We all know that it is important not to be frivolous and careless with our spending habits and finances, but there truly is a difference between being cheap and being frugal. A five-year study of self-made millionaires conducted by Thomas C. Corley found that 67% of the wealthy people in his study considered themselves to be frugal. Being frugal doesn’t mean that you refuse to spend money on anything; it means that you know your priorities and you are willing to spend much more on the things that are meaningful and important to you than you are on anything else. In order to be able to spend money on the things that they value and that matter the most, frugal people cut back on spending in other areas.
Here’s a closer look at some of the differences between being cheap and being frugal.
People who are cheap are concerned with the cost of things, while frugal people are more interested in the value of things. Frugal people are willing to spend money on things that are important to them, while people who are cheap prefer getting the lowest possible price on everything.
Those who are frugal understand that they do not have unlimited finances, so they are careful to pick and choose how they spend their money. For example, they may decide to pack their lunch for work instead of buying lunch every day in order to be able to spend the money they save on something else that they care about more.
Cheap people do not consider how their actions and desires to keep from spending money affect not only themselves, but others around them. For example, if they carpool with colleagues to a conference for work, they likely will not offer to give money to the driver to help pay for gas. People who are cheap assume that everyone owes them a good deal simply because they deserve it and can become angry or belligerent with others when they don’t get it. A frugal person would like a good deal, but understands that they are not owed any special treatment and they will not make a scene over it. Frugal people are making spending decisions with their long-term goals in mind, while those who are cheap are only looking at things through a short-term lens and meeting their immediate wishes.
In the quest for financial security, being frugal is far better than being cheap. Even though people who are frugal may make those around wish they were handling their own finances differently to achieve some of the same positive results, not everyone will like them or be happy with them all of the time. Frugal people understand this and are still willing to make the financial choices that will be beneficial to them in achieving their goals. They realize that everything comes with costs and benefits, and they believe that the benefits of being efficient with their finances outweigh any costs, like some people having negative opinions of their choices.
My grandfather described himself as cheap, but I disagree with his self-assessment. I believe he is the classic example of a frugal man. He grew up during the Great Depression, and he would be the first to admit that it forever shaped the lens through which he viewed the world. He understood that everyone has a finite amount of financial resources that they must be responsible about using, and that it is important to do everything you can to safeguard those resources.
My grandfather was a simple man who loved and provided for his family above all else. He was a farmer who never attended college. He had three children, and when my grandmother passed away when they were entering their adolescence, my grandfather had to assume the responsibilities of both mother and father to them. As the sole provider for his family, and someone who put a high value on getting a good education, he vowed to send all of his children to college. He knew being a farmer would not meet his family’s financial needs, so he took on three extra jobs to save up enough money to pay for his children to further their education. Having them get a better education than he had was of paramount importance to him. He chose not to take vacations or buy expensive birthday and Christmas presents for his kids, and made countless other spending cuts and sacrifices along the way in order to achieve his ultimate goal of giving the gift of education to his children. When they were teenagers, my grandfather’s decisions were not always popular with his kids, but when they became adults, they realized he wasn’t being cheap and mean to them, but rather making sacrifices so he could give them the opportunity for a better life than he had.
Now they can look back on his frugality and the financial choices he made for them with much love and respect. I too love and respect my grandfather and look to him as a shining example of what it means to be a truly exceptional human being.
Key Takeaways:
There are many things that we can learn from the wealthy. How to avoid some of the most common spending mistakes is a prime example. It is possible to learn from the mistakes of others as we surely do not want to have to make them all on our own. It is important to guard against making emotional and impulsive purchases. What seems like a good idea in the moment may cause us to spend beyond our means and wreak havoc on our budget, credit, and finances down the line.
Creating and following a budget helps us to see where we are spending our money so we can make adjustments to ensure our spending habits are more in line with what we value the most. It is important to re-evaluate goods and services that we have been spending money on for a long time to be sure that they are still in line with our goals for how we want to spend our money today.
Having an adequate emergency savings fund, long-term disability insurance, life insurance, and a will are essential if we want to ensure that we can protect our family in difficult or tragic times.
Being responsible with our financial decisions is very important, but it is far better to be frugal than cheap. If you are a frugal person, you are aware of your spending habits and make responsible choices to cut costs where you can so that you can spend money on the things that matter most to you.
