When you hear the term ‘being cheap,’ what comes to mind? Possibly someone wearing clothes with tons of holes in them or a person leaving $5 for a tip on an $100 bill? If so, that’s understandable – and definitely a sign of being cheap. However, there are many additional factors to being stingy.
In this article, I’ll define being cheap vs frugal, the difference between the two and how to become frugal instead of cheap. Learning frugalism can help you:
- Save time and money in the long run
- Keep friendships and relationships with family intact without breaking the bank
- Enjoy owning and using higher-quality products and services that will make you look and feel great
- Become happier with what you have
Read on to learn about the difference between being cheap vs. frugal.
Defining Being Cheap
Firstly, what is being cheap? A cheap person is someone who is only focused on paying the lowest price for products or services with no regard to the quality and the time it takes to travel and find the item or service. A frugal may be afraid of spending money and want to save as much as possible. For example, a cheap person may find the lowest-priced t-shirt and buy it only because it’s cheap.
Cheap people often don’t think about how their time is being used. For example, a cheap person may find the lowest-priced box of cookies at a store that’s 5km from them. This box of cookies costs $2 less than the box at the store around the corner. While the individual is technically saving a couple dollars, aside from the money spent on gas, this person has wasted another half hour of their life. They’ve cost themselves time that could be spent working on freelance gigs or with their family.
While this may seem like a silly example, if it’s applied to other aspects of one’s life, wasted time can really add up.
Being Frugal Instead of Being Cheap
What’s the difference between frugal and cheap? It’s simple, really. A frugal person factors in the time and lifetime value of products and services. They are willing to pay for a higher-quality, top-rated mechanic to fix their brakes. While they could have gone to a cheaper place, they know that the quality mechanic’s job will last a longer time. They won’t have to go back and get the job redone, saving them time and money in the future. Frugal people aren’t afraid to invest money towards high-quality suits and dresses that will last 10 years instead of 1 year.
Frugal people save both time and money. How? When you pay for a higher-quality product or service, you’ll save money in the long run. For example, if you only have to go to the mechanic once every 3 years at a cost of $300 instead of every year at a cost of $200, you’ve saved $300 in the long run. If you choose to buy a quality, versatile dress or suit that costs $200 and lasts 10 years instead of one that costs $100 and lasts 2 years, you’ve saved $300 in the long run.
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Examples of Someone Being Cheap
Due to the subtle difference between being frugal and cheap, it’s often hard to know which one you are someone is. Below are the top signs of a cheap person.
Always Ordering the Cheapest Item on the Menu
While there’s nothing wrong with being mindful of spending when dining out, a stingy person will never treat themselves to what they actually want to eat at the restaurant. Even if a menu item is a few dollars more than another dish, they will always go for the fries, salad or whatever else is cheapest. Don’t even think about drinks other than water – a person pinching pennies won’t consider this at all.
Never Wanting to Go Out – A Telltale Sign of a Person Who is Being Cheap
Another telltale sign of a cheap person: they never want to go out. A cheap person will always suggest to stay in. Instead of going out for a drink and a movie, they’ll insist on making snacks at home and illegally streaming the latest Fast and Furious movie. There is a time and place for staying at home and doing frugal activities. However, if you’re doing it all the time due to fear of spending money, you’re leaning towards cheapness.
Refusing to Buy Something If It’s Not on Sale
There’s nothing wrong with waiting for a sale – this is one way to be extremely frugal without cutting corners. However, if you truly need something right now, don’t be afraid to invest in it. Additionally, you should treat yourself every once in a while. If you really want that new scarf but it’s not on sale, if it’s in your budget, by all means, take it to the cash register!
Wearing Worn-Out Clothes
We all have that sweater that is only acceptable to wear around the house. By all means, keep it! However, if your wardrobe consists of holey t-shirts and ripped jeans (that aren’t fashionably ripped), it’s time to throw them out and replace them. Wearing worn-out clothes makes you look cheap.
Consequences of Being Cheap
There are several main consequences to being cheap. Here are the main telltale signs of a cheap person.
Losing Money in the Long Run
When you always buy the cheapest item, you’ll end up replacing it time and time again. Often, you’ll end up spending even more money than if you had invested in a higher-quality product that lasts longer.
Wasting Time Shopping for Replacement Items and Services
Aside from lost money, being cheap can waste your time. When you have to buy a replacement item, you’ll have to keep going out to the store to buy a replacement item. If you cheap out and decide not to pay an accountant to help you with your taxes, you may end up needing to hire one later to sort out all the back taxes you owe to the government.
Damaged Relationships
Cheap people often skimp out on experiences with loved ones that cost money. If you’re that family member or friend who never wants to do anything because it costs money, you may stop receiving invites to socialize. At the very least, your friends or family members may feel devalued. While money isn’t everything, spending a little bit to treat a loved one to dinner or a small gift is a gesture of your appreciation of having them in your life.
How to Become Frugal Instead of Being Cheap
1. Budget and Make a Plan
If you want to avoid cheapness out of necessity – for example, if you are super tight on funds, but you won’t receive your next paycheque for the next ten days – you’ll need to have a plan to make sure your money lasts the entire month.
Get started creating a budget by undertaking the following steps:
Know Your Monthly (Post-Tax) Income
Before you can set spending limits, you’ll need to know how much you have to work with – how much you take home each month. If you’re a salaried employee, this is easy – generally, you’ll receive the same amount of pay per month. Grab your paystub and check how much money you take home after your taxes are paid.
If you’re self-employed, an independent contractor or work for an hourly wage, calculate the average earnings from the last 3 months. If your income fluctuates a lot, take the safer route and calculate your average monthly earnings from the last 6 months.
For example, if you made $2500 in June, $3700 in July and $3200 in August, your average earnings would be $3,133 ($2500 + $3700 + $3200 / 3).
Therefore, you’ll have $3,133 to work with when you calculate your spending limits.
Understand Your Current Spending Patterns
Next up, it’s time to find out what you spend on each of the following categories:
- Essential expenses such as a rent/mortgage payment, car payment, utilities and groceries
- Non-essential expenses such as takeout, vacations, alcoholic drinks and non-essential clothing purchases
- Savings for vacations, retirement investments and children’s education savings/investments
Grab a notebook and pen. Next, write down each expense type and the amount you spent in the last month. For a more complete and accurate picture of your spending habits, find out how much you spent on each category in the last 3 months and get the average.
Analyze Areas Where You Can Reduce Spending
Now that you have a picture of how much you spend, take an honest account of your non-essential spending. Are you spending more than you should on takeout? Challenge yourself to reduce spending by a certain dollar amount. For example, if you’re currently spending $400 a month, why not aim to spend $300 next month and save the rest? Being frugal begins with mindfully looking at where you can cut costs.
Make a Plan to Stay Frugal
Now that you’ve chosen to reduce your spending by a certain amount next month, how are you going to stay on track and live frugal without sacrificing your quality of life? Here are a few different ideas to practice thriftiness and frugality:
- Shop for special grocery ingredients and cook a takeout-style meal instead of ordering in
- Learn how to mend clothes instead of throwing them away and buying cheap replacements
- Opt for a movie or games night in rather than going to the movie theater
These are just a few of the many ways that you can practice frugality without being cheap.
2. Pay More for Quality and Save in the Long Run
Every woman should own a black dress (or a suit if you’re a man) – it’s versatile and timeless. Let’s say that the time comes to purchase a new dress. You head to the mall and visit several stores. After having browsed all available options, you’ve found two options: a cheaper dress costing $30 and a more expensive one costing $100. Both are essentially identical in style. However, aside from price, the more expensive dress is made from higher quality materials. Upon reading online reviews about the dress on the department store’s website, you’ve found excellent feedback. The dress ohas lasted some women 5+ years.
On the other hand, the $30 dress looks nice, but feels somewhat flimsy in your hands. The stitching isn’t as strong and the fabric is slightly misaligned. Provided they have the money on hand, a frugal person won’t be afraid to invest in the $100 dress.
Why? Let’s say that the $30 dress wears out every year. Over the course of five years, you’ll have spent $150. Investing in higher quality items means you’ll generally spend less in the long run. Plus, you’ll look and feel better in higher-quality items.
Apply this principle to your entire wardrobe and invest in capsule items – high-quality, versatile items that can be worn many different ways. A minimalist capsule wardrobe will help you save money, look great and reduce decision fatigue when putting together your daily outfits.
3. Calculate the Cost Per Unit on Items
In addition to evaluating the long-term cost versus longevity of items, frugal people also calculate the cost per unit of groceries and other items bought in bulk. For example, let’s say that you have the choice of purchasing two packages of garbage bags. The brand-name package comes with 20 garbage bags and costs $7, while the no-name, generic brand comes with 35 garbage bags and costs $10.
At first glance, the brand-name package is cheaper. However, the cost per unit is more expensive than the larger package:
$7 / 20 pieces = $0.35
$10 / 35 pieces = $0.29
While this is a small difference, if you apply the cost per unit calculation to all of your purchases, your savings will add up over time!
4. Learn How to Value Your Time
For example, let’s say that you are making a decent income and rely on freelance clients that make you around $150 an hour. You have a busy week coming up and need to clean your home. Instead of cleaning your home, you invest in a cleaner for $20 an hour to take care of this chore for you.
While there is an upfront investment (hiring the cleaner), this frugal person is saving money because they’re making $150 in that hour and paying $20. The net profit is $130 ($150 – $20). While not everyone can save money by hiring a cleaner or other serviceperson to handle everyday tasks, it’s something you can consider.
5. Splurge on What Matters to You
While being frugal involves cutting costs on goods and services and finding alternatives – for example, making your own food at home instead of ordering takeout – don’t be afraid to treat yourself. We all have one or two things we really enjoy. For example, if you are really into designer bags, don’t be afraid to own a few nice, high-quality bags – so long as you’ve paid all your bills and you’re also saving and investing some of your paycheck.
If you can’t live without your weekly Thai takeout order and bottle of sauvignon blanc, don’t cut out takeout spending completely. Find other areas in your life you can reduce spending on and keep your takeout budget intact. Everyone’s situation and goals are different, so find what works best for you. When you treat yourself to something every once in a while, you’ll reduce the odds that you’ll go on a spending binge. Depriving yourself increases the risk of overspending later on.
All that matters is that you’re being efficient with your money, saving some at the end of the month and still enjoying yourself without being cheap.
6. Try a Frugal Extreme Challenge
Another way you can be frugal and kickstart short-term savings is participating in a frugal extreme challenge. Try cutting out non-essential spending for an entire month. Allocate money saved towards a bank account for a goal such as a vacation or completing a home renovation project. If an entire month spending $0 on non-essentials sounds too overwhelming, start with a low-buy month where you cut down spending by a certain percentage. If this is your first time doing a savings challenge, try a 60-70% reduction in spending.
7. Reward Yourself for Achieving a Financial Goal
Once you’ve reached a goal such as successfully reducing spending by $100 or more per month, treat yourself. Just because you’re saving more money doesn’t mean you can’t indulge every once in a little while! Go ahead and buy that new jacket you’ve been eyeing for months.
A Final Word on Avoiding Being Cheap vs. Frugal
The difference between being cheap vs. frugal is subtle yet distinct. While you may save money in the short-term, being cheap will cost you time, relationships, and yes, money in the long run. Create a budget and stick with, it commit to reducing spending and learn how to value your time. If you can afford it, invest in higher-quality items that will last you a longer time.
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Janita is a frugal living expert and owner of Frugal Fun Finance. With over five years of personal experience finding and trying out the best ways to make and save more money, she's eager to share her knowledge. Janita's strategies have helped her save thousands of dollars for funding investments and traveling to over 20 countries.
Janita completed training in personal finance at The University of Western Ontario and McGill University, two prestigious Canadian universities. Her expertise has been shared on GoBankingRates, Yahoo Finance, and NASDAQ.com.
