Being frugal with money is something to be commended for. In a world filled with extreme consumption, you should be commended for not following the herd. However, in the spirit of being frugal, we could easily cross over into the world of being too cheap. And I personally don’t think this is a healthy place to be at with our money. Being extremely cheap can not only damage our emotional health, but damage our relationship with others and most shockingly, doesn’t make that much of a difference in our overall finances.

How Are Being Frugal & Being Cheap Different?

We often use these two terms interchangeably. We have a friend not wanting to spend money on that $5 coffee and we call him or her frugal and cheap at the same time. But to bucket these two words together really is a disservice. There is a clear line between being frugal and being cheap. Yes, both frugal and cheap people aim to save money. But the way each person goes about that is quite different. A frugal person doesn’t hate spending money. They just don’t like to spend it on things that don't matter to him or her - things such as for status, prestige or ego.

On the other hand, a cheap person just doesn't like the idea of spending money. No matter what. They are focused on spending the least amount of money possible. At all times. A cheap person is focused on buying the cheapest option every time. A frugal person is focused on getting the most value for his or her money.

Growing up, I of course didn’t know the difference. I was ingrained with the idea that spending less always trumped spending more. I don’t think I even knew what the word ‘value’ meant at the time. So whenever we went shopping for new shoes, my mom would take us to a Payless. God bless them because without them, I don’t think my mom would have even considered buying new shoes for us. They always had deals and you could walk out with a decent looking pair of shoes for sometimes under $15.

And this habit carried over to my college days even when my mom wasn’t the one taking us to Payless. I was running more often in college and these $15 shoes would just wear down after a few months, which really frustrated me. One day at the recommendation of a friend that ran with me, I decided that I would invest in a nice running shoe from Nike. Close to $100 for a brand new pair of running shoes. I had never spent that much money on anything at the time and was quite nervous. But I was tired of my cheap shoes constantly falling apart so I made the purchase.

And man, was this a great purchase or what. Not only did this pair of running shoes last me the rest of college, it was literally the lightest shoes I had ever had. It was made specifically for runners and I knew I could never go back. And the best part was because I wasn’t shelling out $15 every few months for a new pair of cheap shoes, in total it actually saved me money.

Cheap people want to save money above all else. They willingly sacrifice quality and their time to squeeze out every dollar they can from a purchase. In the case of my $15 shoes, because I was being cheap, I was willingly driving to a store half an hour away every few months to save what I thought was a lot of money in the long run. Where in actuality, I wasn’t only sacrificing time and quality, but money as well.

And before you think I was able to cure myself of the cheapness disease, you’d be happy to know this is something I’m constantly struggling with today. My kids often wear their shoes way beyond their life expectancy. And don’t even mention their clothes. My son, who is 9 now, still wears the same pajamas from when he was 5 years old. If my wife didn’t slap some sense into me at times my kids might still be sleeping in their baby cribs.

Frugal people look at cost in the context of total value. They factor in important considerations like quality, longevity, and time savings. Not just the cost alone. Sometimes, yes. The cheapest item can offer the most value. But really wise frugal people don’t just focus on the price. They consider cost as one of the factors to consider together with quality and satisfaction when looking to purchase an item.

Frugality Will Turn You Into a Millionaire One Day

Frugality is a crucial habit you want to develop if you want to accumulate real wealth. Benjamin Franklin is known for many things, but not many people realize that he is also known for his frugality.

“Beware of little expenses; a small leak will sink a great ship.” - Benjamin Franklin

In today’s consumer oriented society, finding someone who is frugal is rarer than finding a middle aged man at a BTS concert. It is estimated that less than 3% of the US population will become first generation millionaires, and the common trait among these self made millionaires is their frugality.

Most live in middle-class neighborhoods and drive used cars. They don’t like to display wealth. Friends and family usually have little clue that they are rich and the key to their financial success is based on a foundation of strong defense - frugality.

Frugality requires modesty, humility and discipline. Because you have to delay gratification and not think of yourself as being entitled to status, comforts or showy extravagance. Rich people stay rich by living like they are broke and broke people unfortunately stay broke by living like they are rich. Millionaires have mastered the art of controlling expenses.

Why Being Cheap Is Bad

But in the spirit of being frugal, we can quickly cross over into the world of being cheap. And that I mentioned earlier is not a healthy place to be with your money. Frugality will help you grow your wealth, but ultimately, the more you accumulate many of you will realize that money isn’t everything.

Most wealthy people I’ve met actually spend less time thinking about money as their bank account grows. They’d rather focus on enjoying life rather than counting every penny they have. But a cheap person, who might have accumulated the same level of wealth won’t know how to enjoy life. They only think in terms of having money, thus naturally hoard it. They can also make other people extremely uncomfortable because they dwell so much on how much something costs constantly and they are afraid of spending.

And the most damaging of all is that when they are so embedded in the mindset of being cheap, they don’t know how to be generous with it. I firmly believe that wealth, once it has reached a point of providing you the basics of what you need, can serve our world better when it is generously shared. But a cheap person will never share his or her money. Not with anyone or to any cause.

So, How Can I Become More Frugal, Without Being Cheap?

So if you think you’ve been teetering on the line of being cheap, how can you learn to become more frugal? Let’s talk about a few anchoring principles:

Value

When shopping, don’t just look at the price, but assess the overall value of what you are purchasing. In my example of my running shoes. When I was buying $15 running shoes at Payless every few months, I was looking only at the price, not value. But when I stepped back to assess the overall value of my running shoes, the $100 Nike shoes made much better sense because it was of a much higher quality - improving my running and reducing the potential for injury. Don’t use price as the bottom line. Use value as the bottom line.

Time

Most often when we are looking to save money, we don’t consider time as a valuable asset we must preserve. In TLC’s reality TV show “Extreme Cheapskates,” there is one episode where a man spends hours searching for change around his home and around town. By the end of the search, he comes up with little over $7. Now the question we should all be asking is, is hours of your time worth $7? What else could you have been doing with your time? Cheap people are driven by saving money regardless of time. They are happy if they can save $1 after 10 hours of work. Frugal people on the other hand value their time more. They would rather spend that dollar and spend the extra time doing more valuable and productive activities.

Spend Money - On The Right Things

Those who are cheap are very afraid of spending money. They willingly sacrifice quality, value and time in order to gain some short-term savings. But this comes at the cost of really never enjoying life Ramit Sethi, the author of “I Will Teach You To Be Rich” has a famous saying:

“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don't.” - Ramit Sethi

I really love this statement. When it comes to saving money, ironically saving money isn’t the final end state. We save so it can provide us a sense of security and comfort. And we save so we can enjoy life with the money that we saved. Those who are frugal have mastered the art of saving money. But they also know how to resourcefully spend their money. Maximizing their dollar so they can fund big picture wants and dreams.

For me, the biggest, yet the most satisfying purchase I made recently has been buying back time. If I was still stuck in the cheap mindset, I could never have considered willingly taking lesser pay because that meant I couldn’t save more. But because I was able to recondition my mind towards a more frugal mindset, I saw the true value of time and was willing to pay for it.

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Be Frugal. Not Cheap.