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The Most Underrated Type of Financial Knowledge

When it comes to managing money, there’s a lot to know. Which retirement savings vehicle is best, an IRA or a 401(k)? Which type is best, traditional or Roth? How much should you spend on a house?

But there’s a type of knowledge that’s arguably even more important. Not having this knowledge can cause all sorts of problems—from settling for too small a salary to spending irresponsibly. It can spell the difference between knowing what to do and actually doing it. And it’s at the heart of more financial disagreements between husbands and wives than most realize.

What is this mysteriously powerful form of knowledge? Self knowledge.

Everyone is born with a certain temperament. It doesn’t change. Going through life without knowing your temperament leaves you vulnerable to being ruled by your tendencies.

On the other hand, knowing your temperament is like having access to the notebooks kept by an unbiased person who’s been observing you for a very long time. The insights will be invaluable.

At first, it’ll explain a lot. Why you’ve been having such a difficult time saving money. Why you love to give money away. Why you actually like using a budget, or why you can’t stand the idea.

If you’re married, and if you both take the time to understand each other’s temperaments, it’ll open up a whole new level of understanding. It’ll also give you an opportunity to divvy up financial responsibilities in a way that puts each others’ strengths to work while working around some of each others’ weaknesses. (Within each temperament, there are tendencies that tend to really help manage money well, and there are tendencies that get in the way.

I unpacked some of the financial implications of each tendency with separate posts about Sanguines, Melancholies, Cholerics, and Phlegmatics. A graduate level understanding of temperaments would look at the financial implications of the various temperament pairings. You see, each of us has a primary temperament and a secondary temperament.

You can gain some insights into all of this via a 1994 book written by Jerry and Ramona Tuma called Smart Money (Click on the hardcover or one of the used options).

For example, my primary temperament is Choleric and my secondary temperament is Melancholy, which the Tumas describe as “driven to achieve perfection” (yup), “among the most critical people alive” (I have to confess to a critical spirit; it’s something I’ve had to work on), and “they will finish projects simply because they need to be finished” (very true).

So let me ask you: Do you know your temperament? If not, I highly recommend that you begin exploring this topic. You should be able to identify your primary and secondary temperaments by taking a quiz put together by the Tumas, which is available for free in the Resources section of my site.

Understanding your temperament isn’t as simple as opening a savings account. It’s an ongoing process. First you’ll gain a basic understanding of some of the tendencies that come with your primary and secondary temperaments. Then you’ll notice more and more ways your temperaments influence your feelings and decisions. When you discover ways to put your natural strengths to work while working around some of your natural weaknesses, you’ll really be maximizing this knowledge.

Do you know your primary and secondary temperament? If so, how have you seen it impacting your financial beliefs and behaviors?

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