Financial profile – Understanding how to achieve the best 

A financial profile is the set of behaviors, habits and financial characteristics of a given individual.

In this way, it serves to describe in a simple way how a person deals with their finances.

To do this, information such as debts, investments, savings and spending patterns are analyzed.

In this article, you’ll learn what a financial profile is for, what types it is and how to define it.

Why should I know my financial profile?

When you understand the type of profile you fit into, you can make more assertive decisions about your personal finances.

For example, when you know your habits and attitudes towards money, this helps you set financial goals.

For example, getting out of debt, investing appropriately (according to your needs and objectives), creating a budget, saving money, etc.

It’s also worth mentioning that knowing your profile is also useful for seeking financial advice or financial education.

For example, a person with a debt profile should invest their energy and time in content that gives tips on how to get out of debt.

They should learn the basics of budgeting to keep their finances in line.

If they don’t know how to identify their financial profile, they won’t know what kind of content they need to learn.

This way, they run the risk of buying 10 books on investing, even though they are still unable to control their accounts.

This doesn’t make sense and the 10 books probably won’t be as useful as books on organizing finances, for example.

Types

Now that you’ve understood that knowing your profile will help you improve your financial education, we can talk about the 5 types.

You probably know different types of people:

Those who spend more and without planning, while there are individuals who save a lot.

In addition, there are those who stay in the middle ground, neither spending too much nor saving the right amount.

It is from this understanding that we can learn about the details of financial profiles:

Debtor financial profile 

As the name suggests, the person with this profile is an immediatist.

In other words, they tend to buy items without any kind of planning.

For example, they go to the mall and buy a lot of products they don’t need, always spending more than they need to.

The lack of financial control of a person with this profile can cause serious financial consequences.

These include debts and having to deal with high interest rates.

Because they are short-sighted, they also think only about the present.

In other words, they don’t prepare for emergencies and unforeseen events.

It’s as if the person considers that they only have to live in the moment and don’t need to save money for any future plans.

For example, since the individual spends absolutely all the salary they receive each month, if their partner or one of their children becomes ill, they won’t have any money to deal with the situation.

This means that the borrower’s financial profile is always in debt or borrowing from both banks and family members.

All this creates a lot of anguish for the person.

They don’t know how to control their spending impulses and never have enough money for the things that really matter.

In some months, their lack of control can be so great that fixed bills aren’t paid, resulting in enormous anxiety.

So, as well as not having a peaceful financial life, people with this profile also deal with mental problems.

They don’t know what it’s like to sleep with a clear conscience and are constantly reminded of their debts.

Spending and disconnected financial profile

Talking first about the spender profile, you might think it’s similar to the debtor profile, but there’s an interesting difference between the two:

As said, the debtor profile spends more than it earns and is always covered in debts and loans.

On the other hand, the spender uses all the money they receive each month.

For example, a borrower may use their credit card uncontrollably and not have the money to pay the bill on time.

However, the spender uses the entire credit card limit, but has enough money to pay it off at the end of the month.

The big problem is that unnecessary items are bought and these individuals usually buy on impulse.

Note that this also makes the spender’s financial profile immediate, i.e. they don’t worry about the future.

Therefore, when something unforeseen happens, the spender can become a debtor because they will need a loan to deal with the situation.

Finally, be aware that planning is not this profile’s strong suit.

So we can move on to the disconnected profile.

This is a person who doesn’t know how much they will have available next month and how much they should spend, although it never exceeds the total amount of their salary.

Here, finances don’t cross the person’s mind as a concern and they avoid thinking about it or simply don’t care.

The name disconnected also shows us that the individual with this profile doesn’t prioritize saving money or making it pay.

In other words, spending is moderate, but this financial profile finds it very difficult to accumulate capital and become financially independent.

Since they don’t spend their entire monthly salary, they leave the remaining money in their bank account.

Saver and investor

Unlike the disconnected profile, the saver knows the importance of saving money.

They therefore think carefully before making a purchase, so that they only get what they really need or want.

This means that they lead a simpler life by choice.

In other words, they prefer to lower their standard of living a little in order to save money for future goals such as buying a house or a car.

Therefore, note that the saver is concerned about their future, planning savings and making more conservative investments so as not to take risks.

In this way, the saver is also calculating.

However, when compared to the investor’s financial profile, the calculator does not study the multiple possibilities of the world of finance in such depth.

In view of this, the last profile we’re going to get to know today is the one who takes the time to study finance.

These people know exactly how to organize themselves financially and the best ways to save money.

In addition, they are always looking for new knowledge about investments and study the risks of each of these investments in detail.

As such, investors are financially disciplined and concerned about their future.

They have an emergency fund and have already achieved financial freedom.

Difference between financial profile and investor profile

Although the terms are related, it is essential to differentiate between them.

First, a financial profile is the set of habits, characteristics, behaviors and financial situation of a person in relation to money.

But note that this is a general term.

In other words, it includes budget, income levels, debts, savings, spending, among other factors.

So, although it takes investments into account, this is not the only factor that defines a financial profile.

In this sense, the investor profile is related to preferences, objectives and risk tolerance when we talk exclusively about investments.

Therefore, the focus is on investment choices, including the investment horizon which includes short, medium or long-term plans.

In addition, it is worth talking about the allocation of assets such as bonds, real estate and shares.

In this way, the investor’s profile is discovered to guide investment decisions, so that the person knows the best strategy in their case.

It is essential that you bear in mind that both are important for financial planning because the financial profile directly influences the investor profile.

How do you know your financial profile, and what is the ideal profile?

There are a few steps you can take to understand where you fit in.

Initially, we recommend that you make no mistake.

If you’ve read the 5 different profiles above and identified yourself with the debtor profile, you shouldn’t just say that you’re a disconnected profile.

If you’re still in doubt, pay attention to your financial characteristics and see where they fit in.

Look at your spending records, such as your current account and credit cards.

For example, do you consider your credit card spending to be excessive or do you use it wisely to buy products you really need?

With regard to the ideal profile, there is no doubt that the investor profile is the best.

The person who fits this financial profile understands the logic of money, learns to save and knows how to allocate their capital to good assets.

This means that they are prepared for all kinds of unforeseen events, as they have an emergency fund.

They also keep their accounts up to date and always buy what they need in cash, so they will never have problems with credit cards and high interest rates.

What’s more, this person’s money works for them, so that they are able to achieve their biggest dreams, such as living abroad or buying a house in the best neighborhood in the city.

By multiplying their money through investments, they can also achieve their dream of financial independence, as they will no longer have to work to support themselves.

For this to be possible, people with an investor profile shouldn’t risk everything in volatile assets.

The essential thing is to diversify your capital in fixed and variable income assets.

Tips for improving the financial profile of debtors, spenders and shut-ins

In order to change your financial profile, a series of measures must be taken, especially if you are at the beginning of the process, such as the debtor or spender profile.

So, the first big tip is to understand that this is a gradual process.

Over time, healthy financial practices can lead to a more solid financial situation and a better quality of life.

So, the next step is to create a budget listing all your incomings and outgoings.

All your sources of income (including your steady job and sources of extra income) should be listed.

So should all your expenses, whether fixed or variable.

Get an idea of how much you need to live on and whether your salary is sufficient.

If not, you should look at areas where you need to cut back in order to save money.

On the other hand, if you don’t have any areas to save money, you need to look at the idea of making extra income to improve your financial profile, be it through freelance work, overtime or selling some kind of product.

Here, we recommend that you be honest with yourself. Can you really save anything every month?

Sometimes we think we need a lot of things to live on, but lowering our standard of living can be the answer to a lot of savings.

Emergency fund and dealing with debt

Next, think about creating an emergency fund.

Eventually, unforeseen events arrive and if you’re not prepared for them, you’ll have to borrow money somehow.

To avoid having to borrow money from a friend or family member or having to deal with high interest rates from banks, build up an emergency fund.

That way, you’ll have enough money to repair your house, pay for medical expenses or deal with losing your job.

In case you didn’t know, your emergency fund should be at least 6 months.

So, to improve your financial profile, you should have saved enough money to support yourself for half a year.

As well as your emergency fund, think about paying off any debts you have.

If you have any kind of loan or bill arrears, your priority should be to get rid of these debts.

And when we say “any kind of debt”, this also includes credit card purchases, including those that have been paid off in installments.

If you bought a cell phone and paid for it in four installments on your credit card, get rid of that bill.

Even if you use the card to buy an item and pay for it next month, you should get rid of that debt as soon as possible.

Always think: if, for whatever reason, I don’t have any income next month, how will I pay this bill?

In order to have a good financial profile, the rule is simple and obvious: 

If you haven’t worked for the money yet, you shouldn’t use it

I already have an emergency fund, I don’t need to worry about that!

Your emergency fund is there to help you survive a certain period without a job, for example.

You certainly don’t want to spend the money in your reserve paying for unnecessary items you’ve bought with a credit card.

Therefore, only use the card when you already have the money in your account to pay the bill.

How to have an investor profile

Once you have the financial profile of a saver, you start to think more about your future.

And in doing so, it is essential to set goals.

These goals must be specific and measurable.

For example, let’s say you want to retire at the age of 40.

Although you have a goal and a date, that doesn’t mean that the goal is specific.

How do you intend to retire at 40? 

It can be done through saving, extra income and investment.

Using the 3 strategies above, you can achieve a financial dream and improve your financial profile.

But be even more specific.

How will you save money? What do you want to sell to earn extra income or what kind of investment do you want to make?

As you think specifically, the closer you’ll get to your dream!

Another fundamental step towards achieving the financial investor profile would be to automate your finances.

Set up automatic transfers to your savings account and payments are made every month.

Through this technique, you will make saving a priority in your life because you will do it systematically.

What’s more, by paying your bills on time, you’ll avoid being charged fines and interest for late payments.

Next, consider investing in financial education.

Thinking that you already know enough can cause your financial path to remain stagnant.

So be always willing to learn.

Buy good books on personal finance and as you learn the basics, don’t stop!

Keep studying until you have all the knowledge you need to develop as much as possible financially.

Final tips for having a financial investor profile

We even recommend that you study investment diversification.

Diversifying your portfolio can help reduce risk and improve your long-term return potential.

At this point, it’s best to enlist the help of an investment professional to get the best possible advice.

Finally, monitor your progress.

Measures help you understand what is working so that you can continue along the right path.

Likewise, measurement serves to indicate the risks you run by insisting on handling your financial life in a certain way.

So, if you want to keep track of your finances, monitor them regularly, review your budget, goals and investments.

That way, you’ll be able to achieve your financial investor profile in a simple way.

Daniel 2 de May de 2024