet with us virtually or in person? Schedule a meeting here.
*Advisory services offered through Paul Winkler, Inc. (‘PWI’), an investment advisor registered with the State of Tennessee. PWI does not provide tax or legal advice: please consult your tax or legal advisor regarding your particular situation. This information is provided for informational purposes only and should not be construed to be a solicitation for the purchase of sale of any securities. Information we provide on our website, and in our publications and social media, does not constitute a solicitation or offer to sell securities or investment advisory services, or a solicitation to buy or an offer to sell a security to any person in any jurisdiction where such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.
Today Paul and Jeff talk about their first impressions after the Paul-Tyson fight over the weekend and they both have the same
Today, Paul brings an article that says, “If you’ve made these five money moves, you will likely have enough money in retirement.”
There are investment companies that will do anything to sell products to investors, even if that means lying about their products. Earlier
Advisory services offered through Paul Winkler, Inc., an SEC Registered Investment Advisor. Paul Winkler, Inc. does not provide tax or legal advice: please consult your tax or legal advisor regarding your particular situation. All information contained on the Paul Winkler, Inc. website, including information in our newsletters, as well as information posted on social media, is for general informational purposes only, and should not be considered an individualized recommendation or personalized investment advice. We do not intend for this website to be utilized by any persons who are covered under the GDPR.
