Jun 25, 2021 01:05 PM EDT
How you spend your money can signal aspects of your personality, according to research published in Psychological Science, a journal of the Association for Psychological Science. Analyses of over 2 million spending records from more than 2,000 individuals indicate that when people spend money in certain categories, this can be used to infer certain personality traits, such as how materialistic they are or how much self-control they tend to have.
"Now that most people spend their money electronically - with billions of payment cards in circulation worldwide - we can study these spending patterns at scale like never before," says Joe Gladstone of University College London, who co-led the research. "Our findings demonstrate for the first time that it is possible to predict people's personality from their spending."
We all spend money on essential goods, such as food and housing, to fulfill basic needs - but we also spend money in ways that reflect aspects of who we are as individuals. Gladstone and colleagues wondered whether the variety in people's spending habits might correlate with other individual differences.
"We expected that these rich patterns of differences in peoples spending could allow us to infer what kind of person they were," says Sandra Matz, who co-led the project.
In collaboration with a UK-based money management app, Gladstone and Columbia Business School researchers Sandra Matz and Alain Lemaire received consent and collected data from more than 2,000 account holders, resulting in a total of 2 million spending records from credit cards and bank transactions.
Account holders also completed a brief personality survey that included questions measuring materialism, self-control, and the "Big Five" personality traits of openness to experience, conscientiousness, extraversion, agreeableness, and neuroticism.
Participants' spending data was organized into broad categories -- including supermarkets, furniture stores, insurance policies, online retail stores, and coffee shops - and the researchers used a machine-learning technique to analyze whether participants' relative spending across categories was predictive of specific traits.
Overall, the correlations between the model predictions and participants' personality trait scores were modest. However, predictive accuracy varied considerably across different traits, with predictions that were more accurate for the narrow traits (materialism and self-control) than for the broader traits (the Big Five).
Looking at specific correlations between spending categories and traits, the researchers found that people who were more open to experience tended to spend more on flights, those who were more extraverted tended to make more dining and drinking purchases, those who were more agreeable donated more to charity, those who were more conscientious put more money into savings, and those who were more materialistic spent more on jewelry and less on donations.
The researchers also found that those who reported greater self-control spent less on bank charges and those who rated higher on neuroticism spent less on mortgage payments.
"It didn't matter whether a person was old or young, or whether they had a high or low salary, our predictions were broadly consistent," says Matz. "The one exception is that people who lived in highly deprived areas were more difficult to predict. One possible explanation may be that deprived areas offer fewer opportunities to spend money in a way that reflects psychological preferences."
Viewed in the context of previous research that has attempted to use online behavior to predict personality, these results suggest that spending-based predictions of personality are less accurate than predictions based on Facebook "likes" or status updates, which offer a more direct reflection of individual preferences and identity. However, spending-based predictions seem to be just as accurate as predictions based on individuals' music preferences and Flickr photos.
The findings have clear applications in the banking and financial services industries, which also raises potential ethical challenges. For example, financial services firms could use personality predictions to identify individuals with certain traits, such as low self-control, and then target those individuals across a variety of domains, from online advertising to direct mail.
"This means that as personality predictions become more accurate and ubiquitous, and as behavior is recorded digitally at an increasing scale, there is an urgent need for policymakers to ensure that individuals (and societies) are protected against potential abuse of such technologies," Gladstone, Matz, and Lemaire write.
Following the pandemic, natural calamities, and major employment shifts, a startling new study on the online news site News Nation shows that 1 in 4 Americans don't have an emergency fund.
Generational wealth is a facet of wealth management that is often misunderstood. Labeled trust fund babies, rich kids, and lucky breaks, those who receive an inheritance from families are rare.
Social media has successfully made it to the mainstream consciousness of over half the global population. DataReportal's latest study shows that over 4.33 billion people worldwide are using some form of social networking site this year. That's why it's no wonder many tech companies are interested in investing or forming the next Facebook, Twitter, or YouTube to capture the hearts and minds of the general population.
Ease of access, freedom to choose in which to invest the money and lines of credit designed according to the needs of consumers, are some of the characteristics that have made consumer credit one of the most important financing products in the world’s market.
While researchers have suggested that individuals who base their self-worth on their financial success often feel lonely in everyday life, a newly published study by the University at Buffalo and Harvard Business School has taken initial steps to better understand why this link exists.
The younger generations are willing to put their money where their mouth is when it comes to sustainable living.
An international research team led by NUST MISIS has developed a new iron-cobalt-nickel nanocomposite with tunable magnetic properties. The nanocomposite could be used to protect money and securities from counterfeiting. The study was published in Nanomaterials.
Bank credit officers are more likely to approve loan applications earlier and later in the day, while 'decision fatigue' around midday is associated with defaulting to the safer option of saying no.
After graduating or leaving college, many students face a difficult choice: Try to pay off their student loans as fast as possible to save on interest, or enroll in an income-based repayment plan, which offers affordable payments based on their income and forgives any balance remaining after 20 or 25 years.