Are You Bad With Money? You May Lack This Personality Trait

In this article: Steps for developing the money habits that come naturally to financially conscientious folks
by Andrea Norris-McKnight
Are You Bad With Money photo

About eight years ago, economist James Heckman co-authored a paper in the Proceedings of the National Academy of Sciences. He found that “financial success was correlated with conscientiousness, a personality trait marked by diligence, perseverance and self-discipline.”

If you struggle to get ahead financially, there’s a chance you lack this personality trait. Does that mean you’re doomed to be a financial failure? Not necessarily! But it does mean you may need to work harder to develop the same financial habits that come naturally to conscientious people.

Habits for Developing Financial Conscientiousness

Becoming more conscientious, particularly in financial matters, involves developing habits and mindsets that promote responsibility, organization and foresight—in other words, making smarter financial decisions, staying on top of your budget and other financial tasks and considering your financial future as much as the financial present.

To improve your financial situation, start taking the following steps to develop financial conscientiousness. You may already do some of these things, but you could improve your finances significantly over time by implementing those you tend to neglect.

1. Set Clear Financial Goals

Start by setting specific, measurable financial goals. These could range from saving a certain amount of money within a year, paying off debt within a specific timeframe or investing a percentage of your income monthly. Clear goals provide direction and a sense of purpose in financial planning.

Try these tips for setting and achieving financial goals.

2. Create a Budget

A detailed budget is the cornerstone of conscientious financial management. It should account for all income, expenses, savings, and investments. Regularly reviewing and sticking to a budget will help you live within your means, reduce impulse spending and stay aligned with your financial goals.

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3. Track Your Spending

Keep a record of all your expenditures, no matter how small. You can use an old-school method like keeping receipts and writing expenses down in a notebook or choose a budgeting app and financial software. Tracking spending helps identify areas where you might be overspending (and where you can cut back).

4. Build an Emergency Fund

An emergency fund is a crucial buffer for dealing with unexpected expenses without derailing your financial plans. You want to save enough to cover three to six months’ living expenses.

Your emergency fund should be easily accessible but separate from your regular checking account to avoid temptation.

If you’re starting from zero, this amount can seem daunting. Try these tips:

5. Educate Yourself

Understanding the principles of personal finance and investment options can empower you to make informed decisions and feel more in control of your financial future. Regularly read articles or watch videos on money topics unfamiliar to you.

Start with this article that can help you find the holes in your financial knowledge and give you a better understanding of what it might be costing you: A Guide to Avoiding the High Cost of Financial Illiteracy.

6. Automate Savings and Payments

Use automation to your advantage by setting up automatic transfers to your savings account and automated payments for recurring bills. This step can be especially beneficial if you have trouble keeping your finances organized. Automation reduces the likelihood of missing payments or neglecting your savings goals.

Learning more about the benefits of staying financially organized may help motivate you to stay on track.

7. Practice Delayed Gratification

Before making any significant purchase, give yourself a waiting period (perhaps 24-48 hours) to consider whether it’s essential or merely an impulse buy. This practice helps foster self-discipline and prevents financial setbacks from impulsive decisions.

Here are some more tips to help you control discretionary spending.

8. Regularly Review and Adjust Your Financial Plan

Even though it’s helpful to automate some aspects of your financial plan, you can’t take a ‘set it and forget it” approach with your financial plan. Your financial situation and goals can change over time. Make it a habit to review your financial plan periodically and adjust it as needed. This could mean reallocating your budget, adjusting your savings goals, or reevaluating your investment choices.

Find out how to perform a painless financial check-up.

Building Financial Conscientiousness Takes Time But Is Worth the Effort

Conscientiousness comes naturally for some, but many must work at it. Becoming more conscientious with money is a gradual process that requires consistent effort. By making these tasks habitual, you can better manage your finances for long-term success.

Reviewed August 2024

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About the Author

Andrea Norris-McKnight took over as the editor of The Dollar Stretcher and After 50 Finances after working under the site founder and previous editor for almost 15 years. She has also written for Money.com, GOBankingRates.com, HavenLife.com and The Sacramento Bee.

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