There is a raging debate going on today about the difference of being frugal and simply being cheap. Do you know the difference? Better yet, do you know which category you fall into? While there is nothing wrong with being frugal, being cheap is another issue. Below, you will see why being cheap is not ideal and how to know which one you are and how to change if you are cheap.
Cheap or Frugal. What’s The Difference?
Over the years I’ve found the main difference between the two to be that frugal people are willing to spend money when they find a good deal, but cheap people will still refuse to spend.
For example, let’s say your sneakers are old and the sole is wearing thin. A frugal person will shop for a new pair, looking for the best price-to-value ratio. This means they won’t buy the $10 pair knowing it is a knock off brand and will wear out in 3 months time. They will instead spend more to get a better quality sneaker, assuming they can get a good deal on it.
A cheap person on the other hand will either not buy a new pair of sneakers until the sole wears through or, they will buy the cheapest pair possible, regardless of quality.
At the end of the day, cheap people do not want to spend money on anything. In fact, it pains them to spend money whatsoever. Frugal people on the other hand are willing to spend money, as long as they get value for their money.
Why Being Cheap Is Not Ideal
Being cheap is not something you want to aspire to be. Getting ahead financially is all about being smart with your money. This means earning the most you can, saving a good amount for the future (and investing a portion of that) and spending it. The key here is spending it. You have to spend money if you want some enjoyment out of life.
But don’t take that as me telling you that happiness comes from spending money on things. I used to spend money on things and yes, it did provide me happiness, but that happiness was fleeting and I was miserable a few days after making the purchase. I’ve realized that I get enjoyment more from experiences and the memories from the experiences last forever. Therefore, I choose to spend money on experiences.
Can you enjoy life sitting at home all of the time and never spend money? I guess some people can, but for most people, they will get bored and become miserable fairly quickly. You have to spend to get some enjoyment out of life. As long as you spend smartly and continue to live within your means, there is no reason to not spend.
After all, what is the point of saving everything you earn if you never spend any of it?
How To Change Your Cheap Ways
So what do you do if you are cheap? You need to change your ways. Of course, this won’t happen overnight. It will be an ongoing process. But your first step is to make the value connection in your head. Understand that you can get good value for your money if you just look around.
Realize that yes, the pair of sneakers might cost $50, but they will last much longer than the $10 pair. You might have to do the math in your head to prove this, so be ready to figure out the $10 pair will last 6 months while the $50 pair will last 3 years. Over that time, you would need to buy 6 pairs of the cheap version or spend $60. By purchasing the $50 pair, you saved yourself $10!
You also have to start small. Make small purchases based on value and slowly progress to larger purchases. Again, the transition won’t be event-free, but if you take things slowly, you should be able to overcome the pain of spending money.
Lastly, learn to shift your outlook to the long-term. This goes along with doing the math from the above example. If you can change your outlook to the long term for other areas of life, making the change to frugal living will be easier.
At the end of the day, there is nothing wrong with being frugal because you value your money and make wise spending decisions. You get into trouble when you become cheap and refuse to spend any money, at all costs. You don’t want to cross this line. Life on the cheap side is not fun as you restrict yourself from living and enjoying life. If you find that you have crossed the line, take the steps necessary to change your ways now, so that you can more easily start enjoying life.