Serah Louis
May 3, 2022
If you consider yourself an extrovert, you probably feel energized from being in social situations, but if you’re an introvert, you likely need your alone time to recharge. Your personality type can often influence your behaviour — but does it also affect your finances?
You might demonstrate qualities that indirectly impact your relationship with money, whether that comes down to snagging a bigger raise or taking risks on investments.
In fact, several studies show there are correlations between your personality type, your income and the way you handle your money.
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Extroverts tend to earn more than introverts
In 2018, researcher Miriam Gensowski published “Personality, IQ and income earnings,” which found that men who scored one standard deviation higher on extroversion earned almost $500,000 more over their lifetimes.
Gensowski, a senior researcher at the Rockwool Foundation Research Unit in Copenhagen, Denmark, reviewed the Terman study, which tracked high-IQ children in California beginning in 1922.
The Terman study evaluated the extroversion of the children with ratings from parents and teachers regarding their “fondness for large groups,” “leadership” and “popularity with other children.” The study then tracked the children over their lifetimes to examine their respective incomes.
It’s important to keep in mind that the sample was also focused on high-IQ individuals, which correlates to higher lifetime earnings. Additionally, only half the women in the study were involved in the labor force at the time, so Gensowski studied their family earnings instead.
Gensowski later published “Inequality in Personality over the Life Cycle,” which surveyed a random sample of 121,390 individuals in Denmark. This study also found a correlation between extroversion and higher income.
“We can’t be sure whether the income is a result of the personality, or whether personality changes in response to changes in your income,” she says. “You get a promotion with a really big pay jump, and that can make you feel a lot more confident.”
There was still a significant gender difference to take note of: while women scored highly for extroversion, they earned less than men due to the gender wage 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 managerial roles and be viewed as leaders.
Extroverts tend to spend more than introverts
Wendy Brookhouse, a certified financial planner and founder of Black Star Wealth in Halifax, N.S., says she finds that introverts are typically more likely to be savers, while extroverts are more likely to be spenders.
“Keeping up with the Joneses sometimes plays a role,” says Brookhouse. “I think that the era of social media … really does show a carefully curated section of what people are doing. And it’s usually only the good stuff.”
“People will make assumptions around how much money someone has or think, ‘Oh, my God, they can do this. Why can’t I do that?’”
However, she adds that there may be other factors at play as well, such as whether you rely on cash or credit cards to make payments. Studies show that people spend significantly more when they’re using credit cards.
Introverts’ spending and investing habits are also influenced by a lower risk tolerance, when compared to extroverts.
“This can be a strength if you think about overconfidence, but it can also prevent you from making investments that are risky, but have positive returns,” says Gensowski.
According to a 2017 U.K. study, low-income extroverts also may spend more on “high-status” items (such as golfing 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 brand-name clothing, that kind of stuff — especially when you have a lower income,” says professor Blaine Landis. Landis, an assistant professor of organizational behaviour at University College London, co-authored “Personality, Income and Compensatory Consumption.”
“These feelings of self restoration can boost your own sense of economic standing among the people around you,” he says.
While the difference in personality types can be pronounced for low-income earners, the disparity is less pronounced among higher income earners, research showed.
What’s important when it comes to your relationship with money
Whether you’re an extrovert or an introvert, a spender or a saver, the important thing is to plan and budget around your money, says Brookhouse.
“My philosophy is, here’s your amount for the week that covers all these categories — eating out, entertainment, groceries, etc … Something that’s sustainable over the long term, knowing that [whether] you are more likely to be a shopper or a spender … you have accommodated for that.”
Brookhouse says you may not necessarily be able to change your behaviour completely, but you can work to accommodate your money habits within a reasonable budget.
She also recommends developing a system with your children, so they can be guided toward a healthy middle 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 they’re spending money is — is it worth it?”
