Cheap vs Frugal
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I was perusing the archives of one of my favorite bloggers, Ramit Sethi, and came across this great post highlighting the differences between one being cheap versus frugal. There is a definite difference between the two, but they are often thrown in the same pot. Here are some of the highlights from Ramit’s post contrasting the two:
Cheap people care about the cost of something.
Frugal people care about the value of something.
Cheap people try to get the lowest price on everything.
Frugal people try to get the lowest price on most things, but spend a lot on items they really care about.
Cheap people are inconsiderate. For example, when getting a meal with other people, if their food costs $7.95, they’ll put in $8.00, knowing very well that tax and tip mean it’s closer to $11.
Frugal people won’t order a Coke if they’re on a budget, so that when the bill comes, they don’t look cheap.
Yes, being cheap and/or frugal can be a cultural quality. I won’t spend much more time on this one.
Cheap people keep a running tally with their friends, family, and co-workers. Some frugal people do this, too, but certainly not all.
I think the difference between being cheap or frugal comes from one’s attitude and philosophy towards money and possessions. Someone who is cheap generally has a view that 1) they deserve the money they have 2) their money is for them only. Frugal people on the other hand often have the attitude that money is not an end in itself, but simply a means to achieve other goals. They believe they are stewards of money rather than owners. Frugal people are often generous while cheap people are not. Cheap people place accumulating money above relationships while frugal people use money wisely to enhance relationships.
One of the most interesting aspects of this issue (pointed out by many commenting on Ramit’s post) is that people who are cheap constantly live in fear. Fear of not getting their money’s worth, fear of getting ripped off, fear of not getting what they feel they deserve. In the end, a cheap person ends up becoming a slave to their money rather than its master.
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2 comments
Great points. There is definitely a huge difference between the two, but I think the word “frugal” has unfairly taken on a lot of the characteristics of the word “cheap.” I think value and making each dollar have the largest impact is a lot more important then just saving money by being cheap.
Both cheapness and frugality lead to a higher amount of savings than not being either, so in principle I don’t mind cheap people because at least they’re consistent in their decision making.
What bothers me is blatant overspending or indecision based on an ill-planned budget. The best thing about being frugal is prioritizing. But you first have to know what you value. And that can vary widely based on your emotions, the company you keep, and the # of credit cards you have. We buy too much of what we don’t need, and sometimes just enough to keep up with our friends. Personalizing finance takes the most effort…
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