Frugal vs. Cheap: Financial Freedom Without Being a Scrooge

Words matter.

There’s a chasm between what it means to be frugal vs. cheap.

Being frugal is a goal worth pursuing. Frugality can help widen the gap between what you earn and what you spend. It’s often a necessary ingredient in achieving financial independence (FI).

But being cheap is a dangerous trap to avoid, both on the way to financial freedom and once you get there.

Read on to see if you agree.

What’s The Difference Between Frugal and Cheap?

Frugal is being intentional in how you spend your money. It’s a thoughtful way of living, where you prioritize what’s important to you and avoid wasting money on things that aren’t.

Cheap is an aversion to spending money at all, an impulsive reaction. It’s being stingy with your money and acting in ways harmful to yourself, others, or the world around you.

Is Being Cheap a Bad Thing? 

In the way I’m defining it here, yes, being cheap is bad.

Many people use the term cheap or cheapskate playfully, like in Jeff Yeager’s book, The Cheapskate Next Door. However, the concepts are all about frugality, not being cheap like I’m defining here.

Here I’m defining cheap as what happens if your inner Scrooge takes over and turns you to the dark side of the force of frugality.

What Are the Signs of a Cheap Person?

The sign of a cheap person is living a sub-optimal life because of a mechanical drive to hoard money. In extreme cases, a cheap person can harm themselves, others, or the world around them.

But everyone has different priorities for what they want their money to do for them. What may look “cheap” to one person may be rational behavior to another person. Being cheap is an internal struggle, where it’s painful to spend money, no matter what it’s for or how much money you have.

Sometimes that’s visible, sometimes not.

Three Ways to Be Frugal, Not Cheap

When financial independence (FI) is a top goal, spending less than you earn is necessary. But spending the absolute least amount possible is a path to cheap, not frugal.

Here are three ways to achieve or maintain FI without being a Scrooge!

1. Think Holistically and Avoid Tunnel Vision

Frugal means you are concerned about the best value, not only the lowest cost or price. You look at the big picture.

You consider both time and money in your spending decisions.

It’s frugal to search for the best deal or value possible, but you need to watch that you aren’t spending too much time finding the optimal deal. Be willing to “satisfice” realizing that your time is valuable. Satisfice is a term coined by Herbert Simon, as this article in Money Crashers explains:

“…optimal solutions are sometimes only discovered through more time, energy, and effort than they are ultimately worth, especially when sub-optimal decisions can deliver good enough outcomes.”

After all, your time is valuable.

Being frugal considers your quality of life. You’re willing to spend more money on the things that bring you extra happiness or life satisfaction. To do this in the most economical way possible, you use creative frugality to figure out how to get the same benefits while spending less.

Contrast this to being cheap when the cost or price of something is the only consideration.

Cheap’s tunnel vision on cost makes money the highest priority, ahead of anything else in life. Never forget that you can always make more money, but you can’t make more time.

Being cheap ignores the time costs of your decisions. Remember that the entire purpose of pursuing financial independence is time freedom. Your time now isn’t worth less than your time later.

Being cheap ignores your quality of life. Not choosing the slightly more expensive option which would have made you happier is being cheap. When you do this, you can deprive yourself of the things that bring you joy, even when you can afford them.

Avoid being a Scrooge by thinking holistically and not focusing only on cost.

2. Consider The Long-Term Costs, Not Just the Short Term

It’s cheap, not frugal, to skip paying for maintenance to save a few dollars. Yes, it saves money in the short term, but it’s deceptive because it can cost you a lot more later. Putting off maintenance can lead to higher repair bills (or replacement costs) in the future.

It’s not only a way of expressing gratitude for your possessions, but it also saves money in the long run.

For example, painting a house is expensive. But not painting wood can lead to rot, and rot spreads. Replacing cedar siding is a heck of a lot more expensive than painting it when it needs it.

Being frugal means buying durable, high-quality products even if they cost more (to the extent of your means). Buying higher quality is frugality in action. It’s getting the most value for our money.

Frugal means looking at the used marketplace where high quality can be more affordable.

Cheap ignores quality when buying things. There isn’t always a direct relationship between quality and price, and we can’t always purchase “the best.” But buying junky, low-quality products usually leads to the annoyance of replacing what you recently bought or paying more for repairs.

A perfect example is the high cost of “fast fashion,” where clothes are meant to be worn only a few times, then thrown away. Not only does it cost consumers, but the entire planet as well. It’s far better to buy fewer higher-quality sweaters than endure the frustration and higher cost of bargain sweaters that unravel with the third washing.

Quality items can last longer, saving you replacement or repair costs.

Paying more for higher-quality service can save you money as well. For example, a cheaper freelancer may end up costing you more money if you need to redo most of their work.

Remember—saving money in the short term can cost more in the longer term.

3. Avoid Doing Harm (Cheap Doesn’t Care)

Frugal means saving money, but not at the expense of others, including yourself. Cheap doesn’t care about the harm it can cause when exploiting others to save money.

Cheap is psychologically unhealthy and harmful because it feeds into a negative, scarcity mindset. A scarcity mindset is the painful feeling that you’ll never have enough, and cheap behavior can pour gasoline on that fire.

Being cheap can be physically unhealthy as well, like skipping doctor or dentist appointments because of cost, even when you could afford it.

Cheap gets ugly when “money-saving tips” venture into borderline or flat-out criminal territory. In my writing research, I’ve seen sleazy shortcuts to spend less at the expense of others, often involving committing fraud.

It’s frugal to find a good deal but cheap to con your way into one.

In contrast, frugality can promote an abundance mindset because by being frugal and planning ahead, you know you have enough. It goes beyond doing no harm to being healthy.

For example, being frugal vs. cheap can promote healthy values like delayed gratification and patience.


Many times, after researching the best purchase, you may find that the item you want most is a bit more money than you want to spend right now. You have the money, you can afford it, and it isn’t something you need right away.

Being frugal would mean saving up for it, waiting for it to go sale, or searching for it in the used marketplace.

But being cheap would be picking the least expensive one just so you can have something now. It’s choosing solely on cost, even though you’ll have the pang of regret every time you use it.

In your quest to save money, ask yourself if you’re making a harmful or healthy choice. Avoiding harm will keep Scrooge away.

How To Be Frugal Without Being Cheap

You can be frugal without being cheap by focusing on getting the most value for your money and avoiding seeing cost as the only consideration. You factor in time, quality of life, and how your choices impact the world around you when you make spending decisions.

An excellent action step to be frugal, not cheap, is to have a spending plan or a budget. This helps you be mindful or intentional in how you spend your money through planning ahead. It is the careful stewardship of your financial resources.

A spending plan or budget helps you maximize the enjoyment you get from your money by measuring the money you spend compared to what you get out of it.

It’s easy to fall into the trap of acting cheap if you don’t have a plan. You let a scarcity mindset push you around and pull your strings like a puppet. A plan puts you back in charge of your money.

For example, having an “out to eat” budget category allows me to enjoy the experience because I know it’s in the budget. Yes, my cheap self rears her head, but my frugal self reminds her that the entire purpose of money is to use it, not hoard it.

Having a budget or a spending plan takes your priorities or values into consideration. You spend on what you value most, the things that bring you joy, and cut spending on things you don’t care so much about.

This is what being frugal, not cheap, looks like.

Let Your Frugal Flag Fly

In the quest for financial independence (FI), or to maintain your FI state, being frugal is downright desirable!

You can attain FI while being cheap, but the ride won’t be enjoyable. Cheap is a mindset steeped in lack, where there is never enough, no matter how high the bank balance is.

But frugal is simply being deliberate with your money.

Yes, frugal gets a bad reputation because it can be unfairly lumped in with cheap. After all, being frugal and intentional with your money isn’t exactly the accepted default in society.

But as long as you aren’t harming anyone, including yourself, don’t let anyone frugal-shame you.

You can be frugal without being cheap.

Being frugal means finding your enough to be happy.