Your Money Temperament and Why it Matters

Whether you’re aware of it or not, you do have a money temperament. Everyone does. It’s the way you naturally think about, behave, or react to money. To loosely assess your money temperament and to have a little fun with this, consider the following premise then choose the response closest to what you would do.

Let’s  say, for illustration purposes, that you’re driving an old clunker of a car that’s costing you dearly in repair bills and bailing wire to keep it running.

By some stroke of dumb luck, you are the proud owner of a $20,000 winning lottery ticket. You cash it in, determined to buy a car. What do you do?

a.) Make a $20,000 down payment on your dream car.
b.) Pay cash for a $20,000 previously-owned car.
c.) Exercise extreme patience, flexibility, consumer savvy, and negotiating skills to find a dandy used, late-model, low-mileage, well-maintained car for $10,000 cash, then stash $10,000 into a savings account.

Putting aside your humble columnist’s obvious bias, let’s analyze the options.

Twice the Price

If you responded to option A, you are prone to live your life for twice the price. You don’t mind paying interest and taking on monthly payments because in your mind, that’s the way to get what you want. You’re just doing the best you can to maximize your income so you can drive a reliable car.

You depend on consumer credit to bridge the gap between your income and your expenses. For you, it’s easy and convenient that way.

Because you pay double-digit interest rates on your revolving debt, you end up paying twice, or more, for the goods and services you charge, but you don’t think about it that way. You live for today, assuming that tomorrow will somehow take care of itself.

Full Price

If your response was option B, you are okay with the full price. When you have money, you don’t hesitate to spend it. You’re a cash buyer, not a wheeler-dealer, and you prefer to just pay the asking price. No hassles, no problems.

You have a cash mentality. You pay as you go. If you like it you buy it. If you don’t, you wait.

You don’t pay attention to prices that much. As a result, your income matches your lifestyle. You don’t live beyond your means and never carry credit card debt. Still, it takes every penny to pay the bills. You live from one paycheck to the next. It seems like you can never get ahead.

Half the Price

If your choice was option C, your temperament is geared to live your life for half the price.

You enjoy the challenge of living below your means, you try to never pay the full price. You get a thrill whenever you beat the system. You earn more than you spend and save the difference.

You know your prices, you’re patient, and know how to pay less than the going price for just about everything. In fact, you pride yourself on living your life for half the price.

You live an understated lifestyle and find great satisfaction in being prepared for the unexpected. You live below your means and that means contentment, joy, and financially stress-free life.

Back to Reality

Of course, no one pays twice-the-price for everything nor can anyone be assured of never paying more than half. My point is that with every spending opportunity comes a choice. You can choose to go into debt, you can determine to not spend more than you have or you can work hard to pay half the price.

We are not bound by our temperaments. The ways that we naturally think about, respond, and behave to money and myriad other things in life are simply our first, natural responses.

We have control over those thoughts and behaviors. Sometimes our responses are like bratty kids who need some adult supervision and discipline.

Toil and Trouble

A couple of hundred years ago, Adam Smith, economist and philosopher, wrote in Wealth of Nations,

“The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it.”

I’m not trying to fool you into thinking it’s a simple thing to live below your means. I’ll admit that for some  of us myself included, the natural response is that its easier to just buy what you want and then switch to credit when you run out of money. That’s as easy as walking downhill. Or rolling off a log.

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