How to budget based on your personality

Ever wondered how your friend manages to save money every month while you’re on the verge of filing for bankruptcy by the second or third week, even though you earn around the same salary?

We’ll tell you why. The reason is the difference in your personalities! We’re sure that your personality differs from your friend’s. So, don’t assume that the same budgeting method will work for both of you.

Don’t panic! This just means you should look for an approach that matches your personality and spending habits, as your friend has done.

To help you determine your personality type when handling money, we’ve listed several personalities below and included financial tips for each.

1. The explorer

This person is flexible and is driven by their love to experience new things. They are adventure-seeking and risk-taking. They are spontaneous and as curious as cats — and need to be reminded that they don’t have 9 lives!

Where money is concerned, explorers tend to be carefree with spending. They find it challenging to stick to a budget if it restricts them, as their freedom means a lot to them.

Our advice: If you consider yourself an explorer, the 50/30/20 rule is for you because it gives freedom and flexibility. With this rule, you must allocate 50% of your salary to fixed costs, such as bills and rent, 30% to variable expenses (considered luxuries), such as shopping and travelling, and 20% to savings and debt repayment.

And the best part is that you can adjust these percentages according to your preference, so you never feel restricted!

2. The rational

This person is pragmatic, in control, and independent. They have strong willpower, are highly analytical, and have excellent problem-solving skills. They are only guided by logic and can’t rest until they find the answer to a question!

For the rational person, money is simply a means to achieve goals. So, they don’t tend to overspend and don’t worry much about saving or investing but want to know where every penny goes.

Our advice: If you’re a rational person who wants to ensure that every penny counts, then a zero-based budget may be for you. What’s the zero-based budget? Simply put, it’s a strategy that provides a clear overview of all your expenses, no matter how big or small.

Using pen and paper, dedicate a portion of your salary to your needs, wants, and savings. Once you subtract your total monthly expenses from your monthly salary, your result must be equal to zero — hence this budget method’s name.

3. The spontaneous

This person is focused on the present rather than on the future. They are hasty in their decisions and don’t care about the consequences of their actions.

When it comes to money, impulsive people don’t hesitate to spend loads of money in return for a good time. Know that if you see an impulsive person haggling over an item’s price, you’re dreaming! If they want something, they’ll buy it without thinking twice about its price!

Our advice: If you relate to this personality, we’re giving you 2 pieces of advice instead of 1 because your spending habits may threaten your financial security.

First, we recommend you follow the reverse budgeting method. How does this work? This method prioritises savings. Instead of saving whatever is left of your salary at the end of the month, deduct 20% of your salary for savings at the start of the month, and then spend the remaining 80% as you need/wish!

Second, set up a standing order to automatically pay your bills or replenish your savings account every month via our mobile banking app so that you don’t forget. Speaking of which, do you have a Bank al Etihad savings account?

4. The traditionalist

This person is dedicated to their work and social circle. They are responsible, can be relied upon, and were born to be leaders. They aren’t too fond of taking risks and avoid breaking the rules.

Financially, the traditional person may have difficulty balancing saving and spending money. Moreover, being traditional, they prefer to use hard cash instead of bank cards, which makes it difficult for them to review all their expenditures.

Our advice: If the above has your name written all over it, we advise you to follow the cash envelope system. This budgeting strategy involves allocating specific amounts of cash to your spending categories, such as bills, groceries or entertainment, and placing your monthly budget in labelled paper envelopes.

As soon as one of these envelopes is empty, you must stop spending on that category. This way, you can be sure not to spend more than what you’ve assigned to each category and will be able to keep track of all your expenses.

If you want to learn more about the cash envelope system and how to practise this method in the digital age, read this article.

We hope you’ve found a budget that matches your personality, and we hope you’ll soon be able to save more than your friend!