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Three Differences Between Being Frugal And Being Cheap

August 10, 2017 by Jason Fieber 14 Comments

It’s a fine line to walk between frugality and cheapness.

I’ve always tried to make sure that I stay firmly within the realm of frugality, as being cheap is a slippery slope that can lead to someone being miserly and miserable.

But what exactly is the difference between frugality and cheapness? 

Are they not one and the same?

I believe there are definitely differences – some significant and some subtle – between the two, and I’m going to go over a few of the major differences today.

The point of this article is to define the border between the two so that you’re able to live a happier, more fulfilled life, all while still spending substantially less than the average consumer.

Price And Value

One of the biggest differences between being frugal and being cheap comes down to price and value.

Price is what you pay, but value is what you get in return for your money.

Value gives context to price. Without knowing value, it’s nigh impossible to know whether or not the price of something is reasonable or appropriate.

But being cheap tends to cause one to lose sight of this.

Essentially, being cheap means one focuses almost incessantly on price, while being frugal means one focuses far more on value.

While spending no more than necessary is a hallmark of my views on budgeting, the bottom line is almost never just price.

Instead, focusing on value is what I’ve aimed to do whenever I’ve decided whether or not to spend money.

In fact, I almost always use the words “frugal” and “value” to complement one another when I write about saving money and improving happiness.

Being cheap comes down to being penny wise and pound foolish.

It reminds me of a few years ago when I was shopping for a 49cc scooter to get around town.

I could have picked up a new Chinese scooter for ~$800. Or I could have bought a used Honda for ~$1,000.

Someone who’s cheap would automatically choose the Chinese scooter, as it’s $200 less.

Being frugal, I chose the Honda.

The problem is that the Chinese scooter would probably only last 1/4 as long, meaning it’s far more expensive in the long run. That’s not even to mention the ongoing reliability issues that would certainly add up to a lot of time and money wasted, in addition to all of the frustration in one’s life.

When you’re already saving a ton of money relative to what you otherwise could be spending (assuming you’d get around by car), scraping the bottom of the barrel to the point of diminishing returns is nonsensical.

If the only thing you’re concerned about is spending the least possible amount of money in life, you may as well go pitch a tent in the woods and escape society.

Of course, you’d probably be miserly and miserable at that point. And alone.

But frugality isn’t about just spending less than anyone else. 

Frugality is about maximizing value in one’s life. 

It just so happens that spending less often works in tandem with maximizing value because much of the improvements in one’s happiness and personal fulfillment come about very early on in the spending chain.

Once you’ve already maximized value at the exact intersecting point of spending the least, you’re done.

Being cheap would mean that you’d attempt to still spend less, even if it means sacrificing value. And that’s just not smart in the long run, as you may end up spending more than you otherwise would have.

Plus, you’re probably going to sacrifice time and peace of mind, which both have a cost. But being cheap only focuses on price, ignoring all of the related factors that spending the least amount of money can impact. One’s time and happiness can be deemed almost worthless if one is cheap enough, which is obviously just plain silly.

Affecting Others Around You

There’s another major difference between being frugal and being cheap.

Being cheap affects others around you, often negatively. Being frugal should not do so. 

For instance, leeching off of others in any way would be being cheap. Taking advantage of other people’s kindness, especially in order to save money, is definitely being cheap.

Being frugal means you’re fair. You aim not to take advantage, nor do you aim to be taken advantage of.

A good example of this might be the two-bedroom condo I split with my former significant other for years.

Claudia and I rented a two-bedroom place because she has a son that’s still living at home. And so although a one-bedroom place would have suited just the two of us okay, that plainly wouldn’t work for three of us.

Being cheap would have meant I would have tried to negotiate a lower price of rent (instead of paying 50%), as the second bedroom was necessary for her son (who isn’t my son).

That would have created resentment and conflict, at the very least.

But I paid 50%, as we were in a balanced and committed relationship. We were already being frugal by living in a smaller two-bedroom place, avoiding a larger home in the process. The place was already a good value. To scrape the bottom of the barrel and try to take advantage of the fact that Claudia has a son would have negatively affected our relationship and her view of me, and it would have just been totally stupid.

When you’re frugal, you aim to take a balanced view on spending, accounting for how others feel about money and spending.

One’s life, spending, and long-term financial goals do not exist within a vacuum. One should always account for how their frugality might impact others around them. If there’s a strong negative correlation between one’s spending habits and the quality of their relationships around them, that’s something to honestly investigate.

Frugality is about spending the least while simultaneously improving value the most, but it’s also about being fair and balanced. Having a full bank account and an empty life around you will not serve you well over the long run.

Quality Of Life

I saved the best for last.

In my view, the biggest difference between being frugal and being cheap comes down to one’s quality of life.

Being cheap negatively impacts one’s quality of life, while being frugal can and often does improve one’s quality of life.

In the end, all of the saving and investing that should add up to financial independence is designed to improve one’s happiness, personal fulfillment, and quality of life.

Otherwise, what’s the damn point?

If you’re spending less but miserable, you really need to ask yourself where you went wrong.

I spend far, far less than I used to. There’s a 35-year-old Jason in some alternative universe that’s still living and spending like I used to, and he’s chained to the 9-5 grind. And he’s unhappy.

But I spend a fraction of that alternate me. And I’m far happier than him. I know this because I’ve experienced both sides of the coin.

But spending less is often not simply about spending less; it’s about maximizing value, happiness, freedom, and personal fulfillment. It’s about living a holistic lifestyle that builds in a constant self-reinforcing loop of improvement.

This is why I started my “It’s Not About The Money” series.

Most of my everyday habits and activities aren’t really about saving money at all. Instead, much of what I do is about maximizing happiness. It just so happens that spending less fits in with that theme.

But there is a point of diminishing returns, where spending less does become kind of a competition with oneself (or with others, where there’s a constant comparison occurring). At that point, spending less is almost completely about spending less, happiness be damned.

That’s a huge mistake. 

I actually recently almost fell into this trap myself.

I started investigating the possibility of saving money on my internet bill by cutting out the broadband (i.e., canceling Comcast’s wired connection) and instead using my Cricket Wireless plan to create a full-time hotspot with my iPhone 4s.

Now, this would save me something like $30/month in the process.

But after looking into it, and reading through the numerous trade-offs (slower speeds, high-speed data caps, the possibility of overheating my phone, relying on one source for both my phone and internet, etc.), I realized that I would be dramatically negatively affecting my quality of life to save just 30 dollars or so per month.

The Internet is one of the best luxuries in modern-day society, in my view. And it’s honestly worth much more than I pay for it, which speaks back to my initial point on price and value. If access to the Internet all of the sudden doubled overnight, it’d still be a tremendous value.

Plus, it’s a bit of an investment for me, with an incredible ROI. I use it to not just do things that most people use it for, but I also use it for business/professional purposes.

And due to my freedom and penchant for reading, I probably spend far more time online than most people.

Said another way, I get out more than I put in.

I already have the base package that Comcast offers, and it’s on a promotional special. To try to scrape the bottom of that barrel and make a huge sacrifice in an area of my life that provides a lot of personal happiness and value would be moving very quickly from frugal to cheap.

That’s a slippery slope. Be careful not to start sliding.

Conclusion

I pride myself on being frugal. I’m not ashamed in the least. If anything, I think most members of developed countries should probably take a good look at their own spending and consumption to see if they’re proud of their everyday habits.

But my pride would disappear if I became cheap. In my view, there’s nothing about being cheap that’s admirable. I’d be less happy and less personally fulfilled. And I’d be more alone, as others around me wouldn’t (rightfully so) put up with it.

I think a good litmus test really comes down to quality of life. An honest assessment about whether or not one’s spending affects their quality of life positively or negatively should allow one to start to deduce whether one is being frugal or cheap.

Being frugal has completely changed my life for the better. It’s allowed me the capital necessary to buy shares in wonderful businesses, which has resulted in the portfolio that now generates five-figure passive and growing dividend income on my behalf.

But I’ve tried to avoid being cheap. And in the process, I’ve developed a life that’s, overall, full of happiness and savings.

How about you? Ever toed the line between frugality and cheapness? How’s that worked out? 

Thanks for reading.

Image courtesy of: Sira Anamwong at FreeDigitalPhotos.net.

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Filed Under: Frugality

About Jason Fieber

Jason Fieber became financially free at 33 years old by using dividend growth investing to his advantage. Jason has authored two best-selling books: The Dividend Mantra Way and 5 Steps To Retire In 5 Years (also available in paperback).

 

Jason recommends Personal Capital for portfolio management, Mint for budgeting, Schwab for the brokerage account, and Morningstar, Daily Trade Alert, and Motley Fool for stock ideas. This blog is hosted by Bluehost. If you'd like to start your own blog, Jason offers free coaching when you use our Bluehost affiliate link.

 

Jason's writing and/or story has been featured across international media like USA Today, Business Insider, and CNBC.

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Reader Interactions

Comments

  1. Dividend Diplomats says

    August 10, 2017 at 7:06 pm

    JF –

    Very good article and timely as always. When someone sees me not buy something – they call me cheap. It’s quite funny. It’s because I didn’t buy a martini. I do not like martinis and they add no value to my life (this was an out of town drink for work), I opted for a craft beer, as I enjoy that but costs far less. Further, my girlfriend has wanted a pizza stone for a long time, and anytime we were at Target, she would pick it out and say, “look it only costs $15!”. I would ask her to forgo this one, because it wouldn’t last. I proceeded to surprise her with a Cast Iron Pizza Stone that will last far longer and cook pizza far better, it costs more than 2x the amount of the one she saw, but mine was a top rated, higher quality and on-sale item. We love pizza and making our own to be “healthier”, as well as have fun doing it (this in fact, ends up being cheaper sometimes than take out!), and we are now doing it on equipment that will last a lifetime potentially.

    I wish others that aren’t in the community can read the article and see the difference here!

    -Lanny

    Reply
    • Jason Fieber says

      August 10, 2017 at 7:10 pm

      Lanny,

      Yeah, man. Definitely. I hear you all the way.

      It really comes down to adding value and happiness to your life. It’s about improving your quality of life. The thing is, spending less will often (but not always) accomplish this. It’s just when you enter that slippery slope of cheapness, that can get you in trouble sometimes. It’s a fine line that looks a bit differently for everyone. But I think if you can manage to walk it just right, you’ll find an immense improvement in your overall quality of life. I almost always spend less not because of the money, but because of value and happiness (much of which occurs via the additional incremental freedom). However, I do sometimes find myself teetering on the edge, which I noted with the recent internet bill musings.

      Thanks for dropping by. Enjoy the pizza!! 🙂

      Best regards.

      Reply
  2. P2035 says

    August 11, 2017 at 3:22 am

    Nice one Jason. Thank you for inspiring others and to make that grey matter in our upper boxes work a bit and think about stuff that we really need and don’t. Im not proud of our spending habbits but they are not that bad also. We don’t save enough only 10-15%, but still we manage to save some compared to others that don’t and take consumer loans to have their saving rate negative. I remember one man quate that its acually very easy to become rich, all you have to do is spend less then you earn all of your life 🙂 We spend quite lot on hollidays and home repair as I look at the spending but I find these spendings frugile as we orgsnize our hollidays our self which some times decrease the price by 1/2. Also we make lots of repairs our self thats also max value for comparably low price. Also fun to see the results that your work is. I find the wall paited by ourself much more beutifuland couzy then ones that would be paited by “profesionals”.

    Reply
    • Jason Fieber says

      August 11, 2017 at 12:31 pm

      P2035,

      Right. Building substantial wealth and passive income is simple on paper, but much harder in real life. 🙂

      10% to 15% is still pretty solid. While that probably won’t get you to FI quickly, that’s okay. We all have different goals, time frames, means, etc. And not everyone wants to become free quickly. Some really like what they do for a living, but they just want a little extra flexibility (just in case).

      Cheers!

      Reply
  3. Tall Investing says

    August 11, 2017 at 11:07 am

    Enjoyed the article. I try – for every buy decision I make – to apply the ‘happiness’ lens.

    A few recent examples:

    – 2 books from Amazon for a week at the beach (‘Sapiens’ and ‘Homo Deus’ btw). $19 dollars in total through second hand Amazon sellers. A definite YES as reading is one of my favorite things to do, money well spent.

    – A $20 power bank for my phone at Amazon. A slightly less comfortable YES, but decisive factor was how unhappy I have been, many times, flying home from a business trip with an empty phone. This caused me stress because I couldn’t fetch an (expensable) Uber home, text/update my SO etc.

    – New sunglasses. My old Ray-bans passed away after many years of loyal sun blocking service. Couldn’t get myself to fork over the ~$100 for a new pair but instead sticking with another old pair. Great new sunglasses would make me happy, but smart frugality means I can save the ~$100 for now and make the trade off to stick with an old pair for at least another year.

    Cheers,
    Tall Investing

    Reply
    • Jason Fieber says

      August 11, 2017 at 12:42 pm

      TI,

      Yeah, there you go. Those things aren’t just cheap in absolute terms, but they’re great buys in relative terms due to the improvements in personal happiness they provide you.

      That’s really where it’s at. If spending $20 improves your quality of life, it’s a no-brainer move. It’s just having that honest conversation about whether or not the spending will/does indeed accomplish that end goal.

      Thanks for sharing!

      Best regards.

      Reply
  4. Dividend Gremlin says

    August 11, 2017 at 12:01 pm

    Jason,

    Two great articles in a row. Your last one was a great thought provoker on language and societal views. If I ever had enough passive income to become ‘jobless’ – I’d flaunt the crap out of it! Also I fully agree with being frugal vs cheap. It is something I regularly remind people of, and I think there is a huge difference. Example – hosted a bachelor party recently (as best man), I found a house of a friend we could borrow, kept the location within a short drive, and made the events cost effective. End result was a damn good time, and no one left feeling like a casino (or choice underwear) swallowed their wallet.

    It is a great ability to have. To recognize the different between frugal and cheap, and see that value.

    – Gremlin

    Reply
    • Jason Fieber says

      August 11, 2017 at 12:46 pm

      DG,

      Thanks, man. Glad you’ve enjoyed the articles. I sometimes wonder when I’ll run out of stuff to write about. Hasn’t happened yet. 🙂

      I agree that having that ability to decipher the difference between frugal and cheap is a great skill. I think it develops as you go and learn about yourself. Sometimes you spend too much and realize that you didn’t really get value. You learn from that. Put that experience in the memory bank. And you try to make sure you do better next time.

      Being cheap would have been to resent your friend for picking you as the best man because of the additional costs that putting that party on would incur. That’d be being cheap. Instead, just figuring out how to maximize value and still have fun is being frugal.

      Best wishes!

      Reply
  5. American Dividend Dream says

    August 11, 2017 at 12:26 pm

    Tagging onto Lanny’s comment above. It always irked me the wrong way when I would go out to the bar and not buy a beer and instead get a water or coke. My friends would call me cheap. But I think back to all these articles of frugal vs. cheap and it boils down to your 2nd point above. My decision to have a water only affected me. My friends can drink whatever they want and I can drink whatever I want and it should not affect them. It always did though. The money saved between buying $5 beers a piece and drinking free water at restaurants has probably put me a few thousand dollars richer than my friends over that time period. That few thousand dollars invested can now theoretically pay for those $5 beers now…

    And don’t get me started on my flip phone…

    Anyways, good article!

    ADD

    Reply
    • Jason Fieber says

      August 11, 2017 at 1:18 pm

      ADD,

      Right. We can’t help if others are peeved by frugality. If it’s not cheapness, it’s kind of on them.

      If I’m not doing something to negatively affect someone, yet they’re still bothered by things, I don’t feel bad about that. If you’re doing what’s best for you, others around you should be happy and supportive. If they’re not, you have to be honest about whether or not those people are actually a good fit.

      I experienced resentment even when I was clearly being frugal (not cheap), as I’ve written about before. I have no regrets about that. If I would have been cheap with people, I’d be very bummed out if it affected relationships. That’d be on me.

      Cheers!

      Reply
  6. Ken says

    August 14, 2017 at 5:39 pm

    interesting article jason

    Reply
    • Jason Fieber says

      August 14, 2017 at 5:48 pm

      Ken,

      Thanks. Glad you found it interesting! 🙂

      Cheers.

      Reply
  7. jamesmcsherry says

    September 9, 2017 at 5:40 am

    “But spending less is often not simply about spending less; it’s about maximizing value, happiness, freedom, and personal fulfillment. ”

    This is right at the heart of what simple living and the pursuit of financial freedom means. I just purchased a new apartment and am living in it two weeks – a number of things have gone wrong which I am having to fork out considerable extra spend to sort out. This doesn’t sit well with my frugal and savings-minded self. Yet, there is value in having these things sorted, spending extra now (on quality) will provide that value for the future. Besides I am grateful I am in a position to rectify these things and focus on generating value, even if it means some sacrificing money right now. Every cloud has its silver lining – and often it’s found in our thoughts

    Really enjoying your site and your inspiring story!

    Reply
    • Jason Fieber says

      September 9, 2017 at 7:32 pm

      James,

      Thanks so much. Glad you’re enjoying the site!

      Yeah, if you’re going to own your abode, it makes sense to make sure it’s right and set up for the long haul. Being cheap at the outset only to then deal with higher costs and troubles down the road doesn’t make sense. I personally prefer to rent, but I’d be very careful not to toe that line between cheap and frugal too closely if I had to take care of things within my own home.

      Best regards!

      Reply

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Hi. I'm Jason Fieber. I achieved financial independence and retired in my early 30s by using dividend growth investing to my advantage. I cover stock analyses, market news, dividend updates, and the dividend growth investing strategy.

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