There has been a lot of articles written on how a person can become a frugal spender. There are ways to be able to live below the budget and get some elbow room with the finances. It can help curb unnecessary spending and actually pay down debts and loans faster. It can also help consumers prepare for the future with an emphasis on retirement contributions and even a big reserve fund.
One of the things that a frugal person gets to understand is that bigger is not always better when it comes to buying things. But one of the things some consumer fall victim to is overdoing their frugal approach. It already tends to border on being labeled as cheap by other people. It is true that you should not pay much attention to other people’s opinion but if they are all saying the same thing, you might want to make a personal assessment.
According to BLS.gov, the average American household in 2013 spent about $51,100 to cover all their expenses. Imagine if all these consumers would turn into a frugal spender, this amount would go down and they would have a few extra hundreds of dollars to re-allocate on their budget. With this in mind, a lot of people tend to cross the line from being frugal to being cheap.
It is similar to owning a car that you can use to get to and from work and even to get your chores done over the weekend. But instead of doing that, you get your office mate who has a car to pick you up and bring you home every day. And on weekends, you look for friends or family members who have a car and you ask them to drive you during your chores.
This is how you can crossover from being a frugal spender to being cheap. In this case, you inconvenience other people just so you can save up on gas. If you did not really want to pay for gas, you shouldn’t have bought a car in the first place. One thing you can do is to schedule a carpool with your office mates and take the bus to the grocery to save gas money.
How to differentiate being frugal from being cheap
There are other ways that frugal spending crosses over to being a cheap consumer. Here are some examples that you need to keep an eye out to prevent turning into a cheap person just so you can save a few bucks.
On when to pay up for items
Cheap people basically have one rule of thumb when it comes to paying a premium for quality items and that is no. They will never buy an item when it is expensive and will always opt for the lowest priced one. The price tag on an item is usually the deal breaker for cheap people and will almost always settle for the cheapest.
Frugal spenders, on the other hand, may look at the price and lean towards the cheapest ones as well to save on cost which is a great savings tip. But they go beyond that and take into consideration other factors before choosing a product. The price will play a big part in it but they also look at the quality and durability of the item. Take for example a light bulb, a frugal person would look at the quality of the item. A cheap person would just grab the cheapest one.
After a few months, the cheapest one can give out and the person would need to buy another one. While the frugal person would not have to change bulbs for months. In the end, a cheap person would be shelling out more at the end compared with the frugal person because he has to keep buying bulbs to replace the cheap ones.
Voicing out how expensive things are
The one thing that separates people who are trying to live below their means and the cheap ones is how they voice out their opinions on things. Cheap people would tend to voice out and let other people that they are not buying the item because it costs a lot. Frugal spenders might be thinking the same thing and will not buy the item but they will not necessarily let other people know their reasons for it.
Taking from other people
This is one clear trait that separates frugal from cheap. Think of the last time you went out for good food in a restaurant and you have coupons for a discount. A cheap person would base the tip on the amount after the discount but a frugal spender will not do the same thing. They would compute the tip from the full bill because they will not look to save at other people’s expenses. CNN.com puts the minimum tip at no less than 10% of the bill which can go higher depending on the service.
Foregoing essential services
These usually refer to doctors visit or even going t the dentist for a visit. Cheap spenders will decide to save money by neglecting some essential services just to save on cost. This will only cause bigger expenses down the line. On the other hand, smart and frugal spenders will appreciate the cost and take it as a preventive measure in staying away from bigger costs in the future.
A frugal spender will still donate
Cheap spenders will not donate money to any charity because they believe that their money is theirs and theirs alone. Frugal people will still donate but make sure that their money goes to entities that need them the most. Over and above your higher calling to help other people in need, donating to legal charities that holds a 501(c)(3) certification can offer tax exemptions according to IRS.gov.
Living below the budget can be fun
Taking on a frugal lifestyle may seem simple and definitely worth it at the end. You will see how it can benefit your household budget and your overall finances when you start being smart with your expenses. But it has its own unique set of challenges but here are some of the takeaways you can expect.
- You can learn a new dish. If you’re a frugal spender, you should know by now that cooking your own food is way less expensive than ordering take out every night. But like most consumers, you start with just the basic cooking skills and you soon learn that frying food is not the only way to cook food. As they say that necessity is the mother of invention, the need to eat can be the ultimate push you need to learn how to cook food.
- You might like a new hobby. As you try and lower your expenses, you might decide to make some cuts in your budget and some of the first cuts happen with your entertainment expense. You might find out that reading books might be just as good as watching a movie and even better because you can pause the story when you need to do an errand or finish a project. You find that woodwork as a hobby can be more relaxing than golf.
- You can get in touch with your creative side. This is especially true when you are dealing with kids who constantly want to do something with you. Apart from just dragging everyone in the mall, you can choose to camp out in the closest campsite, your backyard. You just prop up the tent and get the popcorn ready as you look at the stars or share scary movies. Or you can set up your entertainment system and watch a movie in the backyard. These are actually some of the reasons people choose a frugal budget.
- You reach financial goals faster. One benefit of being smart with your finances is that you get to reach your goals a little faster because you manage your budget really well. You get to pay up your loans faster and probably even set up an impressive investment portfolio for your retirement years.
A frugal spender is being smart with money choices and not just choosing the least expensive item. This separates smart consumers from those that are just downright cheap spenders.