What’s Your ‘Money Type’? Knowing It Could Help You Avoid a Financial Blunder
Financial advisers are seeing some interesting stress responses to financial uncertainty. With that in mind, here are some practical tips for three of the most common money behaviors.


As a wealth adviser, I’ve witnessed the various ways people react to financial stress. While I’m sometimes surprised at an individual’s response, I remind myself that people have deeply ingrained beliefs and patterns about money.
There is a large body of research that explores the relationship between money and emotions, financial archetypes, and money psychology. The Money Coaching Institute® holds that there are eight “money types” or archetypes:
- The Innocent
- The Victim
- The Warrior
- The Martyr
- The Fool
- The Creator/Artist
- The Tyrant
- The Magician
Though not specifically included in this list, I’d add one more as a common financial archetype among investors: The Saver/Conservative.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
During the COVID-19 pandemic, I’ve seen clients acting in ways consistent with many of these financial archetypes. It’s a universal truth that we learn things about ourselves during difficult times. So, perhaps now is the time to better understand your relationship with money so you do not let your own stress behaviors derail your financial game plan.
Below are the three most common behaviors I have observed in the wake of COVID-19, as well as the respective financial archetype for each stress response:
- Increasing risk within an investment portfolio in hopes of a large payoff (The Fool/ Pleasure Seeker)
- Selling investments in favor of cash (The Saver/Conservative)
- Refusing to inspect your financial situation or make changes (The Innocent)
Are You a Fool/Pleasure Seeker? Here are Some Tips for You
After the best 50-day rally in history for the Standard & Poor's 500 Index — which occurred in April and May — many investors are experiencing FOMO (fear of missing out). Some people are now looking for a quick profit by going all in on one or a handful of stocks.
If you find yourself fighting the urge to do this, or day trade your accounts, perhaps you fall into this archetype … and you are not alone. In fact, Barstool Sports founder Dave Portnoy has amassed a social media following for his stock picks and daily trades. If you are not familiar with Barstool Sports, Wikipedia describes it as a sports and pop culture blog, not an investment adviser!
If you are going to engage in speculative investing, consider limiting your bets — and remember, they are bets — to no more than 5% of your portfolio. If your bets don’t play out, you can at least write off your losses through tax-loss harvesting if the losers were purchased within a taxable account, not an IRA or 401(k).
Are You a Saver/Conservative? Keep These Considerations in Mind
It sounds counterintuitive, but a bear market is a good thing for long-term investors, because you are buying investments at discounted prices. If you ever consider moving your investments into cash during these periods, consider the following information:
Dating back to the early 1970s, a portfolio consisting of 60% stocks and 40% bonds (60/40) experienced a negative return 9.5% of the time when looking at rolling-year returns. A less aggressive portfolio, 40/60, only lost money 3.3% of the time when looking at rolling three-year returns. However, when looking at rolling five-year returns for the same portfolios, both had a positive return 99% of the time*.
Moreover, a JP Morgan Asset Management study shows that missing 10 of the best stock market days can reduce your return by over 3.5%, and most of the best days follow the worst days, which is typically when investors throw in the towel.
So, if you are more than five years away from needing to tap into your investments, do not let your emotional desire for stability and certainty cloud your judgment when times get tough. Going to cash may give you certainty in knowing your investments will not lose any more money in the short term, but it can also lock in significant losses.
For the clients who cried uncle in March of this year, some have locked in losses of 20% or more!
An Innocent? Here’s What You Should Consider
For those investors who couldn’t bring themselves to look at their investments when things went haywire earlier this year, they actually did themselves a favor, because the stock market has skyrocketed after falling over 30% in a little over a month.
Studies show that the less frequently you look at your investments, the better your accounts typically perform. Taking the “ostrich approach” (burying your head in the sand) may work from time to time and spare investors some heartburn, but it does have the potential to do lasting harm, specifically for retirees.
If you are withdrawing from your accounts, any downturn will be exacerbated by selling investments at low prices. For this reason, it is important for retirees to keep ample cash on hand to prevent from having to sell investments during a downturn. When you need to take money out of your accounts, consider selling bonds during a stock market sell-off and trimming stocks during a bull market.
Taking the ostrich approach may have worked for retirees over the past decade, but not monitoring your withdrawal rate is a recipe for disaster. Assuming no change to your annual withdrawals, a 30% decline in portfolio value would increase your withdrawal rate by ~43%, potentially taking years off your portfolio’s longevity.
Understanding why people react in different ways can help you be a more compassionate spouse, parent, friend or business partner. Once you become more aware of your “money type,” you can leverage the positive traits to empower you to achieve your goals and dreams, while preventing the negative consequences from derailing your financial game plan.
Finally, if you would like to find out more about your own money type, take The Money Coaching Institute’s free online quiz.
*Information based on Ibbotson Large Cap Stocks and Corporate Bond historic performance. The three-year rolling return data dates back to 12/31/1972 and the five-year rolling returns date back to 12/31/1974.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Thomas Farmer is a partner and wealth adviser at McGill Advisors, a division of CI Brightworth. He obtained the CERTIFIED FINANCIAL PLANNER™ certification in 2011, the Certified 401(k) Professional designation in 2014 and is a member of the Financial Planning Association.
-
The Surprising Truth About Loneliness and Longevity
We've all heard about the epidemic of loneliness that can shorten lives and make retirement miserable. But there's more to the story.
-
The Dollar Index Is Sliding. Is Your Portfolio Prepared?
The Dollar Index Is Sliding. Is Your Portfolio Prepared? The dollar's fall has been troubling because inflation appears to be constrained and the economy has been strong. Here's what it means for investors.
-
Seven Financial Considerations When Downsizing for Retirement
With prices going up on everything, you may be looking for a cheaper place to live. To truly evaluate costs, take a hard look at taxes and intangibles.
-
I Have Plenty of Money: Why Do I Need a Long-Term Care Plan?
Long-term care planning, whether through insurance or self-funding, is crucial not only for financial protection but also to preserve family relationships and reduce the emotional and logistical burdens on loved ones.
-
Three Steps for Evaluating a Downsize in Retirement: A Financial Planner's Guide
Unless you think things through, you could end up with major (and costly) regrets. To make the right choice, base it on the three keys to retirement happiness.
-
Worried About Your Retirement Income? Four Questions to Ask Yourself, From a Financial Planner
If you're nearing or in retirement and stressing about your retirement income (so many of us are), consider taking some time to think about these four issues.
-
Do You Need Flood Insurance? I'm an Insurance Expert, and Here's Where You Can Get It
Standard homeowners insurance does not cover flood damage, so you might need separate flood insurance, which you can get either through FEMA or private companies. Here are the details.
-
I'm an Investment Professional: These Are the Three Money Tips I'm Giving My College Grad
College grads can help set themselves up for financial independence by focusing on emergency savings, opting into a 401(k) at work (if it's offered) and disciplined, long-term investing.
-
New SALT Cap Deduction: Unlock Massive Tax Savings with Non-Grantor Trusts
The One Big Beautiful Bill Act's increase of the state and local tax (SALT) deduction cap creates an opportunity to use multiple non-grantor trusts to maximize deductions and enhance estate planning.
-
Know Your ABDs? A Beginner's Guide to Medicare Basics
Medicare is an alphabet soup — and the rules can be just as confusing as the terminology. Conquer the system with this beginner's guide to Parts A, B and D.