Extrovert? You can have better financial results
You might think your approach to money is based on financial advice or past experiences, but new research from the University of Georgia shows that your personality can have a big impact on financial decision-making and management. risk taking.
In a new study, PhD in Psychology Student Jim Exley studies the personality traits of the “big five”: openness, awareness, extroversion, friendliness and neuroticism (OCEAN). He and a team of researchers have identified three distinct combinations of traits with financial results, specifying resilient, over-controlled, and under-controlled personality profiles that are associated with risk-taking and money-management behaviors.
“Based on our results, the people with the best financial results tend to be the ones who are well-adjusted, more outgoing and less neurotic,” Exley said. “They are also willing to take risks, but they don’t take too much.”
Exley was drawn to this research after working in the financial services industry for 25 years, where he learned firsthand about people’s various approaches to finance. No silver personality was quite the same.
“The industry forces us to measure what is called risk, but I was talking to people and I understood that someone’s financial life is about more than their tolerance for risk,” he said. declared.
This revelation led him to begin his studies with W. Keith Campbell, professor of psychology at the Franklin College of Arts and Sciences at UGA. Campbell was the one who suggested that personality might be at the root of the differences Exley noticed in her profession. Their research took off from there.
Three distinct approaches
For the Exley study, published in Personality and Individual Differences, the team asked 395 participants about personality, financial risk tolerance, net worth, and happiness.
“Using advanced statistical modeling, we identified three general types of people based on combinations of their OCEAN scores,” said co-author Patrick Doyle, a recent PhD. graduate in psychology. “We then explored how the members of these three groups differ in terms of financial outlook and experiences. “
The most prominent profile was the Over Controlled group, which exhibited high friendliness and conscientiousness, but low extroversion. These people do not like risk, so they avoid risky activities that could increase their wealth, such as investing in the stock market.
The other two profiles are more risk tolerant. The next largest group, the resilient group, is generally made up of well-adjusted and stable people; they are outgoing, open and pleasant, and not very neurotic. These profiles were associated with better financial results because if they don’t avoid risk, they don’t take too much either.
Members of the Under Controlled group are less conscientious, and more outgoing and neurotic. They tend to like to take risks, but sometimes they take too much, which negatively affects their net worth.
Advice to financial planners
The team’s research sheds light on a poorly studied subject. While money has a significant impact on better-documented topics like marriage and parenthood, it’s still relatively rare to explore the psychology behind finance itself, according to Campbell.
“It’s really interdisciplinary work,” he says. “It takes very basic personality models, as well as sophisticated statistics on psychometric approaches, and then applies them to very basic questions about investing and finance.”
With such strong associations between profiles and financial results, the researchers hope their findings will enable financial planners to better serve their clients, so they can help people make the best financial decisions for them.
“Planners, if they want to help people, have to measure OCEAN,” Exley said. “If people can easily talk about themselves – and this tells you a lot about how they handle money – then practitioners just need to measure and record it.
John Grable, Athletic Association professor at UGA College of Family and Consumer Sciences, is also a co-author.