Saving as much money as possible is fun and exciting. Sure, it takes some planning and effort. Plus, there are sacrifices involved – if you’re used to a certain lifestyle but can’t save any money, you’ll need to reconsider your spending habits. In this article, I’ll define both frugality and being cheap and will explain the essential differences between the two. Additionally, I’ll outline why it’s important to be frugal instead of cheap and how you can go about doing this.
Read on to learn about the difference between frugal and cheap.
What is Frugality?
Before I get into the difference between cheap and frugal, it’s essential that you understand frugalism. In simplest terms, a frugal person places value on saving both money and time in the long run. A frugal and thrifty person not only considers how much an item cost, but considers how long that item will last and the cost per wear. For example, a frugal person is usually willing to pay double or triple the price for a pair of quality running shoes that will last for years and years as opposed to a cheaper pair that will wear out in 1 season.
An Example of a Frugal Purchase
A frugal person knows that paying more will usually end up costing them less in the long run. Why? For example, if he or she buys an $100 pair of shoes that lasts for 10 years instead of a $30 pair of shoes that needs to be replaced every year, in the long run, $200 is ultimately saved. While not everyone can be frugal in this regard – for example, some people are on a low income and cannot splurge on large-ticket items – frugal practices will pay off in the long run.
Defining Cheapness
Being cheap is the antonym for frugal – the complete opposite. A cheap person is short-sighted and only looks at the price tag of an item with no regard to quality. This type of person will buy the cheapest item even if it’s of poor quality.
As I mentioned earlier, being frugal isn’t always possible. A cheap person may need to be cheap because they’re on a low income and need to save out of necessity. He or she may have lost his or her income, may have unexpectedly gone from a dual-income household to a single-income household or may be struggling in other ways. If this applies to you, don’t worry about being cheap – you need to save money! A cheap person is someone who can afford to pay for quality but simply chooses not to because he or she is concerned about price. For more information about this topic, check out this article by EducatorFI on frugality by choice.
The Difference Between Frugal and Cheap
The Difference Between Frugal and Cheap: Frugal People are Resourceful
Need an example on how to be frugal but not cheap? Sure, let me give you one.
Let’s say that a woman is shopping for a new handbag. She peruses the various options available. For simplicity’s sake, let’s say that she compares several bags and eventually narrows it down to two. The two handbags look identical but very drastically in price. She decides to research how long the cheap handbag will last versus the higher-quality handbag by looking up reviews online.
Upon researching reviews about the two handbags, she finds out that the cheaper handbag only lasts about 2 years. On the other hand, the pricier handbag has lasted the reviewer 10 years and counting. The cheaper handbag costs $50 and the pricier one costs $100. By choosing the better looking handbag that costs twice the amount of the cheap one, the woman has saved $100 over five years. The woman had to replace the old bag 5 times at a cost of $50 x 5 = $250. If she chose to buy the more expensive bag, she would have only spent $150 one time.
$100 may not seem like a lot of money to most. However, if one tries applies this principle for every item they purchase, they’ll have the potential to save hundreds, if not thousands per year!
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The Defining Characteristics of Cheap People
Cheap People Fail to Value Their Time
While the most obvious reason a person should be frugal instead of being cheap is saving money in the long run, there is another main purpose to this lifestyle. Frugality isn’t limited to how you value your finances – it also refers to how you value your time. When you choose to purchase higher-quality items that last longer, you’ll spend less time:
- Making a list of all the items you need to replace as they’ve worn out
- Researching and price comparing different stores to replace the item that has worn out with an identical or similarly-priced item
- Physically getting in your car or taking transit to the shopping mall or browsing websites and completing online shopping
Those three tasks can cost you hours of your life. When you choose to buy the more expensive item that lasts longer, you’ll save time. The extra time you don’t spend planning for and shopping for replacement items can be spent on other ventures or activities. Take some time to shop for and cook a meal or start on a side hustle business. Having extra time is freedom!
Cheap vs Frugal and Suffering Relationships
Aside from costing themselves money and time, being unnecessarily cheap can have negative ramifications on one’s relationships. Let’s say that a friend invites you out for dinner. While the dinner isn’t for another month, you absolutely refuse to spend money on non-essential purchases such as dining out, delivery and takeout coffee. Since you refuse to spend money on going out, you decline her invitation.
While you came up with an excuse this time and all is well, if you do this time and time again, what will your friend think? Money isn’t everything. Sure, there are many free activities to do – however, many great experiences do come with a price tag – special dinners included. When you choose to keep money in your pocket instead of spending quality time with friends, your loved ones won’t appreciate it. Money is a tool – sure, you should focus on saving and investing, but it’s also meant to be spent on things and experiences you enjoy.
Cheap People Hurt Others Financially
Aside from potentially damaging relationships with those you know, overly stingy people can damage others’ lives. When you choose to leave a low tip or completely skip tipping at restaurants altogether, you’re reducing the waitstaff’s ability to cover their bills. In many countries, servers rely on tips to make a living. In many establishments, servers also pay a portion of their tips to the back-of-house (kitchen) staff. If you don’t tip, they pay out of pocket to cover the kitchen tip pool. Remember: if you can afford to go out for lunch or dinner, you can afford to tip.
How to be Frugal Instead of Cheap
Spend Less Than What You Earn
If you are serious about saving money in the long run, you’ll need to track what you make and what you spend. Always spend less than what you earn. The easiest way to track your spending is to create and stick with a budget.
Firstly, know exactly how much you make per month after tax. If you’re a freelancer or self-employed person whose income fluctuates every month, take the average of your last 3 months’ earnings. If your income fluctuates a lot, go with a conservative estimate by using your lowest earning month of the year to be safe. That way, you’ll be sure that you’ll be able to cover your expenses after having created your new budget. Next, find out how much you spend on:
- Fixed expenses such as a recurring mortgage or rent payment, internet bills and car payments
- Variable expenses such as groceries and entertainment costs
If you’re currently spending more than you make or simply aren’t saving enough, reduce your variable spending by a certain dollar figure or percentage. Even an extra $100 or $200 invested can help you reduce debt and pay for future goals such as retirement.
Use a handy budget planning template to help you stay on track. Search Pinterest to find one you like!
A Practical Example of the Difference Between Frugal and Cheap
When your ultimate goal is to save as much money as possible, it can be easy to slip into the habit of buying the lowest-priced item. However, this isn’t always the best idea. Why? Simple: the cost per wear and overall lifetime value of goods. Confused? Let me provide an example:
The Smartphone Example
Let’s say that your smartphone breaks or gets slow enough that you need to replace it. While it’s easy to go out and buy an $100 phone as a replacement, the particular model you can purchase only lasts a year. On the other hand, the other choice is to buy a phone for $300 that lasts around 5 years on average. If you decide to go with the cheaper option, over the course of 5 years, you’ll have spent $500 total… $200 more than if you went with the more expensive option.
Always Pay More for Long-Term Value If You Can Afford It
There are many variables that may make you end up spending more money anyway – say, if you drop your more expensive phone in water and need to immediately replace it. However, if you evaluate the overall lifetime spend of each purchase you make, you’ll end up saving in the long run. Additionally, higher-priced goods generally look and feel better. When you invest in nicer stuff, you’ll look and feel better, too! If you can afford it, always go for higher-quality items.
Wait for Items to Go on Sale
Don’t want to pay full price? Smart move. If you can wait, hold out until an item you want to buy goes on sale. Of course, if you need the item right away, go ahead and buy it. However, if you don’t really need that dress or pair of shoes, hold on until it’s discounted.
Be Willing to Pay a Professional for Doing Repairs
We all know a DIY-person who is a pro and fixing his or her car, bike and any appliance in the home. However, the majority of people do not know how to fix their stuff. There’s nothing wrong with that! Pay a professional who knows how to handle appliances and the many other things that may break from time to time.
When you pay an expert, he or she will know how to properly repair whatever is broken. If you try fixing what’s broken yourself, you may run the risk of breaking it. At the very least, you won’t be able to fix it and you’ll have wasted hours of your precious time that could have been spent doing something else.
Consult a Tax Professional
Whether you only file personal taxes or also run your own business, it can pay (literally) to hire a professional tax accountant. An accountant will know which tax benefits you may be eligible for and will ensure you’re maximizing your tax deductions. Additionally, he or she will be able to check to make sure you accidentally under report your income and run the risk of owing back-taxes in the future.
Try a Savings Challenge
In addition to the other strategies listed in this article, try out a different challenge each week (or month). Here are my favorite as they’re easy to start and can be tailored to your sitaution and goals.
Extreme Frugality Challenge
Want to really kickstart your saving and investing habits? Completely forgo any non-essential purchases for an entire month. Instead of spending money, focus on free activities. Go on a hike, arrange a family board games night or do a homemade pizza night and watch a movie with your partner. If you’re feeling really ambitious, try cutting out all non-essential spending for 3 months, 6 months, or even an entire year. While this challenge isn’t sustainable (long-term deprivation can tempt you to go on a spending binge), it’s a great way to kickstart your savings account.
Redirect all the cash you’ve saved towards stocking up your emergency fund. If you have enough money for emergencies, start up a special bank account for a goal such as a vacation.
30 30 30 10 Budgeting Challenge
The 30 30 30 10 budget challenge is a structured way to stay on budget. 10% of your expenses go towards fun stuff – think movie nights or a new phone. The remaining 90% is allocated towards housing, utility bills and saving/investing respectively. The 30-30-30-10 budget method is an ideal strategy for those who need discipline and structure. Give it a try!
Printable 52-Week Money Challenge
The printable 52 week money challenge involves choosing a goal you want to save towards for an entire year. Find a savings challenge template online that guides you on how much you should save per week. The great thing about this challenge is that it’s up to you how much you want to save per week. $5, $10, $50…? The possibilities are endless. This challenge is great for those who like taking small steps. There’s nothing more rewarding than seeing your savings pile up week over week and month over month!
A Final Word on the Difference Between Frugal and Cheap
The difference between frugal and cheap people is subtle yet distinct. Frugal people choose value over the lowest-priced goods and services. Stay on track with living a frugal lifestyle by choosing a savings challenge to keep you motivated. Get your family and friends involved in frugal living. Be sure to reward yourself with a treat after achieving a saving or investing milestone.
Most of all, enjoy finding a balance between discipline and enjoying yourself!
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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.
