Why You Spend the Way You Do

Every human is wired differently. Your fears, dreams, and passions are different. You may also have different thoughts and emotions about money. By understanding why you spend money the way you do, you can get a better handle on your finances.

Let’s start by discussing what the psychology of money is.

The psychology of money studies one’s behavior with money. When it comes to managing your money, it doesn’t matter how knowledgeable you are, or how high your IQ is. It’s about your behavior.

Depending on what your tendencies are, your thoughts, and your will, you can change the way you handle money. Different tendencies affect how you spend your money and in this article, we will be discussing that.

How Different Tendencies Can Affect How You Spend Money

Everyone is different and has different tendencies. None are necessarily right or wrong.

Here are three main tendencies that you need to know about:

1. Saver vs Spender

It is easy to determine whether you are a saver or spender.

The first instinct of a saver is to not spend their money. They feel better knowing that they have money tucked away. They are more patient and can wait to buy the things they want.

Spenders, on the other hand, have creative ways to spend their money. When they have money in their pocket, they can’t wait to spend it.

While both tendencies have pros of their own, issues arise when they are at an extreme level. If you spend every penny you make, you will end up broke. Likewise, if you save everything you earn, you might miss out on fun experiences.

2. Free Spirit vs Type-1

Free spirited people are the ones who like to enjoy their life and are not bogged down in the details. They don’t like to budget for anything and consider entertainment and shopping as their love language. They want to live their life to the fullest.

Type-1 personality people want to see where they are spending their money and figure out a way to make it work better.

Both personalities need each other. Free spirits need type-1s to have a realistic budget and type-1s need free spirits to have some fun.

3. Status vs Safety

People who measure success with status want their lifestyle to showcase how much money they have. This includes the home they live in, the places they go for vacation, and the activities they do.

People who prefer safety want to know that they have enough money saved up to withstand a medical emergency, job loss, or any other major life event.

Just like with saver and spender, problems arise when they go to extremes. A safety person can’t spend their life living in fear of losing their money and a status person needs to have a realistic view of life—and not something that is based on superficial things.