How to Assess Whether You’re a Saver or a Spender of Money

When I meet with a client for the first time, I assess whether they are a “spender” or a “squirrel.” The distinction between these two views on money has a huge impact on how someone manages their funds, and what adjustments they should make to better approach financial planning.

Squirrels love to save money, and stashing cash away is almost an addiction for them. They get as much enjoyment from not spending $5 on Starbucks as someone else gets from drinking a cappuccino. Spenders, on the other hand, get their enjoyment from using money. For them, shopping is a fun activity, and their typical reaction to a raise is to spend that extra money.

You would be surprised to find out just how much your parents’ financial habits can have a huge influence on your own. The amount of credit card debt that your parents carry (or carried when you were growing up) can directly correlate to whether or not you have a balance on your Amex. The correlation can either be positive or negative. For some people, knowing about parents’ debt as a child can make them avoid credit cards as an adult. For others, their adult financial habits mirror those of their parents. How far did your apple fall from your parents’ money tree?

Another way to assess squirrel or spender tendencies is to compare your financial habits to how you believe your siblings are with money. Did your sibling learn from your parents’ mistakes, or is their financial behavior similar to your parents’? I have found that in families where one or both of the parents is very financially savvy, one sibling might have their act together, but another may be wayward. There are no general rules or trends that apply 100 percent of the time, but these questions help frame your perspective on money and might provide you with insight to figure out how a habit or belief was formed.  

Reflecting on the transition from school to the workforce also provides strong insight into your current financial behavior. Did you save anything when you first started working? Could you afford to live? When did you get your first credit card, and did you rack up a balance immediately, or use it responsibly? How do these early working memories and habits play into your current approach to money?

All of these assessments lead up to the ultimate label of “spender” or “squirrel.” There’s really not an in-between. Sure, a spender might rack up a “decent” emergency fund, but only because their advisor made them. They see it as one box to check off so they can get back to spending. Asking yourself why you feel a certain way about money will provide a good mindset for changing some of that behavior so that you can make progress toward your goals.

Knowing your partner’s financial approach is important when deciding which tools you will use to best handle money together. When two squirrels get married, their net worth explodes. When a squirrel and a spender get married, though, the best thing they can do is to institute a play account system. This essentially divvies up the discretionary money between partners, and keeps it separate from the bill money. This will force the spender to limit spending to an agreed-to amount, and allows the squirrel to save as much as their heart desires.

When two spenders get married, a play account system will help, but I highly recommend hiring a Certified Financial Planner™ to help create a cash flow plan. Two spenders together will be too tempted to let the “fun” goals (such as a house renovation or big vacation) override the adult goals (such as paying down consumer debt or saving for retirement). Once you discover your spending or squirreling tendencies, you will be better equipped to find the right tools to manage money.

Advisory services offered through Investment Advisors, a division of ProEquities Inc., A Registered Investment Advisor. Securities offered through ProEquities, Inc., a Registered Broker-Dealer, Member FINRA & SIPC. Stable Waters Financial is independent of ProEquities, Inc.

Katie Waters is a member of the DailyWorth Connect Program. Read more about the program here.