Your spending and saving habits have a huge influence on your life and your relationships with people around you. If you make smart spending and saving decisions, you can expect to have less financial stress and there will be fewer odds of friction in your financial dealings with other people. Two of the commonest labels that apply to people based on their spending and savings habits are being “frugal” and being “a cheapskate”.
Interestingly, some people tend to confuse being frugal with being a cheapskate and it is not always easy to identify the thin line between the two labels. This piece provides insight on four questions you can ask yourself to know if you are being cheap or being frugal.
1. Do you sacrifice quality for price?
Frugal people always seek to find ways to get the best value for their money whereas cheap people are always looking for what they can buy at the cheapest price. In essence, a frugal person’s spending decisions is based on the value they can get out of it – a frugal person doesn’t mind paying top dollar for a high quality item even though they’ll appreciate a great deal. Cheap people on the other hand only care about price and they’ll often buy lower quality items just to save a few bucks. If you sacrifice quality for price, you are cheap and not frugal.
2. Do you find ways to bend the rules?
If you are frugal, you’ll take advantage of deals, discounts, and promotional offers. Frugal people understand the economics of shopping at dollar stores and they are not stuck up on branded items. Frugal people also know how to renegotiate the asking price on stuff and they know how to ask for concessions. Cheap people however find ways to bend the rules or make their own rules just to save money. Cheap people tend to lie about their age, occupation, and health to get discounts. They may also buy new clothes, wear them, and return them to the store to ask for a refund.
3. Do you skimp on important necessities?
Financially smart and frugal people have priorities in life and they spend good money on the items they consider top priorities. In essence, frugal people live rich, happier, and more fulfilling lives because they take care of the important things first. Cheap people tend to be obsessed with saving money. They’ll put off or avoid paying for important necessities as much as possible. Cheap people won’t go to the hospital when they are sick neither will they take family members to see a dentist when necessary. Cheap people also tend to avoid buying insurance.
4. Do you make penny-wise pound-foolish decisions?
Frugal people know that the true cost of an item is more than its sticker price. The cost of an item includes it price, its opportunity cost, time spent to make the purchase, and cost of repair, maintenance, and replacement over time. Cheap people however determine the cost of an item based on price alone. Cheap people can’t seem to understand that it doesn’t make sense to drive 20 miles just to save a few cents on the cost of gas.
Are you cheap or frugal? How do you define the difference?
Photo courtesy of: Pavlofox