Chapter 6: Your Money Temperament

Your Money Temperament

The learning objectives for this chapter guide you through a critical self-assessment to uncover your unique, natural "money personality." Understanding your inherent behavioral tendencies is crucial for creating a financial system that leverages your strengths and mitigates your weaknesses, setting you up for sustainable success.

Objective 1: After completing the "Money Temperament Snapshot" assessment, formulate a personal Money Temperament statement. This statement must be a concise paragraph that accurately summarizes your scores and tendencies across the key behaviors (e.g., Risk Behavior, Financial Planning Management).
Objective 2: Based on your self-assessment, identify one key strength and one potential weakness of your money temperament. Propose one specific action to leverage the strength and another to mitigate the weakness in a real-world financial context.

Knowing your natural temperament provides critical insight into the way you best absorb and process financial information, which is the focus of the next chapter.

Text: Read Chapter 6 and complete the Money Temperament exercises.

Summary

This lesson synthesizes a behavioral approach to personal finance centered on the concept of "Money Temperament," defined as an individual's unique and stable financial personality. This temperament, rooted in natural behavior, biology, and life experiences, dictates how a person interacts with money, including spending, saving, and investing decisions. The central argument is that the conventional, one-size-fits-all advice prevalent in the financial services industry is often ineffective because it cannot account for these deep-seated behavioral patterns.

The proposed solution involves a three-step process—Discover, Uncover, and Unleash—designed to help individuals identify and work with their innate financial personality rather than against it. By understanding their natural tendencies regarding risk, planning, and emotional response, individuals can develop a tailored "one-size-fits-you" financial strategy. This self-awareness is presented as the key to making wiser financial decisions, enhancing financial skills, reducing stress, and ultimately achieving financial security and peace of mind. A case study of a financial advisor's conflict with his parents illustrates how these differences can create financial tension and how aligning professional help with a client's temperament can lead to successful outcomes.

The Core Concept of Money Temperament

Money temperament is a person's intrinsic "money personality" that governs their natural behavior and decision-making related to finances. It is a composite of an individual's biology, beliefs, values, and life lessons that shapes their habits in spending, saving, and investing. This concept positions behavior, rather than mere financial knowledge, as the cornerstone of financial well-being.

The Failure of Traditional Financial Advice

The document posits that the financial services and literacy sector largely overlooks the critical role of behavior. This oversight is like teaching someone to drive by focusing on automotive engineering rather than their actions behind the wheel. The industry's reliance on "cookie-cutter" advice often leads to frustration and a sense of being "stuck" for individuals whose natural temperament does not align with the prescribed strategies. A budget, for instance, is an effective tool only for someone who is behaviorally wired to create and maintain one.

Natural vs. Learned Behavior: The Iceberg Analogy

An individual's behavior is compared to an iceberg, where learned behaviors represent the visible 5% above the surface, while the vast submerged 95% constitutes one's stable, hard-to-change natural behavior. Under stress—such as during a stock market plunge or a political event—most individuals revert to their natural behavioral patterns. This natural behavior is the most consistent and forms the basis of one's money temperament. As stated in the text, quoting Vironika Tugaleva, “To know yourself, you must first sacrifice the illusion that you already do.”

A Framework for Identifying Money Temperament

A three-step process is outlined to help individuals identify and apply their unique money temperament. The framework is derived from research and collaborations with Apexx Behavioral Financial Group, DreamSmart Behavioral Solutions, and Atlanta’s DNA Behavior.

Step 1: Discover Your Money Temperament

This initial step involves a self-assessment exercise, the "Money Temperament Snapshot," based on the DreamSmart Money Temperament Behavioral Identity Assessment. The exercise consists of seven questions designed to provide insight into one's unconscious financial tendencies.

Assessment Components

Factor & Description	Core Question / Measures	High Score (7-10) Characteristics	Low Score (1-3) Characteristics
Spending Style	How do you choose and spend? (Select one style)	Options: Fast-Paced, Move Carefully, Results Oriented, Relationship Oriented	(N/A)
Risk Behavior	Measures emotional tolerance of financial loss.	Risk Taker: Tolerant of losses, takes decisive action, adaptable to uncertainty.	Cautious: Risk-averse, sees pitfalls, prefers backup plans and familiar situations.
Financial Relationship Management	Likelihood of collaborating with a financial professional.	Delegator: Values relationships with advisors, cooperative, diplomatic, invests time in relationship building.	DIY/Control-Oriented: Prefers to maintain control, results-driven, independent, concentrates on achieving results.
Financial Planning Management	How financially organized you are (saver vs. spender).	Saver/Organizer: Follows budgets, is calculated, strategically planned, precise, thorough, and orderly.	Spender/Freewheeler: Prefests spending freedom over budgets, may be disorganized or overspend, acts on gut feelings.
Wealth-Building Motivation	Likelihood of setting and following ambitious financial goals.	Ambitious Goal-Setter: Driven to reach goals, focused, gets things done.	Flexible Goal-Setter: Prefers general and flexible goals, patient, favors stable environments.
Financial Emotional Intelligence	Ability to recognize and manage financial emotions and impulses.	Rational: Manages emotions well, uses reason and logic, initial stress reaction is logical.	Emotional/Impulsive: Prone to impulsive spending, makes spur-of-the-moment decisions, initial stress reaction is often emotional.

Step 2: Uncover Your Money Temperament

After completing the assessment, the second step is to synthesize the findings into a clear and personalized description. This involves:

Creating a bullet-point list summarizing the characteristics identified in Step 1.
Writing a concise statement or paragraph that encapsulates the overall money temperament.

Example Statement 1: “If the opportunity is right, I act quickly and decisively, regardless of risk. But once I’ve decided, I delegate the details and management to someone else because I’m off to my next project. I need freedom to make my spending decisions and flexible goals and controls to make it happen. I’m confident in my ability and can balance my emotions with good data and information.”

Example Statement 2: “Money keeps me up at night. My detailed budget keeps me on track for a comfortable retirement. I know I can’t do this myself, so I work with a financial pro to help me every step of the way.”

Step 3: Unleash Your Money Temperament

The final step focuses on integrating this self-knowledge into daily life and financial planning.

Internalize: Handwrite the temperament statement on a card and read it daily for seven days to reinforce understanding.
Share: Consider sharing the insight with family, key colleagues, and financial professionals to foster better understanding and collaboration.
Strategize: Acknowledge that all temperaments have strengths and weaknesses. Use this knowledge when making significant purchases or creating financial plans.
Align Goals: Ensure financial goals align with the natural temperament; misaligned goals are less likely to be achieved.
Question Conventions: Actively question accepted financial planning views that do not account for behavioral differences.

The text emphasizes that there is no "perfect" money temperament and that comparing them is a pointless exercise, as each is unique like a fingerprint.

Case Study: Conflicting Money Temperaments

A personal anecdote illustrates the practical implications of differing money temperaments within a family. The narrator, a financial advisor, took on his parents as clients, which quickly led to conflict and stress.

Temperament Mismatch

The core of the issue was a fundamental mismatch between the money temperaments of the advisor and his parents.

Party	Money Temperament Characteristics
The Parents	Lived through the Depression; frugal savers; debt-free. Behaviorally, they were careful, risk-averse, highly organized (tracking every penny), preferred to manage their own finances, and became highly emotional about money when stressed. Their wealth was held entirely in cash, savings, and CDs.
The Advisor	As the eldest son, he had a different temperament. Behaviorally, he was a fast-moving, independent risk-taker, organized but not obsessive, and remained rational under financial stress.

Key Points

This clash of temperaments meant they viewed money through entirely different lenses, making financial discussions tense. The parents, despite owning no stocks, would become stressed by stock market news, leading to frequent anxious calls to their son.

Ted resolved the "money drama" by recognizing the behavioral incompatibility. The solution involved:

Identifying a personal banker whose temperament was more aligned with his parents' cautious and organized nature.
Transferring the advisory relationship to this banker.
Removing himself and his siblings from the direct financial management process.

The key takeaway is that stress and conflict in financial discussions, especially within families, often stem from differing money temperaments. Recognizing this allows for better navigation of these challenges, including finding professional help that is behaviorally compatible.

Next, we will explore Step 3: Money Learning Style.

Lesson 6

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Introduction

What You'll Learn

Confessions of a Reformed Financial Advisor

I Confess...

Humans Are Not Hardwired to Work Well With Money

Your Money Beliefs and Values

Technology Is Not (Always) Your Friend

Your Money Values

Your Money Temperament

Your Money Knowledge

Your Money Strategy

Your Money Plan

Share the Word