Spender Or Saver

Four friends have dined at a restaurant. The bill arrives. Each person reacts to paying in a different way. The "Saver" pulls out the calculator in her bag and begins to add up the cost of what she has ordered. She puts in exactly what she owes for one meal, one glass of wine and one quarter of the salad.

The "Optimist" heads to the toilet, intending to avoid the hassle of dividing up the bill and knowing someone else will take responsibility. The "Debtor" keeps chatting and eventually pulls out a credit card while the "Compulsive Spender" throws in much more than anyone else. He says: "I'll pay for the salad because I had more of it and I'll pay for half of the bottle of wine because you guys only had one glass."

The executive director of the Women's Financial Network, Susan Jackson, says the conflict that often arises over the handling of a dinner bill reveals the different attitudes and tendencies that characterise our dealings with money.

She says every one of us has key traits that place us predominantly into one of the four main money personality categories: the saver, the optimist, the debtor or the compulsive spender.

A better understanding of which group a person fits into can save vast amounts of money and eliminate the personal drama resulting from poor money habits.

She says conflicting money personalities in a relationship is a major contributor to marital breakdown. Money style is no exception to the "opposites attract" adage.

No money type is better than any other, she says, because within each category there are people who manage their money well and those who don't. And it has nothing to do with how much money is earned. As a financial planner, Jackson says: "Some of my best organised clients are the ones with the lower income and some of my nightmares are those with six-figure incomes."

"This is all about recognising inherent behavior. You might be managing your money quite well and you could perhaps have some extreme traits and you might be finding yourself in a bit of difficulty or you just can't seem to get ahead with what you are doing with your money."

A person's money type is unlikely to change, but behavior modification is possible, says Jackson. For example, a Spender is unlikely to become a Saver but it doesn't mean he can't start to save.

An overriding issue in financial management is how much control people want to have over their money, says Jackson. Savers want a lot of control and information, she says, and they like to know exactly where their money goes. "They like computer programs, they love writing it all down in an exercise book, they love analysing it."

Then there are the Optimists. These are the people who say they couldn't stand the thought of all that detail. "They work more big picture, they will tend to sometimes be a bit more emotive about what they do."

When advising Savers, Jackson says, she considers their need for detail, information and control, whereas with the Optimist, a simple budget plan works best.

Over the past two years, there has been more focus on understanding inherent traits about money, says Jackson, and many planners are using psychological tools to help understand the emotional and underlying motivators.

In the same way that people can have their personality tested, they can have their money personality tested by a financial planner, says Jackson.

She says she sometimes feels like a financial therapist, because of the time spent talking to people about their underlying issues before they are in a position to start investing their money.

Most behavior about money is learned during childhood, which may be positive or negative, says Jackson. "We may mirror what our parents do, we may do the exact opposite. For example, if your parents have been very frugal, you may grow up thinking 'I didn't have much of a childhood so, therefore, I am entitled now to spend money on things that I want'.

"The other thing is experiences we have. Life is not always kind and we find ourselves in financial crises; the other thing is the environment in which we are trying to manage our money."

There is a dearth of information on how to manage such money issues as how to operate a bank account to best advantage, how best to structure a mortgage or how to get out of a spending cycle, says Jackson.

In the absence of knowledge, most people are guided by their instincts, she says. "Over the years, we develop patterns, as we do with most other things in our lives. There are two things in life we don't have a lot of training about - relationships and managing our money."

The president of the Victorian Psychologists Association, Dr David List, says that psychologically, money is extraordinarily symbolic for many people. "If you look at marriages, the top trigger for conflict is money, not children and not sex," says List.

Consider a woman who has children from a previous marriage. Her second husband may resent her spending money on children who are not his. "It might be about money but, symbolically, it's about the nature of the relationships in the family."

The way people handle money reflects their approach to life. "People who feel that, for example, the world is unsafe or that the world is persecutory, they are committed to safety and to protecting what they have. For those kinds of people, spending money, especially frivolously or self-indulgently, will be viewed as dangerous or even reckless."

The strong meaning of money means it's easy for there to be differences of opinion. It can be something as fundamental as how much to save and how much to spend, says List. Money can be used to show love, a way of "transacting emotion", or as a substitute for other forms of caring, he says.

Going further back to childhood, in Freudian terms, the issue of money goes back to potty training between the age of two and three, says List. This is when children learn how to produce to meet other people's expectations.

"Some children experience potty training, toilet training, as a demand which is unpleasant. Their parents expect more from them than they are able to meet or they are punished for not doing what they are supposed to do. When these children grow up, they have learned that spending, giving away too much, is a bad thing because when they did poos without control, they were punished for it."

For adults, the answer to success with money is finding a balance between maintaining and growing assets appropriately, enjoying life and looking after the people cared for, says List. "Maybe what we need is an emotional credit card so that people can show how they care for other people in ways that are more direct than money."

MONEY PERSONALITIES

The Saver

Savers think twice before spending and find it hard to give up control of money. They buy what's on special or in season. They don't buy things they don't need and can be critical of other people's attitudes to money. They will have a nest egg and a

pension plan.

Caution

Savers often don't have their money working hard enough. Often it sits in term deposits rather than in investment property or the share market, which they see as too risky. Savers tend to feel safe only with the major banks and they like their money where they can see it. They hate being in debt, so the thought of borrowing to invest is quite stressful. They should consider borrowing a small amount of money for investment or taking a higher risk with one year's interest return from a term deposit.

The Debtor

Often generous and anxious to win approval, Debtors are very comfortable with debt. They have an overdraft and owe money on credit cards. Their debts tend to increase with pay rises. Unlike the saver, debtors use credit or loans to buy what they want.

Caution

Debtors may get into trouble where they can't service the debt. And their debts often relate to things such as holidays, lifestyle expenses and consumer goods that depreciate. They should assess what they use debt for, because they won't be putting money aside for the future. No more than 30 per cent of income should be taken up in debt repayments. However, this style, can be a good way to accumulate assets.

The Optimist

Optimists have no cares and, as the name suggests, are optimistic about the future. They enjoy treating themselves and friends, but don't spend uncontrollably. They think something will always come along to bail them out - a windfall, a pay rise or inheritance. Often it does, so they can spend because they don't have to worry about tomorrow. These types are very casual and spontaneous.

Caution

Optimists don't plan for the future. They don't put money aside for unexpected expenses and they don't plan for their retirement. Some optimists say they don't need to, because they will receive an inheritance from their parents. But given how long people live these days, they could be waiting a while and parents may spend their money before they go. Optimists need to see saving as a form of spending that has long-term benefits. They need to focus on setting financial goals.

The Compulsive Spender

Spenders don't have a clue what their bank balance is - only that it's scary. They spend like mad, then panic. Spending is often emotionally linked. They spend because it makes them feel good and they use spending as a reward when they feel depressed. They love the thrill of shopping and don't think about the consequences of their spending.

Caution

They can get heavily into debt and end up with no money for the present or the future. They spend all their money servicing debt. They need some structure to ensure they put enough money aside to pay bills and for savings.

Source: Susan Jackson, executive director of the Women's Financial Network