Psychology of Wasting Money
What is going on when someone spends all his money?
What kind of characteristics does someone have when he wastes money?
These are the topics I will be writing about in this article.
Which one is faster to spend all? $1,000 in your pocket? or $1,000 debt?
There’s a personality testing called “big 5” and this test is considered to be one of the most reliable tests for investigating personality. By taking this test, you know how much you tend to waste money, your wasting habit, and when it happens.
Wasting money or wasting something is very dangerous because it exaggerates more wasting and eventually everything. I will be talking about it today too. Now, I won’t say that money is everything but waste means you lose what you have. and if you lose what you have, what happens is that your judging ability will be impaired and it causes more loss. Debt trap is also the same thing. Once you have a debt, it becomes easier to have more debts. this is interesting but for example, if you compare a speed of spending all $1,000 that you have to spending all $1,000 debts, which one do you think is to spend it all? Actually the faster one is with $1,000 debts. And this is the reason why people go into debt trap.
The reason why it’s better to pay back your debt first
Now some people say “don’t be afraid of spending money. but think of how much more you can earn!” But to be honest, I would say “pay back the debt first of all!” Plus, if you have debt, other thing you should do is to minimize your consumption. We have lots of free services, like SNS or Website that you can get information for free.
I myself have been running my own business but I never have debt, I do this all by my own money. Because if I start up some kind of new business with some money borrowed by a bank or somewhere, I know it will be easily knocked out when a big corporation do the same thing. That’s why I am doing something that only I can do, which is a consultation and coaching for forex traders with my own methods and that way I can win over big players. You know, some people say “debt is credit” hmm, I think it’s true but not for me. Actually I met a guy who runs a company and has $100 million debt but he says “I am earning $1 million per year.” I was like how could you say that? can you pay off the debt while you are alive? you know. Some think it’s a challenge to overcome the debt, but not for me like someone who is an introvert.
Anyways, back to a topic about wasting money. Ever since long time ago, it is said that becoming poor accelerates to become more poor. I was reading a book called “Economics of Inequality” written by Thomas Piketty, a French economist. and in his book, he says something interesting. He says, “money comes to someone with wealth and money goes away from someone with no wealth.”
So who becomes with no wealth? One of the researches reveals that if someone has a certain characteristic, there’s a bigger chance of becoming poor and wasting money. So what kind of characteristics or personality do you think it is?
Who tends to waste money, extrovert? or introvert?
Well, congratulations to those who are an introvert. According to the research, someone who is extroverted with less confidence, or someone who is extrovert and tries to show off, when he becomes poor, he will have a great chance to be bankrupted. As he becomes poor, he spends more money. I will explain why.
Imagine someone who is extrovert and has lots of money. He will say “My business is doing great and I am making money. I am feeling good everyone, so I pay it all! it’s all on me!” Well, this is ok because those who are introverted, when they have money, they also tend to spend. But the thing is, when you spend all the money, usually you stop spending any more right? because you don’t have any more money. Usually, when there’s no money, you start to save it and try to reserve it without spending any more right? However, someone who is extrovert is not like that.
Someone who is extrovert and likes to show off to everyone, what he thinks is that if he stops treating everybody else like he has been doing, he thinks they might recognize that he is not making any money any more and eventually becomes scared to be lonely. what happens afterwards do you think? The fact is that the less he makes money, the more he tries to show off to everyone that he is still making money! So when an extrovert is making money, he treats everybody else, but when he starts not making money, funny thing is that he treats everybody else even more. Then eventually he runs out of money and will be into bankrupt. Whether or not he is taking a risk to make money, when you decide who to be your partner, you may want to avoid someone who is extrovert and spends money.
Research actually proves it!
In fact, there is an interesting article about wasting money. Last year, at London University, they picked 718 male and female and checked all their earnings, debts, and for 12 months they monitored how they spent their money. Then they applied into a scale from 1 to 5, 1 to be secure and safe, and 5 to be someone who is showing off, spending money at an expensive club and drink expensive champaign and so on. so they graded them from 1 to 5 scale and 5 is the most show-off person with high expense.
For example, rank 1 tries to find and buys practical goods on sale with less price. On the other hand, rank 5 travels abroad or buys luxurious paint or becomes a member of executive club and so on.
Then, the researchers combined their personality from big 5 analysis into the way they spend their money. And they found out something very interesting. They found that extrovert and less earning ones tend to spend their money on rank 5 scaling. They spent more money on rank 5 than someone who is extrovert and rich. So the less the extrovert makes, he tends to buy something that can be showed off. Isn’t it interesting?
In other words, someone extrovert and showing off, when they have less money, they want to show and pretend that they are wealthy and have money, that they spend money on waste. so if you know someone who is extrovert and making money but gradually starts to suffer from making money, that’s a warning. In fact this is also true to business owners.
Watch out for extrovert business owners!
Now here is just my own observation and I have not investigated them with big 5, but I can tell from the way they behave, the way they talk face to face or by an interview, I can tell someone who is highly extroverted.
And for the business owners like this, when the business starts to diminish and starts doing not so well, they start to spend money. so when I see the company’s settlement and found deficit, then I might think of short selling the stock. so the character of the business owner, especially who runs business by his own, if you know his character and personality, you can assume what to do depending on how good or how bad the company is doing.
Anyways, someone who is extrovert and wants to show off, when he has no money, it’s a warning.
What about someone introvert? The research shows that someone who is introvert with less earnings never goes for something rank 5. Isn’t it interesting? When an introvert has less money, they save up their money, resulting less chance of bankrupt.
Wealthy Extrovert V.S Poor Extrovert
Now you might think, oh it depends on how much he or she is making. For example, you might think someone who is extrovert and rich wastes money when they become poor, but an extrovert with less money from a beginning, he should save his money because he doesn’t have any money from a beginning.
Actually University of London investigated on this and unfortunately, it is not true. They say that someone who is extrovert and less earning tends to spend their money on rank 5 luxury, and introverts with less money do not go for rank 5 stuff.
Therefore, regardless of earnings and debts, the co-relation between personality and wasting habit still exists. Therefore, whether or not he has debts or not, when extroverts has less earnings, they spend their money on luxury. In contrast, when introverts has less earnings, they tend to save money. Isn’t it interesting?
Why this happens is because of the motivation to make up his poor feeling, poor state is different between extroverts and introverts. Introvert makes up his poorness by saving up, or by being modest because they are interested in themselves. So they are not interested in how people look at them. In contrast, Extroverts are interested in outside of the world and they try to make up their poorness by showing off. and they tend not to look inside but rather start to change someone or buying something luxurious. So my advice for those who are extrovert is, earn enough money!
It is said that how you spend money tells all about yourself, but I think it is true. There are some free big 5 tests if you google it, so it might be fun for you to find out if you are introvert or extrovert by taking those sample tests.