Why People Who Are Bad with Money Think They’re Good With It (And How to Tell If You’re One of Them)

I Used to Know Some… Well, Maybe a Few

I’ve known plenty of people who made way more money than I did, $50,000 a year or more, while I was scraping by on a low income. And yet, despite drowning in debt, they somehow thought they were better with money than I was. To them, my struggle to afford things like eating out or taking vacations meant I just wasn’t “good with money.”

But what they never realized was that I didn’t have the luxury of wasting money like they did. They confused having money with being good with money. Meanwhile, I was stretching every dollar, figuring out what I actually needed, learning how to budget for groceries, and resisting the temptation of lifestyle creep, things they never had to think about.

And sure, I had my moments of bad money habits too. There was a time when I couldn’t even afford a meal from Taco Bell, so when I finally had a little extra, I treated myself. Not often, but enough that I wasn’t really prioritizing what I should have been. That was something I had to learn. But here’s the thing, those same people who thought I was “bad with money” are now struggling financially despite making more.

So why do so many people think they’re good with money when they’re actually not? Let’s break it down.

The Illusion of Financial Competence

People who are bad with money often believe they’re good with it because they measure financial success by what they can afford right now, not by long-term stability.

• They assume that if they can afford monthly payments, they’re doing fine. Leasing a new car every few years? “Smart move.” Buying a house with zero savings? “Just how things are done.”
• They equate a steady paycheck with financial security. But having money coming in doesn’t mean you’re managing it well, it just means you haven’t hit a rough patch yet.
• They think budgeting is for people who “don’t make enough.” In reality, the richest people in the world budget obsessively.
• They assume using credit cards for rewards means they’re “winning.” Some people act like they’ve cracked the system because they get cashback or miles. But most of them spend extra money just to hit reward thresholds, money they wouldn’t have spent in the first place if they weren’t using a credit card.

I once had someone tell me I needed to get a credit card because I didn’t have much money. The irony? That person struggled with debt. Years later, I had another person on Twitter (back before it became the platform I now avoid at all costs) literally laugh at me for not having a credit card. They told me I was “leaving money on the table.”

Maybe that person is doing fine. Maybe they really do maximize their points and never carry a balance. But most people who think they’re hacking the system are the system’s biggest customers. They justify spending extra money just to get those “free” rewards, money they wouldn’t have spent in the first place if they weren’t using a credit card.

Cognitive Biases That Lead to Overconfidence

People aren’t just bad with money—they’re confidently bad with money. Here’s why:

1. Dunning-Kruger Effect – The less someone knows, the more they overestimate their knowledge. A person who’s never faced real financial hardship assumes their money habits are solid.
2. Confirmation Bias – They seek out advice that supports their choices. (“I read an article saying credit card points are a wealth-building tool, so I’m fine maxing mine out.”)
3. Optimism Bias – They believe their financial situation will magically improve in the future, so they make risky money moves today.
4. The Lifestyle Illusion – People believe if they look financially successful (nice car, big house, frequent vacations), they must be financially successful.

Signs You Might Not Be As Good With Money As You Think

Think you’re great with money? Let’s test that:

• You justify unnecessary purchases. (“I deserve this,” instead of “Can I afford this?”)
• You confuse income with wealth. High earners can still be broke.
• You don’t track your spending. If you think you have a “good idea” of where your money goes, you probably don’t.
• You avoid looking at your account balance. If checking your bank account feels like a gamble, that’s a red flag.
• You assume investing is something to think about later. Wealth-building doesn’t start when you “have enough”—it starts with what you have now.

Affording Something vs. Being Able to Buy It

One of the biggest misconceptions I’ve seen, especially among people who grew up without much money, is the idea that if you have enough in your bank account to cover a purchase, you can “afford” it. But that’s not true.

I’ve seen people with $500 in their account convince themselves they can “afford” a $200 pair of shoes just because the number in their bank account is higher than the price tag. But here’s the reality, if you can’t afford to buy it twice over without it hurting you, you probably shouldn’t buy it once.

This is something I’ve personally lived by. If I have $500, and those shoes cost $250, then technically, I can buy them. But buying them twice would leave me with nothing. Buying them once still takes me dangerously close to broke. On the other hand, if I had $1,000, I might feel more comfortable making that purchase because I’d still have more than enough money left over.

That’s the kind of thinking that separates those who just barely make it from those who actually become financially secure.

How to Actually Get Good With Money

So how do you break free from this illusion and actually master your finances?

1. Track Everything. Money doesn’t lie, but your brain will.
2. Embrace Financial Humility. The moment you think you’ve got it all figured out, you’ve lost.
3. Love the Boring Stuff. Budgeting, saving, and investing aren’t exciting, but they work.
4. Ask, “What Would My Future Self Thank Me For?” Before making a purchase, think long-term.
5. Use Your Greatest Advantage—Reading. The ability to learn is your biggest financial asset.

How I Actually Got Good With Money

For two years, I read every article I could find that related to the life I wanted for myself. I wasn’t in a great place. I had just moved into a one-bedroom apartment that cost more than the two-bedroom I had before, all because my old building got bought out and tenants were being pushed out with no relocation assistance. My new apartment was enclosed, dark, with no natural sunlight, and I was struggling financially in a way that felt different, scarier, than times before.

I had more month than money and no idea how I was going to make it. But I knew one thing: I had to figure it out. So I spent my time reading. I would sit in the building’s lobby, reading personal finance and investment articles over and over again, highlighting key lessons, studying them like they were a survival guide.

That was in 2018, a year after I had moved in. I didn’t just read for entertainment, I read to design the life I wanted. I looked for the best investment books and articles written by plain vanilla investors, no gimmicks, no get-rich-quick schemes, just the kind of old-school wealth-building that made sense.

I had always admired the kind of financial security I saw in ‘80s and ‘90s movies set in New York, Chicago, or Minneapolis, movies where people weren’t obsessing over money because they already had it figured out. They had a nice home, a solid career, and financial stability that allowed them to focus on work, family, or personal ambitions instead of stressing over bills. That’s what I wanted.

And so I studied. I learned discernment, how to tell who was actually giving valuable financial advice and who was just selling hype.

If there’s one thing I’ve learned, it’s that:

• If someone is always hyped up, selling the next big thing, or talking about getting rich quick, run the other way.
• If they’re always excited about the latest crypto, NFT, or some obscure investment, they’re probably not giving real advice.
• If they’re making extreme claims about the market, either doom and gloom or insane optimism, it’s usually a sales pitch.

The real money advice? It’s usually boring. It’s about spending less than you make, saving aggressively, investing wisely, and avoiding debt traps.

And that’s how I got good with money, not by luck, not by making more, but by learning, studying, and making intentional choices.

Final Thoughts: The Difference Between Having Money and Managing It

Making more money doesn’t automatically make you good at managing it. If you’ve ever thought, “I’m great with money,” ask yourself, do you actually have financial control, or do you just have money coming in? Because those are two very different things.