Let’s Agree to Disagree
Agreeableness is a personality trait that is often overlooked or misunderstood when managing our financial lives. The field of personality psychology generally recognizes five primary personality traits that are understood to form the basic foundation of individual personality (often referred to as “the Big Five” or “OCEAN model”). These include openness to experience, extroversion, conscientiousness, neuroticism, and agreeableness. Here we take a closer look at the last trait, agreeableness. We will highlight the significant impact that it can have on an individual’s personal financial and wealth outcomes.
Can’t We Agree on What “Agreeableness” Means?
First, let’s define “agreeableness.” It is a term that encompasses many different things to different people. Loose definitions broadly refer to the term’s association with characteristics like being empathetic, altruistic, cooperative, warm, and considerate. One technical definition of the term refers to “two related qualities: (1) the extent to which you value getting along with others, and (2) the degree to which you are willing to be critical of others.” A slightly more nuanced but concise definition of the term is “the degree to which a person values being liked by others.” Whether broadly or more narrowly defined, researchers appear to agree that high levels of agreeableness are significantly correlated with adverse financial outcomes including lower income, lower savings rate, and lower net worth.
The Effect of the Agreeableness Trait on Wealth Building Is, Well, Disagreeable
Let’s state the agreed academic conclusion one more time to be sure that it is not missed: high levels of agreeableness as a personality trait often adversely affect financial outcomes, including income level, savings rate, and net worth. Some researchers argue this is because “nice guys finish last” in saving money and on the job. Others have found that those high on agreeableness also tend to value money (and, financial goals) less so than the more disagreeable sorts. So the kind, cooperative, friendly, empathetic person earns less, saves less, and ultimately accumulates less wealth? Generally speaking: yes, although the research is a bit murky.
Agreeableness & Income
Some research indicates that an agreeable person can have a high enough income to compensate for the adverse effects of the trait. For example, an agreeable person may be able to earn enough to overcome a low savings rate and still build wealth. But why doesn’t the nice guy get the promotion and raise? There are interesting concepts of leadership competencies at play here, where the ability to speak hard truths, and the willingness to disagree to get to the correct answer are an advantage. At an even more fundamental level, the ability to be an advocate for yourself (and therefore, at least implicitly, be at odds with the competition) can be a significant factor.
Agreeableness & Net Worth
The relationship between agreeableness and the symbiotic concepts of savings rate and net worth are easier to spot and understand. The agreeable individual tends to value personal relationships more than personal goals, including personal financial goals. This can lead to a host of less-than-advantageous-from-a-personal-finance-perspective behaviors. For example, the agreeable individual may go along (i.e., spend with abandon) to get along with a peer group. Agreeable individuals tend to display higher levels of compulsive spending. Interestingly, agreeable individuals also prefer low-risk/reward investments, further impairing their long-term wealth-building capacity.
What’s an Agreeable Person To Do?
The personality trait of agreeableness comprises many “facets” or subsidiary traits. These include concepts or traits such as altruistic, modest, empathetic, sympathetic, cooperative, warm, and considerate. Many if not all of these personality traits are objectively viewed as desirable rather than undesirable. They probably are not the set of traits an individual wants to attempt to eradicate as problematic. So how can we think about trying to maintain and preserve the desirable facets of agreeableness while mitigating the undesirable financial outcomes?
Agreeableness = Low on Social Indifference
Our research leads to the conclusion that the problematic and undesirable facet of agreeableness is at the point that it overlaps with the personality trait that we call “social indifference.” The personality trait of social indifference refers to an individual’s willingness and ability to (some extent) ignore what others think about him to achieve first-priority financial goals. Recall one component of agreeableness is the degree to which a person values being liked by others. Most of us would probably concede that it’s a good trait to value being liked by others.
The problem arises, however, when an individual takes that value to such a high degree that they are willing to sacrifice their financial well-being to achieve it. For example, imagine an individual’s desire to get along rises to a degree where he buys luxury cars that he can’t afford to be part of the mainstream crowd in the neighborhood. These consumption behaviors are a harmful by-product of a high level of agreeableness (and, correspondingly, a low level of the related trait of social indifference).
Our data reveal a significant correlation between social indifference scores and net worth, which is why this factor serves as one of the six that we measure in our model of wealth-building potential. High wealth potential folks tend to save 143% more each month than their lower potential peers. Being just a bit disagreeable can go a long way toward improving an individual’s chances of achieving an agreeable financial outcome.
What If You’re Agreeable AND You Want To Build Wealth?
So we want to keep the good (altruistic, friendly, cooperative, generous) and constrain the bad (impulsive spending beyond prudent financial means). It should also go without saying that we want to avoid encouraging high levels of anti-social disagreeableness—note that the idea of being somewhat disagreeable doesn’t mean being somewhat of a jerk. It is undoubtedly the case that one can “disagree without being disagreeable,” as they say (whoever originally coined this phrase had their heart in the right place, even if it erroneously implies that the phrase “disagreeable” is synonymous with being a jerk).
Consider these basic suggestions if you are a highly agreeable person or are assisting an agreeable person in managing their finances.
- Have a clear plan. First, no surprise here, a highly agreeable individual prone to impulse spending with the crowd needs a clear spending plan (or a “budget” if you’re a disagreeable person who doesn’t mind calling it like it is and potentially offending). Build in some flexibility to allow for a certain amount of impulse spending with the peer group, but otherwise aim for clear limits. An advisor or an otherwise friendly influence might remind the agreeable individual that it’s great to place a premium on relationships. However, they still have an obligation to safeguard their interests (i.e., their long-term financial goals).
- Have an advocate. Second, a highly agreeable individual can significantly benefit from having a third party run interference for him or her to short-circuit the bad results that may come from not being able to say “no.” A financial advisor may serve as the “bad cop” through which any requests for loans to friends and family must pass. “What’s that you say, Uncle Frank? A small loan? You’ll have to go to my financial advisor. I’ve pledged to send all transactions of this sort to her. I can’t break my promise!”
Here’s to Being a Bit More Disagreeable In the Future
Keeping the good and minimizing the negative features of the different facets of agreeableness is tricky. And before we’re accused of being wholly pro-disagreeable and anti-agreeable, take note of the positive financial outcomes that are associated with high agreeableness—things like reduced cumulative periods of unemployment and life satisfaction and positive experiences in retirement. People generally want to be liked. They also want to achieve their financial goals. Knowing at the outset that placing too much value on being liked can lead to undesirable economic outcomes is a good starting point to achieving an optimal balance between these two competing concerns.
Asebedo, S. D. (2018). Personality and financial behavior. In C. Chaffin (Ed.), Client Psychology (pp. 137-153). Wiley.
Matz, S. C., & Gladstone, J. J. (2020). Nice guys finish last: When and why agreeableness is associated with economic hardship. Journal of Personality and Social Psychology, 118(3), 545.