Ramit Sethi’s 4 ‘Money Types’ and What Each Needs To Change To Build Wealth
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Jordan Rosenfeld
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Molly Sullivan
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Experts often espouse advice about how your personality type can affect everything from your relationships to your work habits. According to finance expert Ramit Sethi, in his recent newsletter, there are also “money types,” which come from his book “Money for Couples.“
Sethi suggested that understanding your money type, “your core financial identity,” can help explain how you handle your finances, save relationships and, more importantly, bring you “one step closer to breaking the patterns that are getting in your way.”
Here are Sethi’s four money types and how you can work with yours to get better at your finances.
The Avoider
Sethi described this money type as a person who uses both “conscious and unconscious strategies” to procrastinate on all things related to money. Avoiders will often do things like ignoring bills, not looking at their bank balance, procrastinating making a budget and so on, like a woman in one of Sethi’s podcasts he calls “Rebecca.” Things got so bad, it was putting a strain on her marriage.
Avoiders are the most common of the money types, Sethi said, and they’re largely driven by fears of dealing with their finances.
Advice for Avoiders
He recommended they look at the emotional components of why they avoid and to project what might happen down the road if you keep behaving this way. He especially encourages Avoiders to consider their impact on others. He recommended a phrase: “We don’t need a crisis to take control.”
The Optimizer
On the other end of the money type spectrum comes The Optimizer, Sethi explained. This type is as focused as The Avoider is tuned out. He wrote, “They love rules and beating the system. They track everything and are usually quite skilled when it comes to day-to-day money management.”
The downside of this type is that they tend to live in the future and don’t allow themselves to enjoy the moment.
Sethi goes so far as to call The Optimizer “boring” and suggested that they are potentially missing out on life now by planning so hard for the future.
Advice for Optimizers
He encouraged this money type to learn how to “spend money meaningfully” and to hang out with spontaneous people so that some of that behavior might rub off on them. He suggested they take 5% of their net income every month and “spend it on something fun and non-essential.”
The Worrier
Between The Avoider and The Optimizer lives The Worrier, Sethi said. They don’t avoid their finances; on the contrary, they’re always thinking about it, but negatively.
While Sethi said that sometimes Worriers do have real reasons to be worried, often it’s just that “they learned to worry through family history, such as a parent losing a job.” For most Worriers, their feelings don’t necessarily translate to what they actually have in the bank, he wrote.
As a result, you’re actually more likely to be working backward instead of forward, or, as Sethi wrote, “they’re playing life on defense. Worriers live a smaller life than they have to, only focusing on what can go wrong.”
Advice for Worriers
Sethi urged Worriers to ask themselves what they get out of worrying on an emotional level, and who they might be if they stopped worrying. He recommended they play out a worst-case scenario and break it into solvable parts. Moreover, they should look at areas where they feel “confident, competent, and decisive” and “put a box around certain worries” so as not to overdo it.
The Dreamer
The last of the four money types is The Dreamer, people who “use magical thinking when it comes to money,” Sethi wrote. This type may behave foolishly with their money because they think that an easy solution is just around the corner. This type is the most prone to get-rich-quick schemes, such as “timeshares, crypto, multi-level marketing, and dubious passive-income businesses,” Sethi wrote.
They are, in essence, Avoiders, but in a very different way, who may end up failing to take practical steps in their finances, such as carrying credit card debt, or overspending.
Advice for Dreamers
Sethi joked that he has no advice for Dreamers because “you’re not reading this book.” Instead he aims his advice at the partners of Dreamers. He tells them, “I recommend you carefully illustrate — in a format they understand — where the current financial trajectory will take you as a couple. Make them understand how this affects them, their day-to-day life, and your relationship.”
Understanding your money type may help you refocus your financial strategies and communicate better with your partner about money, as well.
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