Living on a Budget: The Difference Between Frugal and Cheap

If you’re living on a budget, you’re doing a great thing for your finances. Tracking your spending and cutting frivolous purchases or excessive expenses is the first step to building wealth. After all, you can’t manage your money properly to see your net worth grow if you have no idea what you’re actually doing with it.

And while I believe in reducing costs, minimizing your spending, and valuing relationships and experiences over material goods, there is a fine line you need to tread here when you want to lead a frugal lifestyle. When you’re living on a budget, you can fall into the habit of stressing over every last penny. Put a stop to that bad habit before you cross the line from frugal to cheap.

Is There Really a Difference When You’re Living on a Budget?

Just because you have a budget and stick to it doesn’t mean you’re a Scrooge. Being frugal and being cheap are not the same thing. When you’re frugal, you simply use less and waste less. You don’t require as many resources in order to be fulfilled and comfortable.

When you’re living frugally, you don’t need the latest and greatest stuff to be happy. You don’t need to spend money in order to have fun. And being frugal often makes it easier to keep and maintain a budget because you understand how to prioritize your spending to make sure your money is going to things that you truly, deeply value. You’re able to provide yourself and your family the things that you have decided are most important, and you’ve simply declined to continue on down the road to mass consumption.

Being cheap, however, occurs when you’re stingy or simply driving yourself nuts with all your little tricks to save a handful of pennies here, maybe a nickle there.

What Cheap Looks Like

Sure, we all know that the grumpy old aunt who shows up to a family birthday party and gives the birthday kiddo a $5 bill – despite the fact she have plenty of money to purchase a thoughtful gift or to take whoever’s birthday it is out for a fun experience – are cheap. That’s being miserly.

But being cheap isn’t limited to being miserly or stingy. It’s also when you’re so neurotic about your money that you drive yourself and your family crazy; when you’re on a penny-pinching crusade.

If you flip out every time someone forgets to flip off a light switch when they leave the room for 5 minutes – cheap. If you have a meltdown over whether to purchase the $10 item or the $12 item when the one that costs a mere two dollars more is obviously of better quality – cheap.

How to Tell When You’ve Gone Too Far

The thought of managing your money and living on a budget makes you feel miserable, stressed, or deprived, you’re probably toeing the line between frugal, mindful spending – and driving yourself crazy over a few pennies here and there. Some other signs that you may be obsessing over a few dollars either way include:

• doing something extremely time-intensive or labor-intensive to the point where the time or work it takes stresses you out – though it only saves you a dollar or two
• refusing to help others in need, or:
• freeloading on others so you don’t have to spend your own money (even though you have it), or:
• taking advantage of outside resources (taking pillows from hotel rooms, or taking enough napkins for a small village from a restaurant)
• buying the absolute cheapest version or option of anything, simply because it costs less
• failing to regularly care for basic personal needs in order to save money (i.e., your health, hygiene, or your home)
• finding yourself on Extreme Cheapskates

Saving Money is Good – Pinching Pennies Will Drive You Crazy

All that is not to say you shouldn’t make a good effort to save money. Just be reasonable about it. Yup, cutting your daily latte habit is something that will save you money over an entire year. Depriving yourself of any tasty coffee drinks completely? Never enjoying your favorite latte ever again? That’s setting yourself up for crazytown.

If you want to make a difference to your finances when you’re living on a budget, cut the big stuff that costs serious bucks – not only over time, but every month. Drop cable and switch to online streaming instead. Cancel your gym membership and either workout at home for free or head to a local park with a workout buddy to exercise together.

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Think big, cut the expenses that you aren’t getting real value out of or that way-lower-cost alternatives are available for, and don’t sweat the small stuff (at least, not constantly). It’s not the end of the world if you forget your coupons from time to time. It’s okay if one light gets left on over night on accident. You’ll still make financial progress – and you’ll stop driving yourself crazy over pennies.