After writing my wildly popular article, “25 Examples of My Extreme Cheapness“, I actually freaked myself out a little. Am I really as cheap as I sound? Then, after receiving a few comments like, “Wow, I can’t imagine living like this”, I was taken back even more! Being frugal is one thing, but to be called cheap is quite a different animal! So what is the real difference between being cheap and exercising frugality? And where do I actually fit in? Am I frugal or cheap?
1) Deciphering the Difference Between Value and the Lowest Cost
If you are constantly buying products because they offer the lowest cost, then you are probably cheap. So why is this a bad thing? Often times the cheapest product is the most poorly made. Instead of spending $5 on a quality can opener that will last 10 years, you spend $3 on a can opener that will only last 2 years. Over the course of ten years, your cheapness has actually cost you $15 for can openers vs. only $5 if you were thinking with a long-term frugal mindset.
What about me? Frugal or cheap? Yeah… I think I have to put myself in the cheap category on this one.
2) The Difference Between Having Fun or Staying at Home
There are so many ways that we can entertain ourselves these days. The list is almost endless! Well, that is, unless you are cheap. If you have the quality of cheapness, then you will likely limit your activities to those that are free. You know, things like hiking, biking, tennis, running, yoga, picnics, etc. These activities can definitely be fun, but you may be letting your cheapness get in the way of some other quality adventures (like concerts, dining out with friends, hosting parties, traveling, etc.). Those that are frugal will find excellent deals on these events, but will still have to fork over some money to attend. Overall, they will spend more money than you, but they won’t be sitting at home having no fun for days on end either.
What about me? Frugal or cheap? I have morphed into the cheap category on this one too…
3) Being Cheap Comes at the Expense of Others
There was a show that aired a couple of years ago that I’m sure you have all heard of. It was called “Extreme Cheapskates”. The featured cheapskates were absolutely out of their minds. There was one guy that rode his bike around town all day to find change. He collected soda cans, found change in and around pay phones, and even walked into restaurants to check all of the seat cushions for change that had fallen out of customers’ pockets. In the end he collected $7. There was another man that would save money by taking leftovers from other couples at the restaurant! These two guys embarrassed their wives terribly and their cheapness was definitely affecting their spouses negatively.
Those that are cheap also avoid saying thank you with their money. For birthday parties, they either come empty handed or recycle a gift that was given to them in years past. With these actions, they are hurting their friends who feel unappreciated by the crappy gift they receive.
What about me? Frugal or cheap? I give myself a frugal rating here. I might give a two-year old a gift from the Dollar Tree, but they typically love it!
4) Crossing the Line into the Office Joke
Nobody wants to be the joke of the office, especially if it hurts your chances of getting promoted. Those that are cheap don’t participate in secret Santa’s, potlucks, and they never give gifts of appreciation to their coworkers. Because of this, they often seem anti-social, elusive, and unappreciative. People like this rarely get promoted. Those that are frugal will get deals on gifts and give them freely. Again, they’ll spend more on a day to day basis, but they have a much better chance of being liked and being promoted within the company.
What about me? Frugal or cheap? I’m calling myself frugal. I do participate in secret Santa’s. I do buy food for potlucks. And, I once brought donuts into work on my birthday. That counts as frugal right?
5) Saving Money vs. Earning More
The major difference (in my mind) between being cheap and frugal is how you perceive money. Either it is a fixed number that cannot be changed or it is a nearly infinite resource.
Cheapskates often feel like earning more money is not easy, so instead they focus on reducing expenses in order to boost their savings. Frugal people think of ways to free up their time so that they can earn more money through other avenues. In other words, those that are frugal might have a lawn care service, a personal assistant, and a house keeper because these services allow them to spend more time working and earning more money in the long run.
Frugal people might appear to be wasting money on services, but in fact their overall income after expenses is often larger than those that are cheap and do everything themselves.
What about me? Frugal or cheap? Unfortunately, I am cheap in the category. I do almost everything for my website business to decrease my expenses, but this does not allow me much time to expand the reach of the site. While I am saving money, I probably am limiting my earnings potential.
So what do you think? Are you frugal or cheap? Why do you think so?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.