Recognizing Your Spending Personality To Build A Great Financial Plan
Oct 21, 2020
Before you can effectively put together a retirement income plan, it’s important to understand your own tendencies for spending. Let’s explore the different personalities.
Here are just a handful of the things that we'll discuss:
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Transcript
John Stillman: Hello and welcome to Wright Money Tips. This week we wanted to bring you a conversation that Isaac had on the radio show recently. Sometimes Isaac has these great discussions on the radio and we say, "There's no way that we could possibly duplicate that conversation again." So let's just bring it to you in its entirety.
John Stillman: So this was a couple of weeks ago on the radio show, Walter along with Isaac talking about different spending personalities, the ways that people approach spending their money, not their saving, not their investing, but spending their money.
John Stillman: And it's so important that you understand your spending personality, because that's going to play into your overall financial and retirement plan. So Isaac Wright, Chartered Financial Consultant, and the President of Financial Dynamics and Associates, here's him and Walter from the Retire Wright show just a couple of weeks ago.
Walter: So what we've done is we've put folks into essentially four different personality categories. I would venture to say that the majority of our listeners will fall into one of these categories. And now you might be a little bit of a mixture of a couple of these, so we'll take that into account too.
Walter: So we'll break down the categories for everybody here, Isaac, and see where we might fall in, and what it tells us about our financial and retirement planning position, and some of the things we should be thinking about. All right, without further ado, the first one is the emotional spender. This is somebody that, not necessarily that they love to shop or spend money, but their emotions affect their spending habits.
Isaac Wright: You know, interestingly, you start with this because if anybody would be "an emotional spender," you're likely going to see that this year, just because of the rollercoaster of emotions we've had. So not necessarily, I want to be clear, not necessarily this is somebody who loves to shop or spend money, but it does allow emotions to affect their spending habits. So if you've had a great day, for example, you may celebrate by going out to eat, or if you've had a terrible day, you may also go out to eat, and drink.
Walter: That's me, Isaac.
Isaac Wright: And Lord knows whatever else to forget about it so.
Walter: "It was a long day. Let's go out to eat." "Oh, it was a great day, let's go out to eat."
Isaac Wright: You know, I think we're battling weight here in this country, this is probably one of the reasons.
Walter: It is. It is.
Isaac Wright: But you have to understand that most people to some degree will have some emotional spending habits. I mean, granted, we're inundated with messages and ads, but I'm talking about being aware of how often you emotionally spend, and how much.
Isaac Wright: And so when you set up a plan for retirement, one of the processes we have at our firm that I think really does help get to the truth of setting up goals can address some of those spending habits. And sometimes people have never lived on a budget till they get closer to retirement, and sometimes people think the word budget is a four letter word. It's not. It's just a getting to the truth of maybe where you're going to stand so you don't run out of money in retirement, or spend too much thinking that you're going to be okay.
Isaac Wright: And so if, again, if you have any concerns about your spending your investments, how to match that up for income and distributions, that's what we do every day here at Financial Dynamics, (804) 777-9999.
Walter: The emotional spender is also going to be somebody who... Anybody who's ever been on commission is going to really understand the need to keep that emotional spending in check.
Isaac Wright: Oh yeah. That's a good point.
Walter: Because they would have that all the time. You might get that big commission check for making a big sale or something like that. And you can develop habits, and bad habits at that, very quickly. Every time that check comes in, do you want to celebrate and use that as a reason or to reward yourself?
Walter: And so the people who have been on that commission lifestyle, certainly I think have had to learn how to keep that emotion in check, and then try not to get too high or too low with the income that comes in, and that kind of thing. So it's an interesting one for sure.
Walter: We also have the YOLO spender that's that, You Only Live Once philosophy that I feel like that was a very popular term a couple of years ago. I don't hear many people saying YOLO any more these days. Also maybe that's just because it's 2020.
Isaac Wright: It's kind of hard to be a YOLO if you want to get out and do something because everything is closed.
Walter: That's right. That's right, yeah.
Isaac Wright: But no, no, no. I mean, listen, I can make this one pretty short and sweet. It's easy for somebody that considers themselves a YOLO spender to go overboard on lavish purchases and experiences, and, let's say, justify it as, "Hey, you only live once."
Isaac Wright: Now I want to be very clear, every family that I've worked with wants discretionary money to go have fun. That's the purpose of retirement. But the over abundance of trying to do too much is something that, in my opinion, it was somebody that has, again, this can almost tie back to having an infrequent income stream.
Isaac Wright: Again, if you're on commission or if you are all of a sudden retiring, you get your social security, maybe you're fortunate enough to have a pension and you've built up a large nest egg, sometimes you can look at that large nest egg and start really thinking about pulling money from it. And sometimes it may be pulling again too much. So what I want to be clear about is this is obviously everybody wants vacations. They want to be able to take certain things from the assets they've accumulated to live a lifestyle that matches up, again without running out of money.
Isaac Wright: So that's what I'm trying to say is this is why I wanted to talk about this half of the fence. And if you have any questions, if anybody listening, if you've been furloughed, laid off, thinking about retirement, wanting to get to the plan that you want to have in the other side of that transition, let me know. I'm here. Isaac Wright, (804) 777-9999.
Walter: Again, all you have to do to get in touch with Isaac is pick up the phone, call or text (804) 777-9999. That's (804) 777-9999. All right. So have the emotional spender, the YOLO spender, and we go to the other side of the coin, the savvy spender. This is where we get to folks who seem to be a little bit more in that responsible category, right?
Isaac Wright: Yeah. I would say probably we try to get as many people towards this type of mentality as possible. So the savvy spender, very balanced spending, let's say their personality lends to that, spend when needed, always have a background of maybe being frugal in their mind, believes in quality over quantity, and believes in spending on experiences better than spending on stuff.
Isaac Wright: Now we all need some level of stuff to live, but that savvy spender has really figured out a great game plan under most circumstances. And I will say without being again, it's not saying it arrogantly at all, I think we do a really good job here at our firm to try to be able to give the mindset to people when they walk out of our door, how to make goals that push them towards that type of spending philosophy.
Isaac Wright: So again, this is definitely somebody, a little different than the emotional and YOLO spender. The savvy spender is probably going to be the most positive way to get your ducks in a row when it comes to retirement, and again, not running out of money.
Walter: Last but not least we are now at the complete other end of the spectrum from the YOLO and the emotional spenders, and we have folks that we then start to put into the category of... And by the way, we're not poking fun at anybody here. I mean, we all have elements of this probably in our personalities of these different things. The miser would be our last category of spending personality.
Isaac Wright: Yeah, yeah. The miser. Well of course a lot of people were misers, especially coming out of the depression, but they really believe the opposite as far as any sort of spending, even if it's necessary spending. They'll keep the heat turned down when it's 30 degrees outside. It's just being overly cautious, trying to cut corners on all costs at all times generally, and I'm going to say this directly, generally misers are not enjoyable people.
Isaac Wright: They're not enjoyable to themselves. They don't-
Walter: Sorry, misers.
Isaac Wright: Yeah. I'm serious. And so here's the deal is this, is, I mean, for me, I try to care about everybody and put people in a good mental space when I can, doesn't mean that you can't live that way. But I would almost want to try to push people that are misers into, again, more of that Savvy Spender category, where they should be able to relax and enjoy.
Isaac Wright: And sometimes it's mentally rooted in how they grew up. Maybe they had no money, maybe, like for me, for example, I lived with my grandparents growing up. So I kind of watch how they handled money. And again, I felt like at the time we lived pretty good and looking back, there were moments where we probably were misers, but we didn't know what we didn't know.
Isaac Wright: So I think with all that being said, if you have never had a financial planner, and this is why I want to say this, is because everybody talks about buying mutual funds, and what's the hot stock of the day. But if you have a true financial planner and somebody that's looking over your shoulder, this is equally, if not ever as much as important as looking after your money, because you have to understand yourself a little bit better sometimes when it comes to some of these personality traits.
Isaac Wright: So again, as we talk about these personalities, I think we've done a good job here, Walter, if anybody has any questions, if you want to talk to me directly, (804) 777-9999.
John Stillman: Hope you enjoyed that discussion from the Retire Wright show. We'll continue to bring you some of the greatest hits from the radio show right here on the podcast, as well as some discussions you can only find here on the podcast right here on Wright Money Tips.
John Stillman: Again, if you'd like to get in touch with Isaac and the team at Financial Dynamics, that number to call is (804) 777-9999. Thanks for tuning in, and we'll talk with you again very soon.
Announcer: Information is for illustrative purposes only and does not constitute tax, investment, or legal advice. Always consult with a qualified investment, legal, or tax professional before taking any action.
Announcer: Advisory services offered through J.W. Cole Advisors, Inc., JWCA. Financial Dynamics and Associates, Inc. and JWCA are unaffiliated entities.
John Stillman: So this was a couple of weeks ago on the radio show, Walter along with Isaac talking about different spending personalities, the ways that people approach spending their money, not their saving, not their investing, but spending their money.
John Stillman: And it's so important that you understand your spending personality, because that's going to play into your overall financial and retirement plan. So Isaac Wright, Chartered Financial Consultant, and the President of Financial Dynamics and Associates, here's him and Walter from the Retire Wright show just a couple of weeks ago.
Walter: So what we've done is we've put folks into essentially four different personality categories. I would venture to say that the majority of our listeners will fall into one of these categories. And now you might be a little bit of a mixture of a couple of these, so we'll take that into account too.
Walter: So we'll break down the categories for everybody here, Isaac, and see where we might fall in, and what it tells us about our financial and retirement planning position, and some of the things we should be thinking about. All right, without further ado, the first one is the emotional spender. This is somebody that, not necessarily that they love to shop or spend money, but their emotions affect their spending habits.
Isaac Wright: You know, interestingly, you start with this because if anybody would be "an emotional spender," you're likely going to see that this year, just because of the rollercoaster of emotions we've had. So not necessarily, I want to be clear, not necessarily this is somebody who loves to shop or spend money, but it does allow emotions to affect their spending habits. So if you've had a great day, for example, you may celebrate by going out to eat, or if you've had a terrible day, you may also go out to eat, and drink.
Walter: That's me, Isaac.
Isaac Wright: And Lord knows whatever else to forget about it so.
Walter: "It was a long day. Let's go out to eat." "Oh, it was a great day, let's go out to eat."
Isaac Wright: You know, I think we're battling weight here in this country, this is probably one of the reasons.
Walter: It is. It is.
Isaac Wright: But you have to understand that most people to some degree will have some emotional spending habits. I mean, granted, we're inundated with messages and ads, but I'm talking about being aware of how often you emotionally spend, and how much.
Isaac Wright: And so when you set up a plan for retirement, one of the processes we have at our firm that I think really does help get to the truth of setting up goals can address some of those spending habits. And sometimes people have never lived on a budget till they get closer to retirement, and sometimes people think the word budget is a four letter word. It's not. It's just a getting to the truth of maybe where you're going to stand so you don't run out of money in retirement, or spend too much thinking that you're going to be okay.
Isaac Wright: And so if, again, if you have any concerns about your spending your investments, how to match that up for income and distributions, that's what we do every day here at Financial Dynamics, (804) 777-9999.
Walter: The emotional spender is also going to be somebody who... Anybody who's ever been on commission is going to really understand the need to keep that emotional spending in check.
Isaac Wright: Oh yeah. That's a good point.
Walter: Because they would have that all the time. You might get that big commission check for making a big sale or something like that. And you can develop habits, and bad habits at that, very quickly. Every time that check comes in, do you want to celebrate and use that as a reason or to reward yourself?
Walter: And so the people who have been on that commission lifestyle, certainly I think have had to learn how to keep that emotion in check, and then try not to get too high or too low with the income that comes in, and that kind of thing. So it's an interesting one for sure.
Walter: We also have the YOLO spender that's that, You Only Live Once philosophy that I feel like that was a very popular term a couple of years ago. I don't hear many people saying YOLO any more these days. Also maybe that's just because it's 2020.
Isaac Wright: It's kind of hard to be a YOLO if you want to get out and do something because everything is closed.
Walter: That's right. That's right, yeah.
Isaac Wright: But no, no, no. I mean, listen, I can make this one pretty short and sweet. It's easy for somebody that considers themselves a YOLO spender to go overboard on lavish purchases and experiences, and, let's say, justify it as, "Hey, you only live once."
Isaac Wright: Now I want to be very clear, every family that I've worked with wants discretionary money to go have fun. That's the purpose of retirement. But the over abundance of trying to do too much is something that, in my opinion, it was somebody that has, again, this can almost tie back to having an infrequent income stream.
Isaac Wright: Again, if you're on commission or if you are all of a sudden retiring, you get your social security, maybe you're fortunate enough to have a pension and you've built up a large nest egg, sometimes you can look at that large nest egg and start really thinking about pulling money from it. And sometimes it may be pulling again too much. So what I want to be clear about is this is obviously everybody wants vacations. They want to be able to take certain things from the assets they've accumulated to live a lifestyle that matches up, again without running out of money.
Isaac Wright: So that's what I'm trying to say is this is why I wanted to talk about this half of the fence. And if you have any questions, if anybody listening, if you've been furloughed, laid off, thinking about retirement, wanting to get to the plan that you want to have in the other side of that transition, let me know. I'm here. Isaac Wright, (804) 777-9999.
Walter: Again, all you have to do to get in touch with Isaac is pick up the phone, call or text (804) 777-9999. That's (804) 777-9999. All right. So have the emotional spender, the YOLO spender, and we go to the other side of the coin, the savvy spender. This is where we get to folks who seem to be a little bit more in that responsible category, right?
Isaac Wright: Yeah. I would say probably we try to get as many people towards this type of mentality as possible. So the savvy spender, very balanced spending, let's say their personality lends to that, spend when needed, always have a background of maybe being frugal in their mind, believes in quality over quantity, and believes in spending on experiences better than spending on stuff.
Isaac Wright: Now we all need some level of stuff to live, but that savvy spender has really figured out a great game plan under most circumstances. And I will say without being again, it's not saying it arrogantly at all, I think we do a really good job here at our firm to try to be able to give the mindset to people when they walk out of our door, how to make goals that push them towards that type of spending philosophy.
Isaac Wright: So again, this is definitely somebody, a little different than the emotional and YOLO spender. The savvy spender is probably going to be the most positive way to get your ducks in a row when it comes to retirement, and again, not running out of money.
Walter: Last but not least we are now at the complete other end of the spectrum from the YOLO and the emotional spenders, and we have folks that we then start to put into the category of... And by the way, we're not poking fun at anybody here. I mean, we all have elements of this probably in our personalities of these different things. The miser would be our last category of spending personality.
Isaac Wright: Yeah, yeah. The miser. Well of course a lot of people were misers, especially coming out of the depression, but they really believe the opposite as far as any sort of spending, even if it's necessary spending. They'll keep the heat turned down when it's 30 degrees outside. It's just being overly cautious, trying to cut corners on all costs at all times generally, and I'm going to say this directly, generally misers are not enjoyable people.
Isaac Wright: They're not enjoyable to themselves. They don't-
Walter: Sorry, misers.
Isaac Wright: Yeah. I'm serious. And so here's the deal is this, is, I mean, for me, I try to care about everybody and put people in a good mental space when I can, doesn't mean that you can't live that way. But I would almost want to try to push people that are misers into, again, more of that Savvy Spender category, where they should be able to relax and enjoy.
Isaac Wright: And sometimes it's mentally rooted in how they grew up. Maybe they had no money, maybe, like for me, for example, I lived with my grandparents growing up. So I kind of watch how they handled money. And again, I felt like at the time we lived pretty good and looking back, there were moments where we probably were misers, but we didn't know what we didn't know.
Isaac Wright: So I think with all that being said, if you have never had a financial planner, and this is why I want to say this, is because everybody talks about buying mutual funds, and what's the hot stock of the day. But if you have a true financial planner and somebody that's looking over your shoulder, this is equally, if not ever as much as important as looking after your money, because you have to understand yourself a little bit better sometimes when it comes to some of these personality traits.
Isaac Wright: So again, as we talk about these personalities, I think we've done a good job here, Walter, if anybody has any questions, if you want to talk to me directly, (804) 777-9999.
John Stillman: Hope you enjoyed that discussion from the Retire Wright show. We'll continue to bring you some of the greatest hits from the radio show right here on the podcast, as well as some discussions you can only find here on the podcast right here on Wright Money Tips.
John Stillman: Again, if you'd like to get in touch with Isaac and the team at Financial Dynamics, that number to call is (804) 777-9999. Thanks for tuning in, and we'll talk with you again very soon.
Announcer: Information is for illustrative purposes only and does not constitute tax, investment, or legal advice. Always consult with a qualified investment, legal, or tax professional before taking any action.
Announcer: Advisory services offered through J.W. Cole Advisors, Inc., JWCA. Financial Dynamics and Associates, Inc. and JWCA are unaffiliated entities.
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