3 Reasons Why Being Frugal Is Better Than Being Cheap
Choosing a restaurant based on happy hour specials is frugal, but shorting your server their tip is cheap.
If you’re one to religiously stick to a budget, regularly pass on ordering takeout or consistently refuse to purchase the many “upgrades” associated with your cell phone plan, you may have been referred to as cheap at some point in your life. Regardless of the accusation coming from a friend, family member or complete stranger, cheap is not a term of endearment. Lucky for you, the derogatory claim as a result of these spending habits, is inaccurate and unfounded. You see, much like the confusion between rich and wealthy, being frugal and cheap are not one in the same.
Here are 3 reasons why it’s important to be frugal (not cheap!) and how the 2 money-minded qualities differ:
Impact on Others
While frugality and cheapness both thrive on saving money, the similarities stop there. Being frugal focuses on saving for yourself, while being cheap focuses on saving at the expense of others. Dining at a restaurant due to happy hour discounts is a frugal practice. Shorting the waiter or waitress the tip they deserved for providing quality service is a cheap practice.
Recognition of Value
Another differentiator that often emerges during the purchasing process is the ability to choose value over price. Those who are cheap focus on paying the lowest price possible and are willing to sacrifice quality for it, whereas frugal buyers are willing to make exceptions for items that offer beneficial features that are important to them. Sticking with the dining out theme, penny-pinching eaters would much prefer lunch at the local fast-food restaurant versus an upscale establishment with healthier menu options as they are more likely to sacrifice health for the low cost when compared to their frugal counterparts.
Length of Thought
Since price is typically the only concern for those that are cheap, their thought process is generally short-term. The goal for the cheap is to simply pay the least amount of money possible, even if the product doesn’t last very long. Those that are frugal are the opposite - they think long-term about their purchases and the life of the product compared to the duration of their need. For instance, according to iSeeCars, 11.2% of Toyota Sequoias reach 200,000 miles in their lifetime compared to the automobile industry average of just 1%. Although Sequoias start around $50,000, which is about $5,000 above the national average, frugal car shoppers understand the long-term value and often opt for this long-lasting vehicle, while cheap buyers turn it down due to price alone. In a sense, those that are frugal are able to see the big picture - the cheap cannot.
Prudently saving and practicing economical spending habits are characteristics of someone that lives below their means through frugality. The practice of frugality will ensure you have a better handle on your finances, a respectable reputation and a higher probability of achieving your financial goals. Becoming cheap can cause these qualities to quickly deteriorate, so next time you’re out shopping for a car or dining at your favorite restaurant, remember to be frugal - not cheap.
I liked how well you give pattern to consumer’s thought process.
Would you kindly allow me to give a reference to this article in my next substack post?
I will add a link to your article too - but only with your permission.
Sincerely
Romana
Good read. I like how you separate being cheap from frugal. So true!