Does Being Frugal Mean You’re Good With Money?

There seems to be a perception out there, especially from the people who maybe aren't very frugal, that being frugal means that you are good with money.

I've come across this argument for frugality during conversations with friends, and attitudes from other bloggers, and sometimes emails and comments from readers. Some people thing that they are good with money only based on the fact that I am frugal. But does being frugal mean you're good with money?

A Case for "Yes"

If you are frugal in some areas, that may show that you are paying attention to where your money goes; a good financial habit, of course.

Frugality typically requires intention; knowing what you are and are not willing to spend money on, and finding good bang for your buck for those things that you are willing to spend on. Spending with intention certainly is part of a "good with money" mentality.

If you are frugal and using that money to either save, invest, or allocate to something more important, you may be "good with money".

However, frugality is only part of the big picture.

A Case for "No"

When I was in my first year of college, I went and spent loads of money on clothes. My shopping binges went on my credit card, at 19.99%. I was spending over $100/mo on interest alone on that card, but my friends still considered me frugal because I only bought things that were on sale, and I bought store brand groceries to save money (still do this).

For all my friends knew, I could be taking all of the money I was saving by not going for coffee when I said no to them, and eating out more than 1-2 times per week, and spending it on a collection of alpaca paraphernalia that I keep in my basement.


How Is "Good With Money" Defined?

We all have different definitions of somebody who is good with money. I don't think the ultra cheap/frugal are good with money; I think somebody who is good with money is well rounded. They may be frugal in some areas to afford to enjoy themselves in others. They invest, save, and use money as a tool to enjoy life. Yes, somebody that is good with money can have debt in my definition, as long as the debt is used as leverage. Not consumer debt, but mortgage debt and student debt; people don't automatically turn into people that are "bad with money" because they have a student loan or business loan.

Other people's definitions will be different. I think we can all agree that to be good with money, you have to:

  • Save some for retirement
  • Diversify
  • Not have consumer debt

But that's all that we can really define. Plus, some people may be good with money now, but have consumer debt left over from when they were more careless. Being good with money is a lesson that many of us learn, and some of us learn it and then still turn to bad financial habits. Some people have phases where they are good with money, and just as many "bad with money" phases.


So, what do you think? Does frugality mean you are good with money?



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23 thoughts on “Does Being Frugal Mean You’re Good With Money?

  1. Interesting article. Being "good" with money can really only be partially defined as being "frugal", saving for retirement, etc... Does one have a good understanding of investment basics and the various instruments by which to apply these basics? Debt isn't a much a factor in being "good" with money, as debt can be both a source of wealth and a detriment to it (it depends on how it is being used). I think the answer can be seen by those that rapidly increase their wealth every year--net worth I mean--they are truly "good" with money, but the details may vary.

  2. Emily @ evolvingPF

    Good thoughts! I agree that frugality - or maybe we could say intentionality in spending - needs to be paired with some other characteristics before you get to the "good with money" level. Frugality only looks at the spending side, not the saving/investment side.

  3. I'm not sure you really can define "good with money." As you say, frugality is only part of the picture. We have always been frugal, but I'm not sure that we have always been good with money. Until we got on a budget, we were not saving nearly as much as we should have been. Plus, we had a lot of debt. So, being frugal is just one of the tools for being "good with money."

  4. Alpaca paraphernalia! I love it. Great topic, this is something I wonder about frequently. Ill notice frugal tendancies in people and wonder if they are actually good with all of their money or just their latte money.

  5. I want me some alpaca!
    I think that as you've pointed out, a lot of it is perception and ability to observe. (ahem, information asymmetries, in technical speak.) Just because someone appears to be frugal in more observable instances doesn't mean they are with everything. I buy discounted food all the time and barely buy any clothes. However, I have a bunch of sporting goods, power tools and a ton of wine.

  6. Christian L.

    No, being frugal does not mean you're good with money. You can be great at not spending money and saving, but that doesn't mean you're handling your saved money that well.

    For example, my buddy doesn't waste any money. I really mean that. He saves far more than he spends and has $5,000 saved up, but it's just sitting in a savings account. He only has that account and a checking account. He could easily start an IRA, still safely invest some cash and have an emergency fund with that money.

    Instead, he just keeps putting his money into the savings account.

    -Christian L. @ Smart Military Money

  7. The Norwegian Girl

    I think being frugal and being good with money can be considered two somewhat different concepts. Being frugal is generally thought of being thrifty with money, food, time, and knowing how to stretch the money. Being good with money is all in the eye of the beholder. You can be good with money in some areas, but then not so good in others. Being good with money doesn´t necessarily mean that you`re spending little, it can just mean that you know how to manage money, but still choose to splurge in certain areas of life that you enjoy. Being frugal is more about limited spending and making the most of what you´ve got.

  8. The simple answer is no! Being frugal does not mean you are good with money. It just means you think about your purchases or expenses. This is so much more about personal finance than just how you handle money.

  9. Bring good with money would have to start with making the most out of what you have. After that, I think it would vary in actual stuff from person to person, but the common thread would have to be getting what you want. If you really want something, and should be able to afford it, but you spend too much money on useless stuff, you're not good with money.

  10. Interesting topic! That's the thing, I used to know people who seemed frugal and so I thought they were good with money, but really they were broke because they didn't work enough and made a lot of bad financial choices.

  11. Some of the cheapest people that I know are bad with money. They will barely tip but aren't actually saving any money. However, you can be good with money and frugal. But being frugal doesn't mean you're good with money.

  12. I think being frugal will help make you good at managing your money. Sort of like how being patient can make you a better golf player. But there are other factors involved like wealth management skills and learning the difference between risk and opportunity that all play into how good (or bad) we are with money 🙂 Interesting topic. Sounds like your friend might be a bit jealous of your financial prowess.

  13. It's one of those cases where you were judged based on on frugality alone where that simply means nothing if one doesn't know the entire picture. Being frugal does not mean one is good with money. We have a friend who is broke,I mean living pay to pay and then some. She coupons like crazy, spending money to save money. She thinks she's being smart with her money, frugal because she shops at Dollarama, the thrift shop etc and she very well may be BUT she doesn't have the money to spend. So,there is a fine line between frugality and money management just like there is with investing. Just because one invests doesn't mean they are good with money and investing either. Like you said, it's just part of the picture and everyone's definition will mean something different to their personal situation. Frugal just falls under the umbrella term of personal finance in my opinion. Great post.

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  15. Great post. I agree with you. There's times when being frugal means you're good with money and there's time it does not. I have a friend who only buys things on sale but she's alway buying things so she's actually not saving all that much. Also for your friend, being frugal/good with money is a life choice. It's just like trying to quit smoking or another addiction. You have to try and keep trying even when you fail.

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  18. This is one very good point to tackle. Just like you, I regard people who are good with money are those that know their priorities on where to spend their money, and somehow being frugal on those things they can afford to let go or not to have.

  19. To give my input and not sound repetitive, the answer is a big fat N to the O. Being frugal means you're cutting back on certain things for whatever reason, but then be a horrible book keeper with the money. So I agree a balance must be made to be known as you are good with money.

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