Is there morality in personal finance?

A while back, my blogger friend and fellow GRS writer Holly Johnson wrote about a healthy dose of lifestyle inflation. In that article, someone made a side point that there shouldn't be morality in personal finance — it should be about practicality.

Within the comments, there was a brief but interesting dialogue going on about this topic — morality and personal finance. I thought it was really interesting and worth expanding on more, as it prompted me to give this topic a lot of thought.

I agree that it helps to think of personal finance and frugality in practical, functional terms. What's the investment of this purchase? How much is my time worth? What is the cost/benefit of something?

But I also think money matters have some place in morals. Benjamin Franklin listed frugality as a virtue, after all.

And I also came across this quote in a book:

“Advocacy in favor of thrift can be roughly divided into two types: traditional, religiously based appeals that classify consumption in terms of vice and virtue, and pragmatic appeals couched in the language of social mobility, budgeting, and financial management.” (Lauren Weber, “In Cheap We Trust”).

I really like this quote, but I'd like to think thrift can be a combination of both virtue and pragmatism. I view thrift as a practical way to manage finances, but at least for me, it's also a concept based on something more virtuous than my budget.

Money Teaches Life Lessons

A lot of financial lessons are life lessons, too. The very philosophy of this site a good example of that. We're founded partly on the idea that there is no “get rich quick” scheme. Financial freedom takes hard work and patience, and I think that can be a useful lesson for other life goals.

Here's another example of a money lesson I think could help with life in general. An acquaintance recently told me he's almost free from six figures worth of debt. Of course, I asked him how he did it. “I stopped feeling sorry for myself,” he told me. “I wanted to go out to eat, and I couldn't. I took responsibility for my past actions and stopped pitying myself, because when I pitied myself, I'd give in and just get into more debt.”

Taking responsibility is the key lesson here, and it's a virtuous one that can definitely be applied to other aspects of life.

We could go on, but the point is, there are lots of money lessons that are also moral lessons that help with life overall.

Frugality as a Virtue

Ben Franklin really found the virtue in frugality. Take the concept of debt, for example. Practically, debt is just money or services you owe to a creditor. A negative balance. But Franklin put it this way:

“Think what you do when you run in debt; you give to another power over your liberty.”

In this way, debt is not just about money or goods; it's about losing your freedom.

Franklin argued that frugality teaches self-discipline. In defining frugality, he made it less a practical application and more a way of life — a way to make the world a better place:

“Make no expense but to do good to others or yourself; i.e., waste nothing.”

Taking Only What You Need

Recently, I took advantage of a free pair of movie tickets to see “The Lone Ranger,” a movie I really have no desire to see. But the tickets were free! And they were limited, so without giving it much thought, I nabbed them. I needed them; they were free.

Practically, this may have been a good decision. After all, it could be a fun, free date night idea. A good, cheap way to spend a Friday night with Brian.

But morally, this was kind of a crappy thing for me to do. Because maybe a hard-working mom saw the ‘Free Lone Ranger Ticket!' link. And maybe she got excited because her daughter wanted to see it — but oops! Someone who doesn't even appreciate the movie already got the last one because, “*shrug* It's free.”

Part of being frugal, at least the moral part of it, is not taking more than what you need — not just because you can't afford it, but because you want to leave more for everyone else. In this way, I think there is morality in thrift. What I did wasn't frugal. It was cheap.

Cheap vs. Frugal

To me, the ongoing cheap vs. frugal debate proves that there's morality in frugality. When does your frugality negatively affect others? Just because it's a practical, sound financial decision for your budget doesn't mean it's a good decision overall. There are ethical questions to consider, which makes it seem like there is indeed morality in personal finance.

Money-related issues go beyond a cost-benefit analysis. We have to ask ourselves, is this hurting anyone? Does it hurt the system when you choose not to pay off your credit cards or take on a loan you can't afford? I think these are moral questions worth asking.

The Virtue in How We Spend

A while back, I wrote a story about poverty and learning financial independence. I want to spend money on my future kids, but I don't want them to be spoiled. I considered how I'd do this, and someone left a really thoughtful comment:

“Spend money on your children if you have it, sure. But do it in a way that actually enriches their lives and helps them understand the world.”

In this way, the money would be spent in a virtuous way. Teaching my children that money can be used for meaningful things is, to me, further evidence that frugality is a moral concept.

The Problem With Morality in Money

Of course, there's the down side to including ethics, virtue and morality in personal finance. Holly's commenter made the very sensible point that morality can replace math when it comes to your money decisions. I've seen this happen, particularly with my mom, who has gone back into a store after being overcharged a few cents.

“It's the principle,” I remember her saying. And in that case, principle trumped math, and I still don't think getting that change back was worth the time spent.

On a larger scale, I think the problem of morality trumping math emerges when we romanticize poverty and deny ourselves things we can afford simply because we feel there's virtue in holding back.

‘The Virtue is in the Mean'

In our thread, another commenter made a good point. “The virtue is in the mean,” he or she suggested. In this argument, virtue is not about thrift or frugality but about finding a balance. Yes, I think there's morality in thrift, and I think there's virtue in frugality. But yes, it can also get in the way and keep you from making practical decisions. At that point, I don't think it's morality that's guiding thought — it's guilt. Sure, morality may lead to guilt, but like many concepts, it's all about finding a balance: deciding what's best for yourself, financially, but making sure it doesn't get in the way of being your best self.

These are just perspectives I've been considering lately; I still think the reader who inspired these thoughts had a good point. But what do you think? Is there morality in personal finance? Has including virtue in money-related matters helped or hurt you along your financial journey?

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Elizabeth
Elizabeth
7 years ago

Interesting post — especially in lieu of the frugal self-righteousness seen on blogs and in the media in recent years. I don’t think it’s possible for personal finance to be purely pragmatic because we set budget priorities, purchase goods and services, and donate according to our values and the things we find meaningful in our lives. I do think we need to find a balance between morals/ethics and thrift. The example of only taking what we need is a good one. For example, do we make an effort to save energy or gas simply because of our budgets? No, many… Read more »

Tina in NJ
Tina in NJ
7 years ago

My son’s dream car is a $95K luxury sedan. Even if I could afford it I wouldn’t pay that much for a set of wheels. I’d rather sponsor a third-world child or fund a scholarship with that kind of money. It may be worth it to him (and we’ll see if it’s still worth it when he’s paying all of his bills), but it isn’t worth it to me.

Tyler Karaszewski
Tyler Karaszewski
7 years ago
Reply to  Tina in NJ

I’m contemplating buying a $45k luxury SUV. The reason I don’t just go out and do it is because part of me feels it’s financially foolish, but that’s a far cry from it being “immoral”. If someone truly feels that he is obligated to help those less fortunate than himself (for instance, by sponsoring children’s scholarships), he’d have to keep giving until he’s no better off than the poorest person alive, because until then, there’s still someone less fortunate than himself. But clearly, nobody (maybe mother Theresa) really believes that. We all set our own thresholds for how well-off we’ll… Read more »

Steve
Steve
7 years ago
Reply to  Tina in NJ

I struggle with the concept of buying luxuries. On one hand, I can buy a cheaper car, and I can use the excess money I budgeted for the luxury model to give to charity. On the other hand, by buying that luxury model, I am putting many people to work. Same goes with hiring a landscaper or mowing the grass myself…either I am putting someone to work, or I am giving that money to charity. Either way, the money is not disappearing, and by either spending it or donating it, the circulation of money is being used to help the… Read more »

Tyler Karaszewski
Tyler Karaszewski
7 years ago
Reply to  Steve

People don’t seem to realize that the fundamental, underlying principal of any economy is not money. It is that *people* produce *goods and services* and then exchange them. Money is a tool for facilitating easy exchange of goods and services. People can have nice things because people build nice things, whether that’s a luxury car or a manicured lawn or anything else. It is not inherently better or worse for the economy overall if you pay a gardener versus doing the same work yourself, it just changes the initial ownership of the proceeds of that work. The world is a… Read more »

AMW
AMW
7 years ago

REALLY enjoyed this post! Thank you Kristin! I think that it is impossible to look at money just from a numbers stand point. After all, if it were always purely mathematics no one would even have children. I tend to think that it is important to look at every resource you have (money, relationships,health, the environment, etc) and make decisions about being a good steward with that resource. Financially, that sometimes means spending money where it is more important…not where it is the cheapest.

Carole
Carole
7 years ago

I sometimes wonder if it is morally responsible for a person with a comfortable income to snap up the best bargains at a thrift store. Just sayin’.

Debi
Debi
7 years ago
Reply to  Carole

On the other hand: The primary good that comes from places like the Salvation Army, Habitat Restores, and Goodwill thrift stores is giving employment to people who need it. When you donate and when you shop there you are contributing to that cause. That’s why they give you a coupon when you donate. They want and need you to shop there as well.

Sheryl
Sheryl
7 years ago
Reply to  Debi

Sally Ann and the Habitat Restore are designed on community giving, but there’s a lot of question about how much of Goodwill’s profits actually goes back to the community vs going into corporate funding and executive salaries.

Mrs. Waste Not
Mrs. Waste Not
7 years ago
Reply to  Sheryl

I think we should also consider that it is beneficial to the environment to be buying second hand, even if the money is not necessarily going back to the community. The money from a garage sale only benefits the seller, but I would say that it is still the right place to purchase goods.

Thomas | Your Daily Finance
Thomas | Your Daily Finance
7 years ago

I think everyone has to find a balance the works for them. I dont mind being called frugal or cheap or both. Its what I choose and it works for me. However I have friends who would rather spend money on the newest tvs and cars and guess what? It works for them. As long as I don’t complain or talk bad about them and they do the same we are good. The problem is that people tend to talk down about the other side of the fence. Its not just about money but money can help you learn life… Read more »

Pauline @ Make Money Your Way
Pauline @ Make Money Your Way
7 years ago

I just finished Atlas Shrugged and there is a fantastic monologue about why money is in no mean the root of evil and wanting more money by being the best you can in business is not immoral, in the contrary. Personal finance and morals sure go together.

Jonathan
Jonathan
7 years ago

There is a small part of the “money is the root of all evil” idea that is often missed. It’s actually “the LOVE of money is the root of all kinds of evils”. Being the best one can be in business often leads to a lot of money, but it may – or may not – be driven by a love of money. Warren Buffett has made A LOT of money, but by all accounts he has no love of it. He does what he does because he loves the work and wants to do his best, not because he… Read more »

Kristin Wong
Kristin Wong
7 years ago
Reply to  Jonathan

Side note: my dad used to say, “Money isn’t the root of all evil…the lack of it is.”

Thanks for the comments! Again, I think it’s about balance. Sure, there are countless examples of how one’s love of money can replace their values. On the other hand, I wonder if the belief that being money-driven leads to evil might also hold someone back from earning more.

Rose
Rose
7 years ago

I agree that they go together, for sure. But Ayn Rand has a very narrow view of the world with her “I want more money, therefore aim to be the best and that’s how I get it” ideas. Her ideas leave no room for corruption, the Bernie Madoffs of the world, the Trans-atlantic pipelines, and unfortunately we live in a world where corruption and true love of money, “let’s just get it at no matter what cost,” are very present.

Great article, Kristin!

John S @ Frugal Rules
John S @ Frugal Rules
7 years ago

Nice post! I think, as with many things, a lot of it comes down to having balance in it. I don’t know if there is much in terms of right/wrong when it comes to personal finance as I think there are many shades of gray. I try to do what seems best and one that will not violate my conscience.

lmoot
lmoot
7 years ago

I think money can make people *more* greedy (and greed is mostly accepted as immoral). It can also make those who are naturally generous become more generous. I’ve never thought of money as changing people (though I’m sure it has, and does), but I think it more often makes people more transparent. I think in that way, personal finance and morality go side by side. The very definition of personal finance is the personal way in which in an individual choses to spend, save, or grow their money. And as we know people choose illegal and immoral routes all the… Read more »

Matt Becker
Matt Becker
7 years ago

I’m not sure I would necessarily call it morality, but I definitely think it’s important to have a balance between the hard numbers and your personal values. As an example, my wife’s family lives 1400 miles away from us. From a purely numbers standpoint it would be most beneficial for us to never visit them. But we value family, so we spend the money to visit fairly frequently. I wouldn’t say that’s a moral decision, but it’s certainly a decision that puts personal values ahead of the financial numbers. Where I think we can get into trouble with the morality… Read more »

Mrs PoP @ Planting Our Pennies
Mrs PoP @ Planting Our Pennies
7 years ago
Reply to  Matt Becker

I completely agree with Matt. I think the financial decisions that we make are expressions of our values, but assigning strict “good” and “bad” definitions to actions surrounding these values leaves us very open to judging others for having different values than we do.

Michael
Michael
7 years ago

Great question. I recently wrote about Medicaid planning (here, in case you’re curious) and one of the first comments was asking about the ethics of jumping through hopes to minimize assets and transfer the burden to the public. On the one hand, this sort of thing (shifting the burden to others) makes me uncomfortable. On the other hand, rules are rules, and steps have been taken to minimize abuse. Most of us claim whatever tax breaks we’re eligible for, and it’s common to engage in planning to minimize estate taxes. So why is this different? If you can protect assets… Read more »

Erinn
Erinn
7 years ago

The Ben Franklin quotes are particularly poignant. if you get into debt, it’s true that you give your liberty over to others; but that also extends to just purchasing things. When you buy that pair of shoes that’s in style that you just HAVE to have, or the new gaming system, you’re also giving up your liberty and tying your mind and body and finances into a system. You start losing options. Spend less and keep your own mind firm!!

Kathryn
Kathryn
7 years ago

Is there morality in personal finance? Absolutely, because most personal finance decisions involve consumption of resources, and none of us consume resources in a vacuum. For example, everyone I personally know who took advantage of “Cash for Clunkers” a few years ago had an upper middle class income and was looking to buy a new car soon anyway. Knowing that the government is cash-strapped didn’t stop anyone, even when they themselves were not. And think of all the (again, relatively well off) people who chose to “strategically default” on mortgages they had agreed to and could still afford but no… Read more »

Debi
Debi
7 years ago
Reply to  Kathryn

In the end the morality vs. frugality question comes down to this quote I heard by Ric Edelman on his The Truth About Money radio broadcast. “Just because you have the right to do something doesn’t mean that it’s the right thing to do”.

Babs
Babs
7 years ago

Nice post Kristin! In my experience making an ethical choice is usually the more practical & frugal one.
Your friend’s comment about feeling sorry for himself resonated with me. I will be thinking about that some more.

Gary LaPointe
Gary LaPointe
7 years ago

In the case of the movie tickets, you took them and you went. I think it’d be a different case if it was an ice cream cone and you’d just ate one and you gorged yourself on another because it was free (or had seen five movies this week and went just because you could). Or worse, if you took the tickets and didn’t actually use them!

slccom
slccom
7 years ago
Reply to  Gary LaPointe

Tickets are given away so that people will watch the movie. You might find that you love it; then you’ll recommend it to others, and that is why they give them away.

I don’t see a moral issue here. If, after you got the last free tickets you heard someone say how much they wanted to see the movie and couldn’t afford to, and you kept the tickets, I could see an argument on moral grounds there. Maybe.

WWII Kid
WWII Kid
7 years ago

Take what you want, eat what you take.

Dave Heffner
Dave Heffner
7 years ago

Absolutely an issue of morality in my opinion. I managed the finances of one side of the family who lived ostentatiously, had no money left, and ended their years on public assistance in nursing homes. Final years living off the taxpayer public. I am now managing the other side of the family who lived very frugally, had a big nest egg that will probably be used to pay for extended nursing home care. No taxpayer assistance. On a long term scale over a lifetime, how can this not be a morality issue?

Carla
Carla
7 years ago
Reply to  Dave Heffner

I guess it is if they had a choice in the matter and it sounds like it did.

I think the problem starts when people make assumptions about *everyone* who lives on public assistance and construct stories of how they got there without knowing anything about them.

Old Guy
Old Guy
7 years ago

Morals exist, and money exposes them. So does lack of money. Judgment occurs at every junction where one’s morals, beliefs, and values are violated by the choices exercised by others. Examination of how one spends money will declare their actual values and morals, even when those values are in direct contradiction of openly stated values. And lastly, you can’t please everyone, so you have to be at peace with yourself (and your God) for your choices.

Matt @ Your Living Body
Matt @ Your Living Body
7 years ago

Taking only what we need – rather taking more than we need is nothing new as even people with money take more than what they need. The book Millionaire Next Door based their concept off of that which gave examples of people with money who were not so well off vs. people who made less and because of their smarter (and more frugal) spending decisions had more in the bank.

Honey Smith
Honey Smith
7 years ago

This reminds me of my post on What IS Financial Responsibility?

There are lots of ways to think about it, for sure. When it comes to student loan debt, for example, I wonder: how much “freedom” are you giving up by having debt payments, and how much “freedom” are you gaining by getting a job you might otherwise not be able to get? And if society funded your education, do you have an obligation to them (beyond paying your loans back)?

Kingston
Kingston
7 years ago

To me, a part of frugality is about not wasting resources, whether it might be wasting gas with an enormous vehicle used unnecessarily frequently; wasting part of the pristine environment by filling landfills with lots of packaging and junky non-biodegradable disposable merchandise; eating lots and lots of meat, which uses more water and land than other types of farming, etc. It’s certainly not my only consideration when I contemplate a purchase or an action (do I really need the A.C. right now?), but it’s part of my calculation. I’d consider that a “morality” component of personal finance.

Juli
Juli
7 years ago

The more I spend on myself, the less I can give to other people/causes. So absolutely, personal finance includes aspects of morality. I feel like too often, personal finance sites cause people to focus so hard on building up their own wealth, that they put blinders on to the needs around them. I don’t want to be someone who holds so tight to money that I won’t give, and I don’t want to be someone who goes around buying a bunch of stuff I don’t need and wasting money so that I can’t give. As a Christian, I believe everything… Read more »

Derek - MoneyAhoy.com
Derek - MoneyAhoy.com
7 years ago

Great topic; there is always a balance between what you take for yourself and what you leave for others.

I’d like to think that most of us are shooting for a balance where we give more, overall, to society than we take.

Developing a frugal mindset can help drastically with this on the consumption side, but we also have to work on the “giving back” side to really be good citizens and neighbors.

Petuunia
Petuunia
7 years ago

What Kingston said.
The morality of money is about what you spend it on.
Caring about not just your own children but the 7th generation, opening your eyes to the impact of what you purchase (spring greens trucked across the country), etc.
Once the “green” lightbulb goes on, it’s hard to turn it off again. The choices it illuminates aren’t always easy or convenient. But that’s where the morality lies, I think. In doing the right thing, based on moral values that include the earth and people in other places, when nobody’s looking.

Beth
Beth
7 years ago
Reply to  Petuunia

I agree with what you, Petuunia, and Kingston have said. It’s also another benefit of shopping at charity/thrift stores – you’re preventing landfill, giving to charity, and not buying from a company with questionable ethics (eg one that uses children to work in sweatshops). Another aspect of the morality of finances that no-one’s mentioned yet is that your choice of bank can detemine what your money’s used – or not used – for. Here in the UK, there’s a bank called Charity Bank, who I’ve chosen to save with because they only invest in community projects. This means I know… Read more »

M
M
7 years ago

I must confess, I have a real cheap streak. Thankfully, I connect with people who help me transform that thrift into something more virtuous. As an example, I tend to grow a lot of my own food simply because it’s cheap. A friend of mine just started a “seed library” at our public library where you can check-out a packet of seeds with your library card. Some of the harvest is then held back specifically for their seed (which you then return). So some of the seeds I invariably save (because I’m cheap, remember?) can be shared with others and… Read more »

Marie
Marie
7 years ago

Personal finance itself is a tool. You use it to meet your goals. Your goals can be either moral, immoral,worthy, unworthy etc.

A hammer is tool. It is either effective or ineffective it isn’t moral or immoral. Your goal in using that hammer can sure be moral or immoral though.

Financial philosophy on the other hand, is a completely different.

Jo
Jo
7 years ago

Personal finance resonates with morality. The economic decisions we make daily reflect what we chose to invest in, whether buying disposable water bottles for their convenience or funding defense contractors through our retirement investments. We have amazing power in our buying decisions, and I try to be mindful of my small part in the economy. John Woolman,an 18th century Quaker,developed economic protest by not spending money in ways that might encourage slavery or war. He refused to believe that self-interest was the best way to guide one’s economic life. I agree, though it’s not often an easy way to live,… Read more »

Ross Williams
Ross Williams
7 years ago

“Is it worth it?” is essentially a question of values. How one spends money therefore reflects one’s values, or ought to.

But there is a danger to treating whether you are frugal or thrifty as a moral question. It suggests that making a poor financial decision makes you a “bad person”. It doesn’t. Nor does making good financial decisions make you a “better person”. The quality of a financial decision is morally neutral.

Stephen Kratcoski
Stephen Kratcoski
7 years ago
Reply to  Ross Williams

Sound financial decisions are not based on morality. Smart financial planning will only improve the quality of life for everyone who practices common sense money management.

Stephen Kratcoski

Kristin Wong
Kristin Wong
7 years ago

I disagree. Talking specifically about decisions, if I only used “common sense money management” to make my financial decisions, I would be working at a job I hated (and eventually, earning less), I would never go back home for Christmas, and I’d never eat out–after all, spending $20 on food that cost $2 makes no sense. My quality of life would suck. But eating out makes me happy, and now we’re talking about feelings. And eating out is worth it to me, so now we’re talking about value. It’s a small (and maybe bad) example, but I agree with Ross… Read more »

Mary B
Mary B
7 years ago

We all vote with our dollars and support our values with our dollars too. Albeit, some people put more of an emphasis on it. For example, Chick-fil-a, some people patronize it because of the values it represents, others stoped patronizing it for the same reason. Very few people who eat there are doing it exclusively based on the menu prices.

Laurel
Laurel
7 years ago

Sometimes I get good ideas on how to do things on the cheap from lifehacker.com. The other day, they had an article indicating there were ways the average person could get a “student discount.” I thought maybe retailers would offer the same discount to non-students if they knew some sort of secret password or something. Turns out, lifehacker’s suggestion was to forge little year stickers to stick on the corner of your old student ID, or even just photoshop them in for a scanned ID. Seems like a good example of being frugal at the price of morality.

Chinweike
Chinweike
7 years ago

Wow, I have never looked at personal finance from the perspective of morality. “A lot of financial lessons are life lessons, too. The very philosophy of this site a good example of that. We’re founded partly on the idea that there is no “get rich quick” scheme” is my favorite part of this article. It makes sense if only people will learn the lesson in good faith. Thanks for sharing.

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