2 advisers try to factor in personalities

September 03, 2006|By Humberto Cruz | Humberto Cruz,Tribune Media Services

Some of the most readable books on personal finance these days are not really about money.

They're mostly about you, and how your personality, impulses and behavior affect the way you handle - or mishandle - money.

I'll give capsule reviews of two after a basic overview of the subject.

As a rule, books on money, personality and behavior come in two flavors.

Some focus primarily on "behavioral finance," a growing field of study that explores how certain human behaviors and ways of thinking can lead to unsound financial decisions.

For example, we tend to assign different values to our money depending on how or where we got it. We may blow an unexpected bonus on a frivolous expenditure even if we'd never dream of frittering away the "hard-earned" dollars from our daily work that way.

The second type of book, more prevalent now, gets more personal. One way is by identifying "money personality" types and offering advice tailored for each. One such book is The Money In You! Discover Your Financial Personality and Live the Millionaire's Life, by securities broker and radio show host Julie Stav (Rayo, $22.95).

Or, as investment adviser Maury Fertig does in The 7 Deadly Sins of Investing: How to Conquer Your Worst Impulses and Save Your Financial Future (Amacom, $23), an analogy to something well-known but non-financial is used to describe the way we handle money.

Carried too far, these approaches can smack of gimmickry.

But if the formula works, why knock it? I'll fess up: Years ago, I wrote a column on making financial decisions by following The 7 Habits of Highly Effective People, the long-running best-seller by business and self-help guru Stephen Covey.

Fertig does a pretty thorough - and entertaining - job of illustrating investor mistakes and suggesting ways to avoid them (including maintaining a balanced and diversified portfolio and, if anything, erring on the side of caution).

I also found Stav's book entertaining and useful, even if the personality types she uses (Diva, Do-Gooder, Dionysian, Dependable Hoarder and Diligent Investigator) seem a bit cutesy and overlapping.

Fact is, few people will fit precisely into the stereotypes described in this type of book. Instead, look for your dominant personality traits and consider how they may affect your money decisions. And never buy any suggested investments - for example, socially responsible funds for Do-Gooders or Treasury inflation-protected securities for Hoarders - without fully understanding what they are.

yourmoney@tribune.com

Humberto Cruz writes for Tribune Media Services.

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