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Introverted or extroverted? How Your Personality Type Can Affect Your Income and Wealth

The way you interact with people can say a lot about your relationship with money.

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If you consider yourself an extrovert, you probably feel energized by social situations, but if you’re an introvert, you probably need alone time to unwind. Your personality type can often influence your behavior, but does it also affect your finances?

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You might demonstrate qualities that indirectly impact your relationship with money, whether it’s getting a bigger raise or taking risks on investments.

In fact, several studies show that there are correlations between your personality type, your income, and the way you manage your money.

Extroverts tend to earn more than introverts

In 2018, researcher Miriam Gensowski published “Personality, IQ, and Earnings,” which found that men who were one standard deviation higher in extraversion earned almost $500,000 more over their lifetime.

Gensowski, a senior researcher at the Rockwool Foundation Research Unit in Copenhagen, Denmark, reviewed the Terman Study, which followed high-IQ children in California beginning in 1922.

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The Terman study assessed children’s extraversion with parent and teacher ratings of their “large group fondness”, “leadership”, and “popularity with other children”. The study then followed the children throughout their lives to examine their respective incomes.

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It’s important to keep in mind that the sample also focused on people with high IQs, which correlates with higher lifetime earnings. Additionally, only half of the women in the study were involved in the labor force at the time, so Gensowski looked at their household incomes instead.

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Gensowski then published “Inequality in Personality over the Life Cycle”, which surveyed a random sample of 121,390 people in Denmark. This study also found a correlation between extraversion and higher income.

“We can’t be sure if income is a result of personality, or if personality changes in response to changes in your income,” she says. “You get a promotion with a really big pay rise, and that can make you a lot more confident.”

There was one more significant gender difference to consider: while women scored high on extraversion, they earned less than men due to the gender pay gap.

Other studies have also found associations between personality type and perceived roles in the workforce. For example, extroverts are more likely to take on higher-paying leadership roles and be seen as leaders.

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Extroverts tend to spend more than introverts

Wendy Brookhouse, a certified financial planner and founder of Black Star Wealth in Halifax, Nova Scotia, says she finds that introverts are generally more likely to be savers, while extroverts are more likely to be spenders. .

“Following the Joneses sometimes plays a part,” says Brookhouse. “I think the social media era…really shows a carefully curated section of what people are doing. And those are usually just the good things.

“People are going to make assumptions about how much money someone has or think, ‘Oh my God, they can do this. Why can’t I do this?’

However, she adds that there may also be other factors at play, such as whether you rely on cash or credit cards to make payments. Studies show that people spend a lot more when using credit cards.

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The spending and investment habits of introverts are also influenced by lower risk tolerance, compared to extroverts.

“That can be a strength if you’re thinking about overconfidence, but it can also prevent you from making risky investments that have positive returns,” says Gensowski.

According to a 2017 UK study, low-income extroverts may also spend more on “high-end” items (such as golf and international travel) than their introverted peers. Participants’ personality types were determined by completing a Big Five inventory: a self-report designed to measure openness to experience, conscientiousness, extroversion, agreeableness, and neuroticism.

““Some people would be inclined to engage in conspicuous consumption — wearing designer clothes, that sort of thing — especially when you have a lower income,” says Professor Blaine Landis. Landis, assistant professor of organizational behavior at the University College London, is co-author of “Personality, Income and Compensatory Consumption”.

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“These feelings of self-catering can reinforce your own sense of economic status among the people around you,” he says.

While the difference in personality types may be pronounced for low-income people, the disparity is less pronounced among high-income people, research shows.

What’s important when it comes to your relationship with money

Whether you’re extroverted or introverted, a spender or a saver, the important thing is to plan and budget for your money, says Brookhouse.

“My philosophy is, here’s your amount for the week that covers all of those categories — dining out, entertainment, grocery shopping, etc… Something that’s sustainable over the long term, knowing that [whether] you are more likely to be a buyer or a spender… you have adapted to that.

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Brookhouse says you may not necessarily be able to completely change your behavior, but you can adapt to your financial habits within a reasonable budget.

She also recommends developing a system with your kids, so they can be guided toward a healthy environment when it comes to saving and spending as they get older.

“Start talking about money and creating systems to work with it. The big question I want people to talk about when spending money is: is it worth it?

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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