Which one are you? The Spender, left, or The Saver, right. Either way you need a plan, says our columnist. *AFP photos
Which one are you? The Spender, left, or The Saver, right. Either way you need a plan, says our columnist. *AFP photos

Ever wonder why it’s so hard for some people to part with their money while others can’t seem to stop spending?

If your home is like my home, you will clearly see who the spender is and who is the saver; there seems to be one in every family.  So who is the saver and who is the spender?

The Saver

Whether they are putting away money for retirement or an upcoming trip, savers are patient planners who understand that all those small sums will eventually add up to something substantial. 

Many savers are afraid of risks and are happy to live on a meager budget in exchange for knowing they will enjoy financial independence. 

However, some savers can go too far and deny themselves the right to enjoy their money that they have worked so hard for. 

A lot of savers are risk averse and the downside is they can lose out on investment opportunities that could increase their actual net worth. 

It is important to save, but it’s more important to have goals for those savings and use those savings in the most efficient way. 

The Spender

Spenders are great optimists who shell out cash or whip out their credit cards believing that they can afford to pay for their purchases, no matter what. For spenders, money is less about security and more about seeing tangible evidence of their financial success. 

While spenders can often appear to have lavish lifestyles, their relaxed attitudes towards money often put them at risk of spending more than they earn. 

Funnily enough, when talking to a spender you will discover that they actually know this and often feel guilty every time they go beyond their budget. 

People who spend and never save tend to always use credit to finance normal cash purchases.

For example, when buying a car, the saver will have the money but the spender will take out a loan.  

Similarly, the saver will have the cash for a vacation or save until they have enough; the spender will regard the credit card as a means to pay for it.

Now when it comes to couples and managing household finances, it is typical for one spouse or partner to do the day to day banking and the other to handle the investments.

What happens if the spender is the “banker” of the family?  

Ask the saver if he/she really knows how bad the finances are? 

What happens if the spender makes more money than the saver and feels that they have more say in how the money is spent? Realistically spouses or partners should be working together. 

Whether you are a spender or a saver, the first step in creating a path for financial independence is to determine what your goals are. 

Is it to pay off a mortgage in five years, finance your children’s tuition at university or develop a small business by using some of your investments?

You must figure out your goals in order to put your financial plans in place.

Once your goals have been decided then ascertain how much money you will need and how it should be invested in order to achieve those goals? 

A financial planner will help you with all those details and will ask you some tough questions in order to suggest the strategies that should be implemented.  

Clearly making money and spending money go hand in hand, however the wise choices and the discipline you exercise today will have a positive impact on your financial position in the future.

Carla Seely is a Senior Wealth Manager at AFL Investments.  She may be reached at 294-5712 or cseely@aflinvestments.bm