Is Your Head in the Game?

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By Dayana Yochim (TMF School)
June 25, 2002

We don't mean to pry, but we have to ask: Are you in denial? Do you frequently make impulsive, self-destructive decisions? Do even the simplest tasks send you into a tailspin?

No, we haven't started the Fool Shrink Hotline... yet. (We're still trying to see if it's a viable business model.) We are, however, concerned about your savings attitude. 

According to the 2002 Retirement Confidence Survey (RCS), an annual study by the Employee Benefit Research Institute and the American Savings Education Council, the majority of people fall into five financial and retirement savings personality types. Each approaches retirement preparation in different ways.

Though there's no magic pill that'll cure your spendthrift ways, there are some relatively painless steps you can take to put yourself on more solid financial footing. Pour yourself a cup of chamomile tea and see if you recognize your savings habits in any of these money personality categories. Then, let's talk about your mother.

Planners: Did you always turn in your term papers a week before they were due? Then you're probably a "planner." When it comes to money, the RCS found that 23% of Americans are disciplined savers and believe that anyone can have a comfy retirement if they just plan and save. Planners are also financial risk takers, which, according to the RCS, means that they understand that putting money in the stock market will help them reach their savings goals. The Rx: Help one of the other financial personality types below.

Savers: Nineteen percent of Americans are cautious enough with their money that they are seldom caught financially off guard by an unexpected event. If you're a saver, we applaud your Boy Scout readiness. However, savers also tend to be risk-averse, making them hoard money in safe investment vehicles rather than invest it to grow over the long term. The Rx: Education. Understanding the risks of inflation and the beauty of long-term investing will help savers ease into the world of "planners."

Strugglers: The RCS found that 18% of Americans fall into this category. Strugglers are not generally impulse shoppers -- and many consider themselves disciplined savers. But they frequently suffer financial setbacks due to unexpected and costly events. The Rx: Set up an emergency stash to cover life's unavoidable financial hiccups.

Impulsives: Did you see the sale at Bloomingdales? Oops. Sorry 'bout that. Impulsives (24% of us) have the right idea -- they understand that a comfortable retirement is possible and are willing to take financial risks by investing their money in the stock market. Unfortunately, impulse buying derails their savings efforts. Rx: Plan, plan, plan. Set up a regular savings program by having your money automatically deducted from your paycheck and put into your company retirement plan.

Deniers: It kind of hurts our feelings, but 15% of Americans dislike financial planning. Sadly, deniers feel that a comfortable retirement is out of their reach and therefore choose not to address financial matters at all. They seldom plan ahead for even expected financial events like saving for college and covering themselves and loved ones with the proper insurance. The Rx: Education with a dollop of fun. This stuff doesn't have to be as dry as chalk. Calling all "deniers" to our 13 Steps!

After that, if you need a helping hand, check out TMF Money Advisor where an understanding soul -- who can walk you through even the most complex financial decisions -- is actually just a phone call away. (Hey, maybe this Fool Shrink idea will work out after all!)

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