The words frugal vs cheap can sometimes be thrown around interchangeably when talking about someone who is focused on reducing spending. However, there are key differences between the two, and it’s important to know the distinction if you want to get more out of your financial journey.
Being frugal is ultimately about making sure you’re getting the best value out of what you’re buying. It’s about getting the most for your money.
On the other hand, being cheap is all about cutting out what you spend no matter the circumstance.
It can be hard to tell the difference between being frugal vs cheap. Below you can find a breakdown of what makes the two different from each other.
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What are the differences between being frugal vs cheap?
Let’s take a look at some of the key differences between being frugal vs cheap.
Differences in definitions
A frugal person is someone who enjoys spending less money on everything they do. They might enjoy bargain hunting, cooking instead of eating out, buying clothes at discount stores, researching lower insurance premiums or cheaper grocery prices, etc.
A cheap person is someone who won’t spend any money on certain things. They could mean making an uninformed purchases solely based on price tag instead of value. For example, they choose to purchase the cheapest car they can not factoring in how long it’s actually going to last them.
Frugal vs cheap: Frugal people want to optimize total volume – Cheap people want to minimize total spend
One of the biggest differences between being frugal vs being cheap is how a person analyzes their purchases. For a frugal person, it’s all about the value for their money. They want to get the most value they can for what they pay. They may buy a more expensive dishwasher that’s going to last them a very long time instead of buying one that breaks down quickly just because it’s cheaper.
A cheap person just wants to minimize how much they spend on anything and everything no matter the circumstances. In this way, they don’t care about whether or not they’re getting a good deal. For example, they might decide to buy the cheapest furniture they can regardless of how long it will last them.
There may be periods in your life where the cheapest option seems like the only option. Try and find the happy medium between the two. Can you find coupons or deals? Can you borrow what you need from a friend until you’ve saved up enough money?
Frugal vs cheap: Frugal people want to make critical decisions about their spending – Cheap people want to reduce all spending no matter the cost
Becoming financially sound is all about making good choices with your money. For a frugal person, it’s all about making the right choices. In day to day life, there’s always going to be decisions about what needs to be purchased and some will come easier than others. For example, if a group is going out for a friend’s birthday a frugal person may decide to attend but get a smaller meal and budget for it in advance.
A cheap person just wants to reduce how much they spend no matter what. However, this can sometimes come at the expense of others. If a cheap person is invited to go out for a friend’s birthday, they may decide to just not tip well or at all if they end up spending more than they planned. Or, they may forgo outings all together which can sacrifice relationships.
When you’re trying to save money or work towards a financial goal, it can be difficult to weigh out what you can and cannot afford. Use a frugal mindset to avoid overspending but try and still live a fulfilling life. If your friend group goes out every week, it may not make sense to go out with them every week too. But hitting the major milestones can be important, and it’s important to think about how you can make the situation work best for your goals.
See related: 7 Questions to Ask Yourself Before Buying Something
Frugal vs cheap: Frugal people focus on long term financial goals – Cheap people focus on immediate short-term gains
The last big difference between being frugal vs being cheap is how a person is looking at their goals. Frugal people make decisions that will optimize their financial future in the long run.
This doesn’t mean cutting out spending completely. It means prioritizing their spend on things that will help them achieve their goals. For example, if their goal is to build passive income they will exhaust every channel of free information they can get. However, if an opportunity comes up to take a course or buy a book they cant rent on the subject, they’ll budget it in because they know it’ll help them reach their overall goals.
A cheap person is more focused on immediate gains or minimizing their losses at the expense of long-term goals. They’ll sacrifice everything that’s important to them just to save a few bucks now. This could include passing up on certain opportunities to further their knowledge or skills because there is a cost associated with it.
Every purchase must be analyzed for its worth. If a purchase doesn’t offer additional value, it’s probably something you can afford to skip. But, if it adds value to the overall bottom line of your life then take a look at how you can incorporate the purchase into your plans.
Living your life frugal vs cheap
So, you’re ready to start living a more frugal life? Here are some of the key ways to get yourself on track.
Take a look at your spending and compare that with what you value to set your limits
The first step to any frugal journey is understanding how much you spend and setting limits. If you don’t know where your money is going, you’ll never get a grip on what kind of life you can afford to live. Create categories for all of your expenses including necessities like rent/mortgage, utilities, even luxury expenses like cable. Once you have this list it’s time to decide how much budgeting you feel comfortable with in each category.
If you’re trying to educate yourself on financial topics, set a budget category for knowledge.
If you a big group of your family is going to be visiting your town for the summer, budget in additional money to make memories with them.
It’s all about setting limits based on what you can afford and what you value.
Become resourceful to make meaningful purchases
Being frugal doesn’t mean never making a purchase. It means being thoughtful and resourceful about those purchases. If you need to buy a certain product, consider if there’s a way you can get it for free through borrowing or purchasing used. Search the web to find the best price or an online deal. If it means taking a little time to get used to your new item, consider putting up with it until you can find a cost effective purchase.
Living frugally is about finding alternative ways to get what you need.
See related: Couponing to Be Debt Free
Don’t be stingy when it comes to people
Giving up every aspect of your life to save money will most likely not bring you the joy you’re seeking. Think about what will provide the most happiness to your life. If you’re spending a lot of money going out to movies with friends, consider making that time into a small get together at your place instead. It’s more affordable and just as fun!
Friends and family are an important factor in your life and there’s no reason to give up on them just to save a few bucks.
See related: How to Stop Living Stingy and Still Grow Your Wealth
Can you become rich by being frugal?
Being frugal is all about making sound financial decisions with your money. It’s about making choices that bring you the most happiness and minimize your stress. It’s not about becoming rich overnight or quitting your job to travel around the world.
Living frugally is a choice and for some people, it might mean to keep working even though they could retire tomorrow if they really wanted to. But, one thing is true. Living frugally will help you get closer to your goals while saving you money along the way. Being able to pay off debt or save enough money to start your own business are great examples of how making smart financial decisions can lead to big rewards.
The key to living frugally is understanding the true value of your money. Remember, living frugally doesn’t mean cutting out every happiness from your life. In fact, many people who take up a frugal lifestyle find themselves more fulfilled as they make choices that benefit their life.
Living frugally is all about being resourceful and making smart choices with your money. It’s also about not forgetting what you value most in life. These are just some of the ways to get started, but once you’ve got the ball rolling it will be easier than ever to keep up your new habits.