What Money Type Are You?
Take our test to learn how to stop making the same old money mistakes
By Penelope Wang

(MONEY Magazine) – Prepare to meet your unconscious mind. It could be the best acquaintance you make this summer.

Why? Because chances are much of your financial behavior is driven by tendencies that you didn't even know you had--tendencies that are likely costing you money every day and quietly sabotaging your long-term financial goals.

You don't believe it? Olivia Mellan, a Washington, D.C. psychotherapist, author and money coach, sees it all the time. She's counseled investors who jump aboard high-flying stocks just before they plunge and then bail out at the bottom, not realizing that the self-confidence that serves them well in other realms can hurt them in the market. She's worked with patients who scoop up a pair of Manolo Blahniks or go out for an obscenely expensive meal after a bad day, not recognizing the connection between their mood and their spending. "Every one of us has personality blind spots when it comes to money," says Mellan.

The aim of the MONEY personality test is to obliterate these blind spots.

You've probably taken personality tests before. They're a standard tool of corporate human-resources departments, which rely on them to help place people in the right jobs. By some estimates, personality testing is a $400 million business. Only recently, though, has personality research made its way into the world of economics, which had long clung to the academic notion that people make financial decisions on a purely rational basis. Today the burgeoning field of behavioral economics is confirming that our decisions about money are often driven by psychological factors over which we have little conscious control: learned behavior patterns, perceptual biases and--most important--emotions. As a result, we're prone to mistakes that undermine our long-term interests.

What personality testing brings to this field is the promise of helping us to recognize which errors we're most likely to make--and to use that knowledge to prevent them. Meir Statman, a highly respected behavioral finance expert at Santa Clara University, teamed with Vincent Wood, president of AdvisorTeam.com, a behavioral research and testing firm in San Francisco, to design the following test. It builds upon a tried-and-true personality profiling system called the Keirsey Temperament Sorter, as well as a series of studies that Statman and Wood used to isolate the characteristics of each personality type.

Four categories emerged: Guardians, who tend to be cautious with their money; Artisans, who are freewheeling and daring; Idealists, who care less about money than other goals; and Rationals, who make most decisions by the numbers. Most of us, of course, are a mixture of these tendencies. Still, Statman and Wood's research shows that most of us will find a strong affinity with one or at most two of the categories.

On the pages following the quiz, you'll learn how to use your newfound self-knowledge to defend against your weaknesses and take advantage of your strengths. "If you understand your temperament, you can better manage financial risk and plan your goals," says Statman, "and perhaps become more successful in other walks of life as well."



Guardians, says Statman, place greater importance on financial security than on getting rich. Your test answers indicate that you are disciplined and patient, and that you enjoy organizing and planning ahead. Naturally, you'd rather invest a tax refund than spend it. And you tend to investigate investments thoroughly before committing. Caution is likely to rule your portfolio--you often prefer fixed-income investments to relatively volatile equities.

» DEPLOY YOUR DISCIPLINE Statman and Wood's study found that more than 50% of Guardians agree with the statement "I like self-discipline." So make the effort to come up with specific goals and plot a long-term financial course because, unlike some, you have the temperament to follow through.

» CONQUER YOUR TIMIDITY Guardians are among the least likely to invest in a double-or-nothing proposition with fifty-fifty odds. That's not a bad thing, but you're apt to play it too safe by keeping the bulk of your nest egg in cash or bonds--and risk being outpaced by inflation. You also tend to hold too little in foreign issues: Guardians greatly prefer domestic stocks.

» COURSE CORRECTION Use an asset-allocation tool (like the one at money.com) to determine if you need more stock or foreign equities, which can actually decrease your overall risk by adding diversification.



Your responses show that you tend to focus on assisting others and improving society rather than on building personal wealth. Sixty percent of Idealists agree with the statement "I feel compassion for the needy," almost triple the rate of Rationals (23%) and higher than Artisans (38%) and Guardians (42%). That tax refund? You'll probably use it to help friends (who are your most likely source of investment advice). The price for your relative lack of interest in money matters can be a failure to reach your financial goals--assuming you even set any.

» PUT YOUR INVESTING ON AUTOPILOT Your lack of interest in money can be to your advantage. By not obsessing over your portfolio, you're less likely to follow the crowd in and out of the market at the wrong time. You're also less likely to take outsize risks on a tip.

» HAVE YOUR CAUSE AND MONEY TOO Pay scant attention to your finances and you'll miss easy opportunities to save and invest for the future. And a deep aversion to risk holds the seeds of a common portfolio goof: too much in fixed-income assets.

» COURSE CORRECTION Remember, you can do more for others if you're financially secure yourself. Launch a plan--perhaps with expert help--that incorporates socially responsible funds, and sign up for automatic investing and bill paying. If you find most stocks too dicey, consider dividend-paying stocks, which offer an income cushion.



Based on your test answers, you probably enjoy problem solving and fact finding and have a deep interest in science and the latest technology advances. When the market moves, you tend to stay calm--but you're also likely to be a bit too sure of your ability to outthink the market. In the late '90s, says Statman, many Rationals were certain that tech stocks would continue to climb and lost badly when the bubble burst.

» FEED YOUR TASTE FOR SYSTEMATIC THINKING More than any other personality type, you're naturally inclined to put together a financial plan and pick your own investments. Jump on the task--you'll find it satisfying as well as profitable.

» REMEMBER: THE MARKET ISN'T ALWAYS RATIONAL You feel best about your finances when you're "successful at implementing a complex strategy." You're also the group most likely to think you can outsmart the market. But remember, brains alone won't do the trick. Many of the smartest economists favor index investing, a strategy that assumes beating the market is ultimately impossible.

» COURSE CORRECTION You're in the group most willing to "take a lot of risk with some of their money." Keep that impulse in check. You can reduce risk simply by shifting 10% or so of your assets to bonds and cash.



Your answers suggest that "trust your gut" sums up your financial decision-making style. An entrepreneurial type or performer, you enjoy the thrill of investing, act quickly on buying opportunities and are comfortable taking risks. When you retire, you'll likely seek out an adventurous lifestyle. But you tend to lack interest in the long-term planning and discipline needed to reach that goal. If you get a tax refund, for example, you usually spend rather than save it.

» USE YOUR CONFIDENCE... Sixty-three percent of Artisans feel they can choose stocks that will deliver above-average returns--a number that's second only to Rationals. Go ahead and build a portfolio heavy in stocks, but confirm your gut feelings with research and diversify adequately--just in case you're wrong.

» ...BUT DON'T INDULGE EVERY WHIM Only 22% of Artisans strongly agree with the statement "I like self-discipline." So guard against following every impulse, or you're liable to get whipsawed by the market. You may also be inclined to take on too much risk. Nearly 40% of Artisans--more than any other money type--would jump at a double-or-nothing opportunity with 50% odds of success.

» COURSE CORRECTION If discipline is your weak point, use automatic investing. And commit, say, no more than 10% of your assets to satisfying your yen for gutsier bets.