When it comes to how you spend your hard-earned money, the terms cheap and frugal are often used interchangeably, but they actually describe two very different approaches to parting with your dollars.
Cheap and frugal both describe people who care about the price of an item and aim to save money, but the similarities end there. Here’s a 2×2 matrix that shows how frugal and cheap compare to luxury along the dimensions of quality and price:
Being cheap means that one cares only about the price of an item and not all the other effects of buying the item like its quality, durability, time savings, impact on health, and social / environmental cost.
In effect, being cheap is saving money without considering any negative impacts on yourself or others. This negative impact is likely not immediately noticeable, which is why it can be easy to think that the cheap option is desirable.
Like being cheap, a frugal person is sensitive to the price of a item, but a frugal person considers many factors beyond just the price of the item. Being frugal is spending your money in a way that gets you the best value for your money, while also taking into account all factors like quality, durability, time savings, and health / social / environmental impact.
Being frugal is being intentional and purposeful with your decisions to get the most utility for your money. As a frugal person, you realize that your time is valuable, so you consider how an item could save you time or eat up your time when making a purchase decision.
Being frugal vs being cheap
Between being frugal and being cheap, it is pretty clear that being frugal is the better strategy, as it optimizes for all factors, not just the sticker price. Choosing the cheaper option often ends up costing you more over the long run, so its important to consider the long-term implications of a spending decision.
When is it ok to be cheap?
While being frugal is in general the best approach, sometimes it does make sense to go with the cheapest route. If an item isn’t going to be used much or its non-price factors don’t make much of a difference to you, then it makes sense to find the cheapest product that solves your problem.