Your financial adviser may ask you to take a financial personality test to determine how you view and deal with money. The results of the test will alert your planner to weaknesses in the way you deal with your finances. Your planner can help steer you away from such weaknesses and instead help you to make more informed financial decisions.
Furthermore, the test will help your planner design a financial plan that matches your money personality to the most suitable investment options. According to the South African Financial Planning Handbook 2006/7, the different types of money personalities are:
- Safety players – average income-earners who put most of their money into safe investments. Although they may be well-educated, safety players lack the confidence to take calculated risks and so stick to strategies that have worked for them before.
- Entrepreneurs – high-income earners whose decisions are not motivated by money alone but also by the power and prestige that comes with money. They favour investing on the stock market and are usually men.
- Optimists – not highly involved with their money. Their money decisions can be impulsive and they are more interested in enjoying their money than in watching it grow.
- Hunters – usually highly educated and have a live-for-today lifestyle. They have a strong work ethic but use impulsive spending as a way to reward themselves.
- Achievers – usually married university graduates. They are conservative and are not interested in risking assets they have worked hard to accumulate. Achievers also have a need to control their own money.
- Perfectionists – often so afraid of making mistakes that they avoid making decisions. Although they try hard, perfectionists lack self-esteem, in particular about financial matters. They consider investments from every angle and often find fault with practically any venture with an element of risk.
- Producers – work hard and desire more but have difficulty getting ahead financially. Often, they do not understand how the financial system works and do not evaluate risks carefully.
- High rollers – thrill-seekers who enjoy the ride of financial risk but are only mildly interested in where it takes them. They seek power and use money to bring them instant recognition. High rollers work hard and play hard, preferring to risk their assets instead of sitting back bored with financial security;
- Money masters – the top wealth accumulators, although they may not earn the most. They trust the recommendations of others and act on sound advice. No investment decisions are based on luck; money masters believe that determination is the key to success.
- First published in Personal Finance newspaper on 27 June, 2009.