The Difference Between Frugal and Cheap

November 28, 2012

I’ve recently learned about a new show on television called Extreme Cheapskates, which features real people going to extraordinary lengths to save money. Their methods have included re-using paper towels by hanging them to dry, doing laundry in the shower to save money on detergent, and even refusing to buy toilet paper! As entertaining as this might sound to watch, it’s unfortunate because it really gives people the wrong idea about what it means to be frugal.

My view is that pinching pennies actually has more in common with spending your paycheck on frivolous purchases than with being frugal, because in both cases you’re using a lot of your time or effort (either to earn money or avoid spending money) without getting all that much in return. These so-called “extreme cheapskates” are likely causing themselves unneeded stress by worrying over every time they might have to spend a dollar. If saving money requires you to live your life with sacrifice, hardship, and stress, that’s frankly no way to live.

By contrast, being frugal isn’t about saving every last dime but rather about getting a good value for your money when you do buy something. What does it mean to get a good value for your money? It’s less about how cheap or expensive something is, and more about whether the purchase will make enough of a positive difference in your life (like saving you time or making your life easier or more pleasurable) that greatly exceeds its cost. In other words, it’s okay to spend more money on something if you’re getting a lot out of it. Here are some guidelines I can share with you from my own experience that have helped me better define how to be frugal and get better value from my spending:

1) Don’t be as concerned about price as you are with buying something well made. We’re often tempted by something cheap to save money but it can be really frustrating to use things that just don’t work right. For example, I used to own cheap blenders that I’d never even wind up using because the blades wore down so quickly and they wouldn’t mix anything well. Then I purchased a restaurant quality blender even though it was $400. It was expensive, but it works so effectively and is such a pleasure to use that I now make delicious, healthy smoothies every day. Life is just easier and more enjoyable when you’re not stressing out about how difficult it will be to do things with a poorly made product. Sometimes it’s even cheaper in the long run to purchase a higher quality thing that won’t break down and need to be regularly replaced; the blender I purchased was more expensive up front but is expected to last 25 years.

2) Well made things don’t need to cost a lot of money. Find something that fits your needs. It’s important to remember that you aren’t always getting the better value just by purchasing what’s more expensive. For instance, a luxury car may be more enjoyable to ride in than a Toyota, but since both can equally be relied on to accomplish what most people need a car to do – get you where you’re going – paying thousands of more dollars to own a BMW probably isn’t worth it. It’s important to find something well made that actually fits what you need it to do.

I recently decided to purchase a laptop, and because I knew I was going to use it every day, I didn’t want to buy something cheap that would run slowly or be a chore to use. I then seriously considered getting the new MacBook Air, which was a lot of fun to use when I tested it out at the store but also would cost me $1,000. After a lot of thought, I realized that for what I needed my laptop to do – web surfing, word processing, watching videos, and listening to music, I didn’t need a $1,000 laptop. I opted instead for a Samsung Chromebook, which is designed primarily for Internet browsing and saving documents online. It’s a low cost item at only $250, but it’s not poorly made; it’s less expensive because it’s designed to do fewer things more efficiently. I was able to find a high quality product that I would really enjoy using without needing to spend a lot of money.

3) Consider how often you’re going to use something. Even if something is a really well made item, if you only plan to use it a few times a year (or less), you still may not get much value out of buying it. In that case you’d be better off purchasing something cheap or perhaps renting it instead of owning it. Also, if you make a habit out of buying things that you’ll rarely use, even if they’re low cost or on sale, those costs can add up over time. Even worse, if you’re paying for a larger house or apartment just to have all that stuff you’re never going to use collect dust in the closet, you might actually be spending thousands of dollars a year in housing costs for it.

4) Bulk purchases on things you buy often. If you need to buy a lot of something frequently, it can often be a better deal to buy things in bulk. I find this to be true about non-perishable food staples (flour, grains, beans, rice, oatmeal, etc.). I like to buy organic items, and packaged staples at the health food store can give you a sense of sticker shock. But most health food stores usually have bulk bins for these items where the prices are very reasonable. I purchase organic oatmeal at Whole Foods for $1.50/pound, compared to my local grocery store that sells packaged non-organic oatmeal for almost twice as much. Being frugal doesn’t mean you need to sacrifice.

5) Experiences that improve your relationships with people or improve you as a person. Something you can spend money on that will almost always have a benefit that greatly exceeds its cost is building stronger relationships with the people in your life that are close to you. You may overpay for a beer at your local bar, but if it allows you to have a great time with good friends then it’s always worth it. You can’t put a price on the value you get from getting closer to the people in life that you care about. One area which I strongly believe highlights the difference between frugal and cheap is being a good tipper when you receive good service. For only a few extra dollars, you help out someone who’s working hard for you and you can build a stronger relationship with the service providers you rely on for what you need.

In addition, it’s often a great value to spend money on learning new skills that stay with you for life. I spend about $300 a year on martial arts classes, but what I’ve gained in improved strength, fitness, and mental clarity, vastly exceeds what I’ve spent. Once you’ve learned new skills, they improve your life every day and no one can ever take that way.

Remember that the goal of being frugal is supposed to enhance your life, not subtract from it. That’s why frugal beats being cheap – it’s a win-win that saves you money and also makes your life better.