What’s Your Spending Style?
Matching Your Spending Style with the Right Financial Model
Understanding your spending habits is key to effective money management. For the modern woman, aligning your natural purchasing tendencies with the right financial model can be what makes or breaks reaching your financial goals. This post explores and matches the eight buyer types with four popular financial models, offering insights into which framework might work best for you.
What Are The Different Buyer Types?
Before diving into financial models, let's identify your buyer type. Are you a Bargain Hunter, always looking for the best deal? Or perhaps you are a Brand Loyalist, loyal to your favorite brands regardless of the price? Identifying your purchasing style can significantly influence which financial model aligns best with your habits and goals.
You might identify with more than one buyer type, and that’s ok. They will likely be aligned with one another, or one might be the dominant pattern, whereas another one might be more of a subconscious self-soothing tool (looking at all the impulse buyers out there).
Also, a little side note: this is a zero-shame space. Our spending habits are multifaceted and influenced by psychological, sociological, epigenetic, and neurobiological factors. Everyone’s relationship with money is complex and nuanced, but there’s power in:
Knowing which buyer type you are.
Accepting where you are and choosing it.
Or deciding to work towards change.
Eight Buyer and spending Types
1. The Bargain Hunter:
This shopper loves a good deal and is always looking for sales and discounts. They're savvy with their spending but may risk purchasing unnecessary items just because they're on sale.
2. The Impulse Buyer:
Impulse buyers make spontaneous purchases based on immediate desire. While they enjoy the thrill of a new buy, this can sometimes lead to regret or financial strain.
3. The Brand Loyalist:
Loyal to their favorite brands, these shoppers prioritize quality and familiarity over price, often leading to consistent but potentially higher spending.
4. The Researcher:
These shoppers thoroughly research products before buying, ensuring they get the best value for their money. They are informed and deliberate in their purchasing decisions.
5. The Luxury Shopper:
Luxury shoppers prefer high-end products, and are willing to pay a premium for exclusivity and quality. Their spending habits are driven by quality and status rather than necessity.
6. The Ethical Shopper:
Focused on sustainability and ethics, these shoppers prioritize products and brands that align with their moral values, even if it means spending more.
7. The Practical Shopper:
Practicality and functionality are key for these shoppers. They spend on necessities and are less likely to make impulsive or luxury purchases.
8. The Digital Shopper:
Comfortable with online shopping, these shoppers value convenience and variety. They are savvy with digital platforms and may be influenced by online reviews and social media.
Exploring Personal Finance Models
Once you know your purchasing style, let's explore four financial models: Ramit Sethi's spending categories, Richard Jenkins' 60 percent solution (with adjustments), the 50/20/30 Rule, and the 70/20/10 Rule. Each model offers a unique approach to managing income, spending, and savings. You can see a full breakdown of these models in this blog post.
1. Ramit Sethi's Spending Categories:
This model suggests allocating income into specific categories: 50-60% on fixed costs, 10% on investments, 5-10% on savings goals, and 20-35% on guilt-free spending.
2. Richard Jenkins' 60 Percent Solution (Adjusted):
Jenkins advises allocating 60% of income to fixed expenses, with the rest divided equally among retirement, long-term savings, short-term savings, and fun money.
3. The 50/20/30 Rule:
This rule suggests dividing income into three parts: 50% for necessities, 20% for savings or debt repayment, and 30% for personal wants.
4. The 70/20/10 Rule:
Under this model, 70% of income goes to monthly expenses, 20% to savings, and 10% to debts or investments.
Matching Buyer Types with Personal Finance Models
You might gravitate towards one money model intuitively. Still, this chart comparing buyer types with these four financial models can help you narrow down which models might be most impactful for you personally, allowing you to compare and run the numbers.
Ultimately, you want to select a financial framework that complements your spending style and just slightly stretches you, enhancing your ability to meet your financial objectives.
Start where you are and then work towards where you want to be.
WHY UNDERSTANDING YOUR BUYER TYPE MATTERS
Your spending style and financial planning approach are deeply interconnected. You can create a more sustainable and effective financial plan by choosing a money model that aligns with your natural buying tendencies. Alignment helps ensure that your budgeting and savings strategies work with instead of against your lifestyle.
Implementing Your Chosen Model
Once you’ve identified a model that resonates with your buying type and reviewed your budget to know what you might need to tweak, the next step is implementation. Start by setting realistic goals and gradually adjusting your spending (and account automation) to fit the chosen model. Flexibility and adaptability are key – don’t hesitate to refine your approach as your financial situation evolves.
Understanding your spending style and choosing an appropriate financial model is an empowered step toward financial freedom and reaching your money goals. Whether saving for a big purchase, investing in your future, or simply seeking to manage your money more effectively, the proper financial framework can set you on the path to success. Embrace your unique buying habits and use them to inform your financial strategy – your future self will thank you.
Reminder: I am not a financial professional or money expert. I am a strategic and analytical thinker who loves data and dives into topics I'm curious about (Reflector Life). I have learned these things from self-study while working on my finances, and this info should not be used in place of seeking guidance from a legitimate financial advisor.
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