Understanding your Money Type with Dr Ranpura

Disclaimer: The views and opinions expressed in this blog are those of the au-thors and do not necessarily reflect the official policy or position of first direct.

Author: Dr Ash Ranpura
May 2021

Time to read: 10 minutes

When we introduced the concept of Money Types financial life looked very different. The pandemic has changed everything and has profoundly shaken the economy. An awareness of your Money Type can help you to navigate this post-pandemic financial world, giving you insight into the opportunities and pitfalls that might lie ahead.

We’ll look at each of the six Money Types in terms of the psychology and neurobiology that underlie them. We’ll explore the brain structures that are associated with different cognitive tasks and show you how to use knowledge about the brain to play to your strengths. We’ll also look at the ways in which lockdown might have particularly affected each of the Money Types and offer some strategies for transitioning to a post-lockdown life.

Whether you’re a Juggling One or a Driven One, a Level-Headed One or a Self-Sufficient One, a Balanced One or a Living-In-The-Moment One, you’ll find some useful insights here. This pandemic has been a once-in-a-lifetime challenge for all of us, and we have a unique opportunity now to make a fresh start. Armed with knowledge about your Money Type, you’ll have the perspectives you need to make the most of the coming years.

Introduction

When we introduced the concept of Money Types financial life looked very different. The pandemic has changed everything and has profoundly shaken the economy. Personal savings are at an all time high, and this summer will bring an anticipated surge in consumer spending. Can knowledge about your Money Type still provide insight into your financial life in this postpandemic world?

Research into personality types suggest that it can. And understanding these personality types can help in identifying what drives our decision making.

So it’s time for another look at the Money Types. If you haven’t had a chance to identify your own Money Type yet, then take our Money Types quiz it will only take a few minutes, and it will give you an individualised way to think about your financial life. 

With your Money Type in hand, let’s take a deeper look at how your brain makes financial decisions and what lessons we might learn for life after lockdown.

The Juggling One

Your Brain 

That rush of pleasure you experience when you make an impulse buy is associated with a molecule called dopamine. Dopamine is made in the midbrain and shipped out all across the cortex, coordinating functions ranging from attention to movement. It acts as a reward signal, telling your brain that you’re about to get something you really want. That’s why you make impulse purchases the anticipation of getting something desirable produces a rush of dopamine, which captures your attention and feels heightened and exciting.

The key to understanding how to manage dopamine signals is to remember that they happen in anticipation of reward, not during or afterwards. The moment you’ve swiped your credit card at the till and gone home, that dopamine signal will start to decay. When it’s gone you can be left feeling rather down and flat, even depressed.

Lockdown And Your Money Type

With your love of new experiences and your unbridled energy, you probably found lockdown incredibly frustrating! Maybe you shifted some of your shopping habits online, and the stream of all shapes and sizes of brown cardboard boxes arriving at your door felt like Christmas every day. Or maybe you had a chance to reflect and slow down. But now, as lockdown ends, you’re probably looking forward to a bit of a splurge. You’re eager to travel, eager to see your friends, and looking forward to the next chapter.

Your Chance To Change 

This year you’ll have a unique chance to run an experiment on yourself. Think of how you feel about your financial life right now. Are you worried? Are you comfortable? Are you excited? Are you nervous?

Having taken stock, try starting a money diary to keep track of what you feel when you purchase something and what you feel about that purchase in the weeks afterwards. Do you notice the dopamine rush, and can you predict the crash afterwards? You’ll probably start to see a pattern, with some purchases giving you lasting happiness and others fading away quickly.

Find ways to get long-lasting joy from the purchases you do make; think about how special they are, what they contribute to your life. You’ll be amazed how much this kind of gratitude practice can boost and extend the feeling of pleasure for weeks, months, and maybe years.

The Driven One

Your Brain

Your brain runs in high gear all the time! Analytical reasoning is one of the most difficult functions that the human brain performs, the latest and greatest products of human evolution. Cortical regions like the dorsal parietal lobes and lateral prefrontal cortices integrate information, create abstract representations, and allow you to model potential strategies so that you can solve complex problems.

While these brain regions provide powerful tools for reasoning, they consume a lot of energy and they suppress areas of the brain which respond more directly to bodily sensations, emotions and social awareness. Without those grounding influences, the brain’s analytical powers can churn away on problems that cannot and possibly should not be solved. Introspection and emotional reasoning, skills which involve midline regions of the brain called the Default Mode Network, tend to be suppressed when we put all of our energy into analytical reasoning.

Lockdown And Your Money Type

You’ve finally had a chance to catch up on planning and you may be feeling much more confident than your friends and colleagues! While many were caught off guard by the pandemic and the lockdown, you had some resources and plans in place and hopefully you’ve been able to switch to these backup strategies fairly seamlessly.

But you’ve had more time than ever to obsess over the details. You may have found that you’ve been endlessly tweaking existing plans, or that the sudden change in your financial life has caused you unexpected anxiety. Your analytical brain needs material to analyse, and when the world isn’t providing enough stimulation sometimes you invent your own problems to solve.

Your Chance To Change

Find a controlled way to give up control. Start a slush fund, for example, just a simple list or account where you can keep track of any extra money you get like tax refunds, sign up bonuses, or presents from grandparents. Use that slush fund to make some impulse purchases, luxury items and experiences that you would never ordinarily spend money on. These need not be expensive things, but they do need to be joyful and ideally a bit frivolous. Don’t use your slush fund to get your gutters cleaned.

The Living in the Moment One

Your Brain

Just like your soul mate [The Juggling One], your brain is all about dopamine. But instead of a focus on reward learning, in the context of your money type let’s think about the role that dopamine plays in novelty. 

New experiences and new ideas cause neurons in your midbrain to release a flood of dopamine throughout the cortex. That dopamine influence grabs hold of the attention control mechanisms of the brain, and makes you intensely present focused. It feels wonderful and heightened, and you’ll find you’re highly engaged in whatever triggered that dopamine rush.

For some people new experiences can be frightening, but for you they’re a playground of opportunities and questions.

On the other hand, you may not be so good at following through once the novelty has worn off! Your brain craves another dopamine hit, and your attention might wander off in search of the next shiny object just as soon as it can.

Lockdown And Your Money Type

The first few days to weeks of lockdown were probably pretty exciting for you. New ways of working! New ways of getting around! The weather was amazing!

But then, after weeks or months, you may have begun to feel trapped and deflated. Those online trumpet lessons that you started in the spring may only have left you playing a bleating “Mary Had A Little Lamb” by winter. You will have missed your active lifestyle, and long stretches of undifferentiated days may have started to get you down.

Your Chance To Change 

As the lockdown comes to an end, you are probably champing at the bit to get going. You’ve already booked ten holidays worth of travel, made plans with all the friends you could find, and bought a new outfit (or three) to look your best.

But before you plunge back into the exciting buzz of your pre-pandemic life, take a minute to consider what you’ve learned. There were probably some aspects of lock-down that you enjoyed, a slower pace when you found meaning. Don’t lose track of those moments. Keep up with those trumpet lessons. The most joyful things in life are the ones that create the most meaning.

The Level-Headed One

Your Brain

Your strong principles can guide you when things are unclear, but when the brain uses principles to plot a course it can be hard to notice changes along the way.

You might have heard of “Set,” a pattern-matching card game based on neuroscience research from the University of Wisconsin. In the research version, players had to sort a deck of cards based on patterns of colour, shape or number. The scientists tell you whether you’re right or wrong but they don’t tell you why, so you have to work out the sorting rule by trial-and-error.

Easy enough at first, but after a few rounds the sorting rule changes. Now cards that were “right” become “wrong” and you have to work out a new rule - instead of sorting by colour now it’s by number, or by shape.

When the rules change your prefrontal cortex goes into overdrive. The lateral prefrontal cortex, which maintains the current rule, has to take a back seat and the medial prefrontal cortex has to take over to figure out the new rule. If you can’t switch from the lateral regions to the medial regions, you end up stuck with the first rule you deduced, even after it stops working well.

We can all feel like that sometimes - just as we’ve learned one set of rules, something happens to change the game. It’s great to use principles as a guide when things are unclear, but you need to know when to change things up, too.

Lockdown And Your Money Type

While most people were sent scrambling during the uncertainty of lockdown, you may have found that your steady, principled approach kept you on track. But some of the things you worked hard to build may have rested on shaky foundations. The rules of the game changed during the pandemic, and your confidence in your ability to predict things may have taken a hit. That might leave you feeling uneasy about what may be coming next.

Your Chance To Change

Plans and principles are fantastic bedrocks, but the pandemic has shown us that the nature of things is to change. You have a wonderful opportunity right now to embrace change. Steadily review your finances and see if there are new financial services or products that might be available to you now. Stay light on your feet and be willing to switch things up. If you can remain flexible, your principled approach to life will be a tremendous asset.

The Self-Sufficient One

Your Brain

We live in a culture that rewards the individualist, and it can be empowering to feel that you are the captain of your own ship. In neuroscience this is called a sense of agency, it’s the idea that your decisions come from you alone. 

That feeling of agency depends on activity in the inferior parietal lobe of the brain, an area approximately behind the tops of your ears, and activity in that brain region can be hard to predict. When things go your way, the inferior parietal lobe create a strong connection between your actions and their consequences, you feel a strong sense of agency. When things go badly, though, your inferior parietal lobe will be less active. You might attribute the consequences of your actions to bad luck or even sabotage, and you won’t feel much agency at all. Our feeling that we’re the ones steering the ship very much depends on where that ship is headed!

Lockdown And Your Money Type

Your self-sufficient, can-do attitude may have let you ride out the pandemic with a strong sense of purpose and drive. While others were drifting and waiting for things to improve you might have tackled some DIY building projects, or used your down time to take up a new crafting hobby.

In some ways, the pandemic has proven the value of an approach like yours. But in other ways, it’s shown us that we are all part of an interconnected system. In order to truly thrive as individuals, we must thrive as a society and as a species.

Your Chance To Change

With the end of lockdown approaching, it’s a good time to think about the fulfilment you can get from embracing interdependence. You’re probably already a leader amongst your friends and family and now is your chance to take it one step further and be a leader in your broader community. Find ways to give back and help those less fortunate. Even if you do that in very small ways, there is no greater sense of agency and empowerment than you feel when you help someone else.

The Balanced One

Your Brain

You’re sensible with your financial decisions and although you’re comfortable with some degree of uncertainty, it helps to know what you’re dealing with. You might be happy with a small, guaranteed payout from a savings account, but you’d expect a much bigger return from a highly volatile stocks and shares investment.

At low levels of uncertainty, brain regions that connect the two hemispheres like the posterior cingulate help to coordinate decisions; if a toddler is wobbling his way into your arms, for example, you’ll just open your arms a bit wider to catch him. But as the level of uncertainty rises, decisions become more like gambling, and now your orbitofrontal cortex takes over. At that point your emotional response to risk and reward plays a big role in how you make decisions. Your desire to gather information and think things through helps you reduce uncertainty and therefore helps you to keep your emotions about risk in check.

Lockdown And Your Money Type

The pandemic added a lot of uncertainty to all of our lives, and you may have found it disturbing to realize that even experts didn’t always know the right answers. And now, as the lockdown draws to an end, you may worry about the many areas that remain uncertain, like vaccines, travel, and large indoor gatherings.

But perhaps you also found a sense of calm during lockdown, and maybe you’re hoping to hold on to that a bit. With fewer independent decisions to be made you may have had a chance to focus on things that matter more, like family and close friends. You may have enjoyed more time at home, reconnecting with a quieter way of living. It will be important to carry those lessons with you into the next year.

Your Chance To Change

With all of the changes we’ve seen in the last year, it’s starting to look like things may begin to go back to normal, at least in some ways. Now is your chance to slide easily into a more comfortable relationship with uncertainty. Trust in your own judgement and be willing to adapt when things don’t go the way you planned. Become comfortable acting in the dark, or at least acting in a bit of shadow. If you are able to create good backup plans, you’ll be able to face uncertainty without fear.

Conclusion

The pandemic created enormous changes in our work and financial lives, some very positive and others quite difficult. The ending of lockdown represents a fresh start, an opportunity to draw a line in the sand and make a change.

Your Money Type can offer a useful window into your habits and behaviours, and often awareness itself is a significant part of a change. Learn from and celebrate your strengths, and take this time to consider what changes you could make to take better care of your financial wellbeing. It can be a lot of fun trying a new approach, and this is certainly the year to do it.