Frugal vs Cheap – Is There a Difference?
When you mention to people that you’re trying to be frugal, a good portion of them will hear the word ‘cheap’. Why? I noticed two big reasons for the majority of them. First, they may have had a bad experience with someone “frugal” where they had to foot the bill because they other person was too cheap to pay. An example I can think of is going out to dinner with friends and one person getting a ton of food and then everyone having to split that item. That’s not being frugal, that’s being cheap.
A second reason I’ve noticed people confuse the two terms is because their own financial habits are skewed. Some people don’t understand and/or care about their finances. I know some really sweet people that don’t get the concept of money and spending plans. They can’t tell you their net worth or bank account balance because they don’t pay attention to it. To them, being frugal is shameful. They think that they have to live on rice and beans and wear consignment store clothes. That’s not being frugal.
Using good old Wikipedia, I found a suitability definition of frugal –
Frugality is the practice of acquiring goods and services in a restrained manner, and resourcefully using already owned economic goods and services, to achieve a longer term goal.
In other words, being frugal means making the most of what you have for a specific goal you created. Do you want to own a house or a business? Do you want to travel more? Do you want to pay down your debt? Incorporating frugality into your lifestyle can be a wonderful way for you to save money for what really matters to you.
Finding Frugality Tips That Work
Curious to see if frugality is helpful for your situation? I compiled a list of frugal tips to help you get started.
- Get a snapshot of your finances. It’s hard to know where to go if you don’t know where you’re starting. Mint is a great, free tool that you can use to see what you’re spending your money on.
- Create goals and write them down. Write out what goals you’d like to achieve this year and longer. Then post it up on the fridge or bathroom, where you can see it everyday.
- Compare your goals with your spending. If you want to buy a house in 3 years, do you notice how much is going to your savings right now? Decide on where you can cut back by looking at what’s NOT important to you. If you’re not too crazy about eating out, try to having your friends over more for potlucks.
- Rent an affordable apartment. Don’t live beyond your means. Can you get a roommate to offset of your expenses? make sure that you don’t sacrifice safety to save $50-$100/month, be balanced on where your money is spent.
- Let online bill pay be your friend. Take 30 minutes or so to set up your bank accounts to automatically pay your monthly bills. Also focus on starting an automatic transfer to savings every paycheck. Even if only $10/week, you can sock away over $500/year (plus you earn a little more with a high interest savings account). Once you start saving a bit, make your next goal to send extra payments to pay down any high interest debt you have.
I recommend that you try out 1 or 2 of the tips at a time and see if it works for you. As you develop the habit of being frugal, you’ll notice that it becomes easier to adopt.
Thoughts on Being Frugal
How about you? Do your friends and family see being frugal as a virtue or shameful? Would you describe yourself as frugal? Do you think you’re cheap sometimes? Do you have any stories to share on being frugal vs being cheap?