When you’re on a tight budget, being frugal is one of the most effective ways to protect your cash flow and ensure that you aren’t overspending by mistake. Sometimes, however, “frugal” goes a little bit too far and turns into being downright cheap! Not only that, you want to be sure that you’re making frugal financial decisions, not cheap ones that will make you suffer more down the road. If you’ve been cutting corners and decreasing your overall spending, is it time to take a look at which one you really are?

When you make a frugal decision, you’re opting for financial practicality–and that doesn’t always mean making the cheapest purchase. Some purchases–clothing and appliances, for example–may be worth spending a little extra in order to get a high-quality product that will last, rather than one that will fall apart the first time you try to use it. When you cross the line from frugal to cheap, however, you’ll start making decisions based solely on price, rather than on how practical that item will be for long-term use. 

Real-world example: Your son needs new shoes. You know that if you buy a cheap pair for less than $20, they’re going to fall apart quickly and look just like the old one the first time he wears them outside. Do you buy the cheapest pair you can find? If so, chances are, you’re moving toward cheap behavior. On the other hand, if you opt for a reasonably-priced pair of shoes that will last your son until he grows into the next size, you’re displaying frugal financial behavior. 

When you make frugal decisions, you’re choosing financial wisdom: prioritizing your financial freedom over things that will be gone in a matter of moments. That doesn’t mean, however, that you have to always make the smartest financial choice. You may continue to put money into hobbies, or time out with friends, or things that you love, not because you’re being financially irresponsible, but because those things are important to you! Whether it’s an important date night out, a friend’s birthday, or a celebration you’ve been looking forward to, you save ahead and plan for the events and expenses that are important. 

Real-world example: It’s your anniversary. You and your spouse have managed to secure a babysitter, so you get to go out without the kids. Are you going to go to the restaurant you really want to go to, or do you try to convince your spouse that fast food is good enough? Frugality chooses a reasonably-priced restaurant with a nice atmosphere, especially if your budget is tight. Cheapness, on the other hand, attempts to convince your spouse that the cheapest option is the best one–potentially even if it’s a place that neither of you likes.

Frugality is important, especially when you’re on a tight budget–but it’s not the most important thing in your life, either. When you’re faced with a choice between generosity and clinging tight to every penny, what do you decide? Frugality means you make wise choices with your money: the amount you can afford to share; the things you can afford to do with your money. Cheapness, on the other hand, refuses to let go of your hard-earned funds, even when you might be able to help someone else–or when it would be more practical to let it go. 

Real-world example: You’re out with a bunch of friends and, at the evening, you decide to just split the bill instead of breaking it into individual portions. Do you negotiate over every last cent, or do you keep things simple by tossing in your fair share for the evening? If you’re splitting pennies when you’re out with friends, chances are, you’re leaning toward cheapness instead of frugality. Note: It’s different if you’re very tight financially and simply aren’t able to afford splitting the bill, in which case, you may need to let your friends know that you can only afford to pay for your specific portion. 

Frugality versus cheapness: both rely on financial savvy. Cheapness, on the other hand, tends to take over your life, making you uncomfortable in the effort to save money. When you’re cheap, you allow your money to control you. Frugality, on the other hand, takes control of your money and allows you to make more practical decisions for your financial future.

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