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
- 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?