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Being Frugal Vs. Being Cheap: A Breakdown

Either way, if being a little more conservative with spending results in carrying less overall debt, that's certainly not a bad thing, especially during uncertain times.

March 26, 2021

Anyone who has ever kept a close eye on their budget consistently and who is able to easily turn down spending temptations has dealt with (hopefully) well-meaning family members and friends referring to them as cheap. The word “cheap” can get a bad rap, but if you’re doing everything you can to make good financial decisions and that comes across as being stingy with money, so be it. You can laugh your way to an early retirement or that dream kitchen renovation.

Another way to look at keeping a close eye on your wallet is being frugal, which often has a more positive connotation. While there is a decent amount of overlap between cheapness and frugality, there are some key differences that may help you determine which side of the line you fall on. Either way, as long as you’re making financial decisions that you feel comfortable with, we’d say there’s nothing to laugh about.

The Differences Between Being Cheap and Frugal

Let’s get right down to the root of things. While we all have our own perceptions of what being cheap and frugal looks like, what is the actual definition of these two words? According to “cheap” in the context we’re discussing means “stingy or miserly,” while “frugal” means “economical in use or expenditure; prudently saving or sparing; not wasteful.”

Basically, when someone is cheap or frugal, they try to keep their spending on the lower side. However, the motivations behind that goal are usually a bit different. Those who are frugal, tend to strive towards getting as much value as possible out of their money. They focus on spending their money on the things that matter to them. Generally, those who are frugal care about the value of their purchases, and those who are cheap focus more on the cost. While those who are cheap try to always get the lowest price on things they purchase, those who are frugal are willing to make exceptions for purchases that are important to them. In many cases, frugality only affects the party making the purchases, not those around them, which is why those who are viewed as cheap can sometimes rub friends and family the wrong way with their spending habits. For example, if you never pitch in for a tip when ordering food with friends and as a result, they need to put in more money towards the tip, you may start to get a reputation for being cheap. But, if you simply choose to order water instead of a pricey cocktail at a restaurant, no harm is done to others and chances are you’ll be viewed as frugal.

How to Be Frugal Without Being Cheap

At first glance, frugal actions can appear cheap. For example, if someone only buys used furniture, they may appear cheap. However, if they prefer traveling to staying home, they may not care as much about home decor and might want their funds to stretch farther in other directions — like first class plane tickets that only they know about.

On the flip side, if your mom and dad only ever planned road trips instead of international extravaganzas, it may seem like they’re cheap, but they may be able to afford to take more vacations throughout the year with their family if they keep travel costs low. For them, their top vacation priority might be family time over an exotic location. 

While some may choose to spend less on material goods, they may be making purchases behind the scenes that can lead to greater satisfaction. A study from the University of British Columbia and Harvard Business School found that money can actually lead to happiness — when money is used to purchase free time. If someone is willing to shell out for gardening or house cleaning services, they may have found a way to make their money really work for them. The takeaway from that study was that when people use money to buy themselves more free time, they have greater life satisfaction. While hiring someone to do your taxes or help with home repairs may not be that flashy on the surface, those purchases may really pay off in the end. 

To be frugal instead of cheap, the key is to spend your money where it really matters. What that looks like to you may not be what it looks like to your neighbors, colleagues, or friends — and that’s more than okay.

Making Financial Decisions in Challenging Times

While cheapness may appear like a bad quality on the surface, that desire to spend as little money as possible may actually be a coping technique for those with financial anxiety or might act as a tool when dealing with financial struggles. It’s no secret that the past year has caused financial strain for many. With so much uncertainty in the air, it can be tempting to save as much money as possible. Many Americans chose to save their stimulus checks instead of spending them. After receiving stimulus checks in the first round of aid during April of 2020, about one in three recipients put that money into savings. For many consumers, making wise spending choices during these challenging financial times may be the right path to take, even if it makes them appear cheap. Either way, if being a little more conservative with the cash results in carrying less overall debt, that's certainly not a bad thing, especially during uncertain times.

Even if they’re just teasing, when friends and family call you cheap or frugal, those words can sting. At the end of the day, you need to remember what your financial goals are and how your actions help achieve them. Chances are, your loved ones can’t see the entire picture that you can see. They don’t realize that skimping on subscription services or packing your lunch for work every day is helping you speed up your goal of buying a home or saving for a child’s education. Your financial wellness is much more important than what anyone else thinks, so try to remember that next time they tease you for only buying things that are on sale.

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