Would you prefer to listen to a podcast on this topic? Financial Beeswax’s Episode 11 discusses how your leadership style is expressed in your attitude toward personal finances.
Leadership is a popular topic these days. The study of leadership began in earnest in the late 1900s and early 2000s. Now, many colleges offer various degrees in leadership. Interestingly, many people view leadership as a positive characteristic even though there are many examples of coercive leaders throughout history. Recently, I took an Organizational Leadership course in my doctoral program. It fascinated me that the definition of leadership is still hotly debated.
It was a recent leadership course that caused me to wonder if our leadership style is expressed through our attitude toward money. If so, could a person improve their money management skills if they understood their leadership style? Most would call this behavioral finance.
There are quite a few leadership style theories, but the leadership styles discussed in this blog are transactional, transformational, authentic, servant, and adaptive.
Transactional leadership is as it sounds. It is leadership focused on the transactions. Those with a transactional leadership style focus on the way a company is managed: performance measures, supervision of employees, organizational models, etc. A transactional leader would focus on the short-term emphasis of managing money rather than the long-term effects. Short-term financial accomplishments or impulses would be secondary to long-term goals and consequences. Transactional leaders are good at organizing and creating a process to accomplish set goals, but they struggle to look ahead or at the big picture.
Transformational leadership is the polar opposite of transactional leadership. Transformational leaders look at the big picture and set goals while working to bring all employees into the process. Transformational leaders may overlook small problems to obtain success in the overall plan. In other words, they may manage money based on large financial goals without considering the cause of money problems or fixing them.
Authentic leadership is a relatively new area of leadership being studied. Authentic leadership deals with the authenticity of a leader’s motivates. It asks the question, “Are leaders acting authentically?” Many of us have seen a supervisor act one way at work, only to see them behave opposite outside of work. In personal finance, one can ask themselves if they are authentic or sincere in their approach to their finances. Are they honest with themselves about their finances? For example, a person may say they don’t want to use credit cards as a source of cash, but then they don’t tailor their spending to fit within their means.
Servant leadership is serving others. Robert K. Greenleaf identified this leadership style. Leaders lead, but servant leadership is when leaders show leadership through serving. Servant leadership is when a person puts others before themselves. In personal finance, a servant leader can lead by example or by helping their families understand finance. A disadvantage in servant leadership is giving to others at the expense of oneself. An example of this is giving your money to others before making sure your bills are paid, and money has been saved. One of our kids loves to serve others, but one time they gave all of their money away and then ran out of gas. They had to call us to bring them gas for their vehicle.
Adaptive leadership is guiding others to follow through motivational behaviors. When I was in high school, I worked at a fast food restaurant. The manager demonstrated adaptive leadership through her actions. When she asked someone to clean the floor drains, she would clean one, too. She would have us participate in mopping races, where she would mop the back line and have an employee mop the front line and race to see who would finish first and did the best job. She was teaching skills to employees through adaptive leadership. Adaptive leaders can identify the problems in their personal finances and create changes, or adapt to new ways to manage their money. They can teach themselves to manage money effectively through adaptive behaviors such as incorporating money apps or software programs into their money management practices to make the process easier and more manageable.
These are simplistic ways to look at how our leadership styles influence our financial attitudes, but it opens up the discussion about how we view personal finance. Do you know your leadership style? If so, how does it influence your attitude toward personal finance and how you manage your money? If not, do you think that understanding your leadership style will help you understand your attitude toward your personal finances? Considering what affects our financial habits leads us to define our strengths and weaknesses in managing our money. And, once we have a grasp on our financial strengths and weaknesses, we can then improve our habits and behaviors.