Get expert advice delivered straight to your inbox.

Skip to Main Content

Understanding the Psychology of Money

We’re all wired differently. Our passions, our fears and our dreams are different. And when we hear the word money, we all have unique thoughts and emotions too. Understanding the psychology of money will help us be aware of those thoughts, emotions and behaviors.

What Is the Psychology of Money?

The psychology of money is the study of our behavior with money.

Success with money isn’t about knowledge, IQ or how good you are at math. It’s about behavior, and everyone is prone to certain behaviors over others. Once you become aware of your tendencies, you can harness the power of your own mind, your thoughts and your will—and you can literally change your life.

I’ve been studying the psychology of money, and over the last decade I’ve seen it play out in real life while coaching people with their money. This stuff is powerful, so I want you to dig in with me.

Why the Psychology of Money Matters

I’ve come to value self-awareness as a tool. I need to learn more about the way my mind works if I want to grow. Whether we’re talking about money or life as a whole, knowing yourself is a huge factor in creating meaningful change.

Right now, in Nashville and much of the South, the Enneagram is huge. It’s a personality typing system, and it’s honestly the best assessment I’ve found that accurately describes the way I tick.


The reason I love the Enneagram and other personality tests like it is because they give me the gift of self-awareness. If we aren’t aware of which strengths, weaknesses, perceptions and tendencies we bring to the table, we’ll never be able to lead ourselves to improve and reach our financial goals.

The same is true for your money. For years now, my dad, Dave Ramsey, has said that personal finance is 20% head knowledge and 80% behavior. That’s why his proven plan for getting out of debt relies on changing your behavior instead of throwing a bunch of numbers and formulas at you.

And if you want to get to the root of why you behave the way you do—why you spend, save, use debt, put off investing and more—you’ve got to learn about how the psychology of money affects you.

4 Ways Psychology Affects Your Money

I love digging into money tendencies and how money plays out in someone’s story. Like I said before, everyone is different, and none of these tendencies are right or wrong. It’s just how you’re naturally wired. Here are four things I want you to identify in your money mindset:

1. Spender vs. Saver

Most people find it pretty easy to determine if they’re a spender or a saver. Spenders can see so many creative possibilities when it comes to money. This is totally me! Whenever I have extra money, it burns a hole in my pocket, and I can’t wait to spend it.

On the other hand, a saver’s first instinct is to not spend their money. They feel much better about having money tucked away. Savers are patient and willing to wait to make a purchase.

What’s dangerous for spenders and savers both is going to the extremes. As a spender, if you spend everything you make, you’re going to be broke. And savers, if you save everything you make, you’re going to miss out on a lot of fun experiences that bring joy to your life. This is pretty obvious when we think about it—but the point is that we need to think about it.

2. Nerd vs. Free Spirit

Have you heard of the two types of budgeters? Nerds thrive on crunching numbers. They genuinely look forward to organizing their budget. Weirdos. (Just kidding!) It gives them a sense of satisfaction to see where their money is going each month and to find ways to make it work even better. Everything has a nice, neat place, and they love it.

Book Icon

Get Rachel Cruze's new book to learn why you handle money the way you do!

Free spirits are . . . Well, we’re the party! We don’t get too bogged down in the details, and that frees us up to enjoy life. If you’re a free spirit, just reading the word budget might make you break out in hives, but the shopping and entertainment categories are basically your love language. Free spirits like to live life to the fullest!

Nerds need the free spirits to inject some fun money into the budget for nonessential categories, like date nights, vacations and birthday parties.

Free spirits need the nerds to help them make a realistic budget. My husband, Winston, is a nerd, and I love his attention to detail and the fact that he knows what’s going on.

Before you assume that people who are more likely to save money are the nerds, and people who love spending are the free spirits, guess again. My dad is actually a nerd-spender. He loves spending money, but he also loves keeping tabs on the budget.

3. Safety vs. Status

Are you financially motivated by safety or by status? For this one, you may have to do some real soul-searching. Be honest with yourself as you think through what motivates you when you spend or save. This piece is key to making the psychology of money work for you.

People who value safety want the security that money can bring. They want to know they can withstand job loss, a medical emergency or even just a dip in income. If you’re a safety person, you need to watch out for living in fear. Fear can keep you from giving generously, investing in retirement, or even spending money on a new pair of shoes when the ones you wear every day have a hole in them and clearly need to be replaced. 

If money is about status for someone, it’s how they measure success. The amount of money they have affects the type of home they live in, the activities they’re involved in, and their ability to go on that dream vacation. (More on this motivation later.)

4. Your Family and Childhood

The way you heard your parents talk about money—or not talk about it—definitely influenced your attitude about it from an early age. This alone won’t define your money mindset, but it’s good to be aware of.

Here’s an example of how your past experience can lead to money fights as an adult: Does it drive you crazy and start a fight when your spouse splurges on, say, the cage-free, brown, organic eggs? “It’s just $2 more than the gross white ones,” he protests. “That’s $2 that could go toward something else!” you argue.

Have you ever asked yourself why you’re really worked up over organic eggs? Is it because the grocery budget was a stressor in your household growing up? Or did you have a parent who rolled their eyes at hippie-dippie farm-to-table groceries? Or maybe you’re a saver-safety person because you grew up with very little, and spending extra on anything makes you feel, understandably, insecure.

I don’t know your background. Maybe it’s not a dozen eggs that’s causing tension around money in your life, but I bet there’s something. This is where knowing yourself can lead to healing, change and more progress than you’ve seen before.  

How the Psychology of Money Affects Your Decisions

The truth is that money is just a magnifying glass—it makes you more of who you are. If you’re kind and generous, you’ll be even more kind and generous with money. If you’re rude and self-centered, you’ll be even more rude and self-centered with money. Money is simply a tool, and you get to determine what to do with it.  

There are hundreds of little decisions that we make each day without even realizing it that are influenced by the psychology of money. One example for me is in the safety vs. status tendency. I naturally bend toward status. I’m more likely to value a name-brand purse or luxury car, and I’m more likely to find a way to justify a larger purchase if, on some level, it makes me feel successful.

On one hand, this just means I like nice things—and please hear me when I say there’s nothing wrong with having nice things if you can afford them. But knowing that I have that status tendency means I have to keep my spending in check. I need to remember that the stuff I own doesn’t define me as a person.

I know this stuff is hard work, but you can do it. I know you can, because I’ve seen millions of people from all backgrounds and income levels find the courage to make lasting change, not just for them, but for their whole family tree! It’s not easy. But the good news is, it is possible, and you can get started today.

My Know Yourself Money Assessment will give you clarity on your personal money tendencies. Once you’ve got this insight on your own money mindset, you’ll finally understand why you have the money fears, dreams and tendencies you have. Knowing why you make decisions the way you do will make progress possible. Get the assessment today!

Did you find this article helpful? Share it!

Rachel Cruze

About the author

Rachel Cruze

Rachel Cruze is a #1 New York Times bestselling author, financial expert, host of The Rachel Cruze Show, and co-host of Smart Money Happy Hour. Rachel writes and speaks on personal finance, budgeting, investing and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She’s appeared on Good Morning America and Fox News and been featured in TIME, REAL SIMPLE and Women’s Health, among others. Through her shows, books, syndicated columns and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love. Learn More.

Related Articles

Rachel Cruze pointing to a sign that says money mindset.

How to Change Your Money Mindset

What beliefs, attitude and mindset do you have around money? What you believe will directly affect the way you handle money.

Rachel Cruze Rachel Cruze
Rachel Cruze holding a piggy bank talking about financial security

5 Proven Ways To Achieve Financial Security

Financial security isn’t just a dream that only certain people achieve. It’s for everyone—that includes you! Here are five ways to achieve financial security (and become financially stable).

Rachel Cruze Rachel Cruze