Are You Frugal or Cheap? Take the Simple Test

Regardless of how much income or money we have, we all find ourselves in situations every day where we must decide how much money we should spend for something. For example, hotels have rooms at a variety of difference price levels and you can choose one depending upon the level of comfort you want. You can go to a restaurant and buy an expensive entree or an inexpensive entree. A store is perhaps the best example because no matter what the item of merchandise is involved there will always be lots of choices, each involving perceived quality, value and price. When we want to buy a gallon of ice cream we can wind up spending anywhere from $2.29 to $6.50.

Before we can appreciate the secret difference between being cheap (a bad thing) and being frugal (a good thing), we need to appreciate the true meaning of these terms. Being cheap does not mean that you don't pay for anything. Being frugal does not mean that you know the value of your money. Many people know the value of their money, and how hard they've worked for it and still squander it. In the same way, cheap people or "cheapskates" often pay for quite a bit, but that doesn't change the fact that they are cheap. So then, what does it really mean to be cheap and what is the difference between being cheap and being frugal?

If we buy an item - a car, a business suit, a pair of gym shoes, etc.- for our own use, and we want to spend as little as is reasonably possible for that type of item given all the surrounding circumstances, we are being frugal. When we don't mind getting by with the minimum - a base model car or a pair of no name brand running shoes that are on sale. In fact, when we are successful at being frugal we're generally very proud of ourselves. We will walk out of the store relishing the thought that we saved $79.00 because, "I really don't need a $100.00 pair of Nike running shoes. These $21.00 shoes are good enough for me". When we choose not to buy the $125.00 Persol 2270 sunglasses and instead are very content to buy the $19.95 sunglasses that look like Persol 2270 sunglasses, that's not being cheap that's being frugal! But that's for ourselves.

Now lets look at being cheap. When we are leaving a restaurant and we don't leave a tip we are being cheap. When we buy a cheap pair of running shoes for our daughter's birthday when we really could have afforded something a little better, that's being cheap. When we go on our family vacations and stay in the least expensive accommodations even though we could have afforded a little bit nicer we are being cheap. When it's our turn to bring donuts and pastries to the office and we buy them at the gas station when everyone else at the office buys them from the bakery, we are being cheap.

The secret is simple. If you try and save money and cut corners when spending on yourself, you are being frugal. If you try and save money and cut corners when spending on others, you are being cheap.

Importantly, being frugal and being cheap always involves the freedom to make a choice. If all we can afford for ourselves is that $21.00 pair of running shoes then we're not being frugal. In the same way, if all we can afford for the family is the $49.00 hotel room we're not being cheap. It's only when we have a choice that frugality and cheapness become involved. In situations where we have not made a choice either consciously or unconsciously out of habit we are not being frugal or cheap.