We all know the difference between cheap and frugal when it comes to friends. Someone who’s cheap will bring nothing to a potluck dinner and drink the most expensive wine. Someone who is frugal will organise the potluck dinner in order to spend quality time with loved ones, without the expense of going out to dinner. The same qualities apply to how we deal with our own finances- sometimes we act frugally, making sensible financial decisions and other times we resort to being cheap, making short-sighted financial calls that cost money in the end. Here are some thoughts on understanding the difference and saving money in the process.
The Value Of A Dime
At the bottom of the difference, is a crucial understanding of the value of money. Of course, both frugal and cheap people are interested in the saving money. Where the two diverge is that cheap people will do anything to save money, taking the shortest route possible, while frugal people will consider the overall value of the money. That means taking into account the projected lifespan of an item and whether or not it will require continuing investment over the years. It’s one thing to buy a used car, lots of financially savvy people do. But someone who is cheap will buy the car with the lowest price tag and declare they’ve found a bargain, without thought of how much money might have to be put into maintenance over the long-term.
When Time Is Money
Often it’s easy to get caught up in money-saving habits, and sometimes we do so to the detriment of our finances. Ever spent hours chasing down a bargain, when you could have bought it around the corner and used the time far more effectively? Or driven out of your way to fill up at a cheaper petrol station? Frugality is about effectively weighing up choices and choosing the one that truly fulfils the notion of value, beyond the nitty gritty of price tag.
At Who’s Expense?
Frugality is at no one else’s expense- we live in a frugal manner, which affects us and what we buy, eat, do, but has little effect on those around us. Cheap, on the other hand, is always at someone else’s expense. It doesn’t necessarily have to be individuals (the inevitable friend who never buys a round) but can sometimes can be at the expense of a business. Sitting on a salad between three people when the restaurant is packed out might not seem like a huge offence, but it’s costing the business money. Being frugal also implies an empathy for other people’s financial wellbeing, as much as our own.
What We Do With It
As well as having a more realistic appreciation for money, people who are frugal also have great ideas about what they do with their money. If someone is cheap, they’re often saving money for saving alone. There’s nothing necessarily wrong with that, but wouldn’t it be better to be saving money in order to achieve some goals, financial or otherwise? After all, what else is our frugality about other than using the money we save as a tool to achieve the lifestyle we desire?