As you seek to manage your financial affairs, make sure that you don’t take it too far. There is a difference between being frugal and cheap.
Being frugal means using your money with value in mind. Frugal is using your money to get the best possible value now. It often means spending more money now and realizing the savings in the future.
If you are cheap, it means buying with only price in mind. Cheap purchases do not consider long term cost, quality, or effect on others.
A frugal decision would be to start biking to work to save on commute costs including gas and parking. Or taking the bus instead of driving.
Cheap decisions put costs on others or disregard the value of your time. Like finding a way to steal a parking spot from a colleague or moving your car every two hours to avoid paying.
As you take control of your finances it is important to look at all decisions through the lens of frugal compared to cheap. This can apply whether you are shopping for shoes or thinking about taking a vacation.
Let’s start with the shoe example. You probably need to buy new boots occasionally, whether you live in a cold area where they are necessary in the winter or enjoy going hiking. When you buy new boots, you have a lot of different choices. There are brands that will sell very nice looking pairs of boots for $20 – but these boots are not going to last more than one year.
Instead, by comparison shopping and doing research into what other’s customer’s experiences have been you find another pair of boots that is also good looking but also gets reviews which say they last for ten years. These boots may cost around $150 – but if you find them on sale you will probably pay around $100.
Now, on the surface that is five times as much money. But if these boots last for ten years than you are only spending $10 per year, rather than re-buying a $20 pair of boots every year. Over ten years that will cost you $200.
Now, consider the vacation example. A vacation has an enormous amount of value to you and your family. It is good to spend money in ways that make you happy – as long as it is done in a sensible way. Being frugal does not mean saving every single penny but rather using their resources carefully to maximize the quality of their life without going into debt. Now, the cheap perspective looks at vacation expenses in another way. Invited on a family vacation a cheap person would book a hotel considering only prices rather than safety, for example. Then they would either not enjoy meals out with friends – and thinking about how much less money they would spending eating at home rather than enjoying themselves.
