Trent Hamm* says saving every penny can cost people more in the short- and long-term.
I still remember the moment when I realised I was starting to cross the line from frugal to cheap.
I was pumping gas into my vehicle after buying groceries for my family, which is normal, right?
The problem is that I had driven about five miles out of my way to get slightly cheaper gas.
While I was getting out to pump gas, a friend of mine called and asked me if I wanted to go to a pub trivia night at a bar that charged quite a bit for drinks and snacks. I thought about the cost and turned him down.
As I stood there, I realised that I had just driven halfway across town to save maybe $2 on gas, while at the same time I had declined to spend an evening with a friend that would have cost me $20 at most.
Did I value $2 more than the time I spent driving over here?
Did I value $20 more than an evening with a friend, particularly one who was often willing to have potluck dinners with us?
I wasn’t being frugal. I was being cheap.
Frugal versus cheap
While the difference between being frugal and cheap might be intuitive, it’s useful to nail down what each of those things are and what the difference is.
Frugality is simply being economical or efficient with your money.
When you’re being frugal, you’re attempting to continue to have high-quality outcomes, but you’re trying to do so with less expense.
Installing energy-efficient appliances is frugal.
Making meals for yourself at home when you’re eating with just your immediate family is frugal.
Adopting daily habits that bring the joy with less expense is frugal.
Cheapness happens when that drive to be economical or efficient with your money starts to result in negative outcomes for other things you care about in your life.
Cheapness happens when your drive to save starts impacting friendships or causing you time management stress.
Cheapness happens when cost-cutting makes normal things harder to do and you’re not happy about that difficulty change.
Frugality is wonderful. It’s a financial tool every one of us has within our grasp to help us achieve financial goals, both short term and long term.
Cheapness is not wonderful.
When we pay the cost of spending less money by sacrificing our time, our relationships and our mental well-being, we simply pay too much in terms of a healthy all-around life.
Be frugal. Don’t be cheap.
How going ‘cheap’ can cost you
Saying a hard ‘no’ to friends can damage friendships
A good friendship incorporates balance. Sometimes, you’ll do things that you choose, and those can be frugal.
Sometimes, you’ll do things your friend chooses, and that might be expensive.
Don’t just say “no” when they suggest expensive things if they’re saying “yes” when you suggest frugal things.
For example, one of my oldest friends loves going on hikes and playing board games – both very frugal activities, but also has a taste for going out for fancy meals.
There’s a balance there. On the whole, hanging out with him is rather inexpensive, even if there are expensive moments.
If you’re finding that a friendship is “expensive” because it always centres around expensive things, suggest some less expensive things as a counterbalance.
Your friend might surprisingly enjoy it. Furthermore, you’ll discover whether this person is a friend who enjoys your company or an acquaintance who just enjoys the activity.
It may be a true friendship, or just a friendship of utility or pleasure.
Scrimping can harm relationships
This doesn’t mean you should always spend, spend, spend with other people.
Rather, it means that there needs to be a healthy balance between minimizing costs and maximizing fun, and if you’re going to err, err occasionally on the side of fun.
For example, having a potluck dinner party is great, but don’t serve the cheapest main dish you can think of.
Instead, come up with something people will genuinely enjoy.
You don’t have to go high-end, but prepare something delicious and crowd-pleasing with good ingredients.
Your guests will feel loved and welcome and you’re still being frugal.
Spending lots of time for a little money can cause stress
One temptation that crosses the line from frugality into cheapness is the desire to invest lots of time and energy into something that doesn’t save a lot of time and money.
In general, if you’re investing time into a frugal project that’s not bringing you other kinds of joy and you’re not saving significant money per hour of time invested, it’s probably not worth doing.
This is particularly true when you’re starting to feel stressed about not having enough time for important things in your life.
An example of a frugal activity that can have rapidly diminishing returns is couponing.
In general, the time investment in couponing versus simply planning meals around what’s on sale and buying store brands isn’t a great bargain.
Having said that, there is definitely a “game” to be played with couponing, and that game is enjoyable to some.
If that’s you, then by all means treat it as a recreational activity that happens to save you a little money.
It’s great to find inexpensive hobbies or even hobbies that can save you money, but those things are hobbies first and foremost.
It’s OK to drop time-consuming frugality that isn’t a hobby for you.
Go for the big wins
When you’re trying to cut spending, it can be easy to get fixated on small gains, particularly if they’re frequently repeated.
If you can cut back a quarter a day in spending with little effort and no lasting drawbacks, that’s going to add up.
Where this can cross the line into cheapness is when you find yourself worrying about smaller and smaller gains, particularly one-time gains.
Don’t worry about the decision to toss a $1 item and replace it with something better.
The stress over that decision is more costly than the dollar.
If you find yourself worrying about little expenses, think about the actual size of the savings and how much time you’d have to invest to get that savings, and ask yourself honestly if it’s worth it.
If you’re stressing over a small savings, or even a moderately sized one with a time investment, just let it go.
Think about the big wins, and don’t sweat the small ones.
Use frugality to achieve your goals
Most people use frugality as a tool to achieve their life goals, things like paying off debt or saving for retirement. Those things are empowering.
However, don’t lose sight of why you want those goals.
Things like a nice home or debt freedom or a secure retirement are intended to bring you joy and contentment.
Being cheap often brings stress, damaged relationships and negative health impacts — the opposite of joy and contentment.
If a frugal choice does not feel like a clear “win,” don’t do it.
If it’s introducing enough drawbacks that you feel stressed, that you’re negatively impacting a relationship, or that you feel worried and preoccupied, it’s not worth it, particularly when it’s only producing a tiny step toward your goal.
Another tip: Frugality isn’t helpful in and of itself. While saving money is always great, if you’re simply spending it on something else that’s nonessential, you’re not getting ahead.
Frugality should help you achieve your goals. Keep track of what you’re actually saving by being frugal, then automate your savings.
Set up an automatic transfer into an emergency fund in an online savings account or bump up your automatic retirement contributions.
*Trent Hamm is the founder of The Simple Dollar.
This article first appeared at thesimpledollar.com.
