Let’s be real: You may not know—or think about—the psychological factors that contribute to your financial decisions. But if you want to build healthy financial habits and improve your relationship with money, this topic is worth exploring.
“Our personality has a huge impact on our behavior, preferences, and values,” says Alex Melkumian, PsyD, founder of the Financial Psychology Center in Los Angeles, CA. And when it comes to money, he says that each of our personality traits can impact our financial psychology and mindset in different ways.
The "Big Five" personality traits
Your personality exists on a spectrum—that means you don’t have a single personality type or show one personality trait (people are complex, after all). However, scientists have developed a personality model that identifies five traits found in most human beings:
- Openness to experience
- Extroversion (which also includes introversion)
"Every person embodies some portion of all five of these,” says Dr. Melkumian. “They’re neither good nor bad, but each one can have a negative and positive impact on how you deal with money.”
1. Openness to experience
Openness to experience ranges from being closed to being open and reflects your creativity and curiosity. It could show up in whether you’re game to try new things or prefer to go the conventional route.
- If you’re more closed, you might have an easier time focusing on the financial goals you set.
- If you’re more open, you could be good at coming up with non-traditional ways to earn money.
“Openness can be a driving force behind a lot of financial success,” Dr. Melkumian says. “Creatives [can be] really high in openness, for example.” However, people who are more closed may have an easier time implementing new plans.
Conscientiousness ranges from spontaneous to conscientious, and it reflects your thoughtfulness, organization, dependability, and grit.
- If you’re more spontaneous, you might be more likely to take big risks that lead to big rewards.
- If you’re more conscientious, you may find it easier to create—and stick to—a financial plan.
Conscientious people tend to be dependable and punctual, which can be a positive trait in a money manager, but they may also seek validation from others. “They may worry about what others will think of their financial decisions,” says Dr. Melkumian. “It may prevent them from taking a risk that they should [consider].”
Extroversion ranges from introverted to extroverted and reflects your sociability, assertiveness, and how you feed off the energy of others.
- If you’re more introverted, you may not be as likely to compare yourself to others when making financial decisions.
- If you’re more extroverted, it could be easier to build a professional network that you can leverage to advance your financial goals.
Some people are also somewhere in the middle (ambiverts), or move from one end of the spectrum to the other. "You need a little bit of both to be the best professional," says Dr. Melkumian. The extrovert in you can help you connect with others, while the introvert will keep you from being overly concerned about others' approval or validation.
Agreeableness ranges from hostile to agreeable and reflects your honesty, generosity, and how you care for and trust others.
- If you’re more hostile, you might have an easier time advocating for yourself and your needs.
- If you’re more agreeable, you could be good at collaborating and forming trust-filled relationships, which is key if you're sharing finances with a partner.
One more thing: Agreeableness may also have an impact on your ability to earn money. For example, "You might [be less likely to] demand the top pay for your skillset being more agreeable," Dr. Melkumian explains. That can in turn affect your financial planning.
Neuroticism ranges from stable to neurotic and reflects your confidence, resilience, self-esteem, and how well you self-regulate your emotions.
- If you’re more stable, you may be less likely to make rash financial decisions.
- If you’re more neurotic, your strong emotions could propel you to achieve your financial goals.
“Emotions get a bad rap in the field of personal finance,” says Dr. Melkumian. “As long as we’re able to keep ourselves out of the extreme negative emotions, they can be motivating and helpful.”
So, what can you do next?
Look for ways to leverage your personality to accomplish your financial goals. Luckily, Upwise is for everyone, and it's designed to help you create positive habits. So while you may not change your personality, you can work toward improving your financial future.