Frugal vs Cheap - The difference
Frugality and being cheap are often used synonymously.
Somehow when we advise young individuals to save, it is misconstrued to imply that a fun life is being denied.
Yes, there is a constant tussle between saving and spending. Between living for the moment with an eye on the future. And it is only natural to feel pulled in separate directions by both narratives.
Frugality helps reconcile the tension between the two.
Frugality is not about getting a cheap deal, it is about maximizing total value.
A rich man bought a really good pair of leather boots for $50. This pair would keep his feet dry for a decade.
A poor man could only afford to spend $10 on a pair of boots. He would probably have to get a new one every season or two.
Consequently, the poor man would have spent $100 on boots over the same period and still have wet feet.
- Captain Samuel Vimes in the novel, Men at Arms
Although their incomes are the lowest, the working class is compelled to buy the most expensive articles – that is, the lowest-priced articles.
Everybody knows that good clothes, boots or furniture are really the cheapest in the end, although they cost more money at first; but the working classes can seldom or never afford to buy good things; they have to buy cheap rubbish which is dear at any price.
- Socialist visionary Frank Owen in the novel, The Ragged-Trousered Philanthropists
The above two are self-explanatory. It points to how being a savvy spender and a frugal spender, does not make you a cheapskate. If anything, it emphasizes how beneficial frugality is. It allows you to focus on getting as much value as possible out of your money. Because your focus is on quality, frugality enables you to spend less money.
Frugality allows you to focus on spending your money on what matters to you.
Once you stop compartmentalizing and realize that every part of your life affects every other part, you will be able to figure out what is of consequence to you.
A runner will not compromise on a good pair of sneakers but may be more than happy to curb on designer clothes and bags. Another may prefer on spending money on gadgets and be totally happy not eating out every other day or constantly checking the new restaurants in town. I would love to spend on flowers in my apartment, but am perfectly okay with a minimalist wardrobe.
A study done by researchers from the University of Columbia and Harvard Business School suggested that money used to buy free time is linked to greater life satisfaction. Paying to get someone to clean the house, cook, tend to the garden, take care of the children, even hiring a CA to file your tax returns instead of doing it yourself, or giving your clothes to the laundry instead of using the washing machine, are some examples.
Change your mindset. Stop thinking that you have to spend less. Stop thinking that you have to cut corners. Instead, prioritize your spending so that you can have more of the things that make you happy and bring you pleasure. Spend on what matters, not on what impresses others.
Frugality is not about miserly money-saving behavior, it is about lifestyle choices and values. It is about removing the obsession with materialism and competitiveness and focusing on what matters to you.
Keep morality aside, but take a hard look at your spending.
I personally don’t see frugality as a vice or a virtue. As long as you’re making financial decisions that you feel comfortable with, why should anyone’s opinion matter? If you are wealthy, why is it reprehensible to be extravagant?
Having said that, danger lurks when your consumption is driven by competitiveness. When you need to spend to earn the badge of social prestige. When you are defined by the brands you own. And when your lifestyle gets you into debt.
Don’t get played by society.
Shout-out to Morningstar for the school of thought.