Georgia: According to a study, people with extrovert nature are better at making financial decisions. Such people are open to take risks and adjust well in many situations.
In the new study, psychology PhD student Jim Exley investigated the “Big Five” personality traits: openness, conscientiousness, extroversion, agreeableness and neuroticism (OCEAN). He and a team of researchers identified three distinct combinations of traits with financial outcomes, specifying Resilient, Over Controlled and Under Controlled personality profiles that are associated with risk-taking and money management behaviours.
“Based on our results, the people with the best financial outcomes tend to be those who are well-adjusted, more extroverted and less neurotic,” said Exley.
“They’re also willing to take some risks, but they don’t take too many,” he added.
Exley was drawn to this research after working in the financial services industry for 25 years, where he encountered people’s varied approaches to finances firsthand. No one money personality was quite the same.
“The industry requires us to measure this thing called risk, but I was talking to people and understood that there’s more to somebody’s financial life than just their risk tolerance,” he said.
For Exley’s study, the team surveyed 395 participants about personality, financial risk tolerance, net worth and happiness.
“Using advanced statistical modelling, we identified three overarching types of people based on combinations of their OCEAN scores,” said co-author Patrick Doyle, a recent PhD graduate in psychology.
“We then explored how members of those three groups differed in financial perspectives and experiences,” he added.
The largest profile was the Over Controlled group, which exhibited high agreeableness and conscientiousness, but low extroversion. These people didn’t like risk, so they avoided activities that are risky but could grow their wealth, like investing in the stock market.
The other two profiles were more tolerant of risk. The next largest, the Resilient group, were generally well-adjusted and stable people; they were extroverted, open and agreeable, and not very neurotic. These profiles were associated with more successful financial outcomes because while they didn’t avoid risks, they also didn’t take too many.
The findings of the research have been published in the ‘Personality and Individual Differences Journal’.
first published:Dec. 7, 2021, 2:52 a.m.