Today's guest post comes Michael over at YouCanBeFree123.com/
His site is all about becoming financially free and it's literally amazing. I really like his post on Biblical financials (here). The post below is quite possibly the best guest post we've seen here at StopBeingDumb. This is going to change your perspective on frugality. I can't wait to hear what you think. Make sure you hit him up in the comments and let him know about your point of view!
Financial freedom sounds good, doesn’t it? Freedom from money worries, freedom to pursue life goals and dreams and freedom from the need to work full time to afford our lifestyle. Sounds idyllic and something many people strive for. Typically, financial freedom is attained by saving and investing money to produce passive income to cover living expenses. The investments can take the form of stocks, bonds and real estate just to name a few options. Another component of financial freedom, though, is driving down expenses to get to freedom faster. In other words, financial freedom is achieved when passive income sources exceed expenses, eliminating the requirement for a full time job to pay household expenses.
Many times, you hear people describe a person that can reduce his expenses as thrifty or frugal. Usually it is an expression of praise or admiration. But sometimes you hear people talk about those that are just plain cheap, stingy or miserly. Is cheap or stingy the same thing as being frugal or thrifty? I don’t think so, and I think the distinction really matters.
There's a fine line between frugal and cheap. Frugal people use money and other resources carefully and consistently toward one’s most important dreams and values. Many times that dream is essentially to be financially free to eliminate the need or requirement to work full time. Frugal people understand that paying more doesn't necessarily mean better value. And frugal people are driven by value. Cheap people, on the other hand, use price, not value, as the bottom line. Cheap people are driven by saving money, regardless of the cost, quality or experience. The bottom line: Being cheap is about spending less, where being frugal is about maximizing value, including the value of their time.
Let’s take a look at some common everyday examples of being cheap versus being frugal
IS PAYING LESS A BARGAIN?
Cheap people only look at price. They believe that the only way to achieve value is to pay less and downplay other factors such as function or experience. An example would be someone who purchases ill-fitting shoes because they are less expensive than properly fitted shoes. Frugal people know that, sometimes, it's best to pay up, because value is the most important factor. A quality pair of shoes may cost more, but the added support and comfort may help somebody with feet pain or a bad back. In addition, paying the extra money for a pair of durable shoes from a premium store may result in longer life and fewer signs of wear.
GOALS & DREAMS
Frugal people prioritize goals and dreams in their budgets and make tradeoffs in other areas to achieve them. They value goal achievement more than the sacrifice to get there. After all, a true goal is central to the purpose of one’s life. Cheap people, on the other hand, because they are so price focused, might tend to reduce or eliminate dreams that cost too much. It begs the question, then, is it really a true goal if the value of the money is greater than the value of the goal?
SAVING MONEY AT THE EXPENSE OF OTHERS
Have you ever gone out with somebody who uses coupons to save on the price of a dinner? That's frugal and most people wouldn't see that as cheap. But how about the person who uses the coupon and then tips based on the adjusted amount after the coupon is applied, instead of the original price? That would be cheap…and inconsiderate. Frugal people love to save a buck, but they won't take money away from others to do it.
SHORT-TERM PERSPECTIVE VS. LONG-TERM PERSPECTIVE
Have you ever met someone who won't go to the doctor for an important medical procedure because it costs too much? Or to the dentist to relieve pain because of the price? That’s cheap, and may be short sighted, leading to even higher medical bills because the medical problem worsens. Frugal people simply look to get the best price they can for such emergencies. The frugal person realizes that pain and health problem resolution are just as much a part of the value to them as saving money is.
PURPOSE, PEOPLE, SAVINGS
people love to save a buck, but that doesn't mean that they aren't generous with their money. They believe in giving to worthy causes and budget for it. Cheap people may have a different mindset. They see their money as theirs and they may value holding it for the rest of their life over helping others. The cheap person’s friend might speak of them as somebody who would rarely give a gift or help when help was needed. This may lead to strained relationships. Money appears to mean more than the relationship with others.
THE BOTTOM LINE
The best description that I have heard of the difference between being frugal and being cheap is attributed to J. P. Lynn who said:
“Frugality is getting more for less. Cheap is getting less for less.”
The chief critique of being cheap is that the cheap person’s focus on price values money over people, goals and dreams. Whereas, the frugal person’s focus on value for your money puts people, goals and dreams first and then prioritizes the use of money to meet them. Be frugal, not cheap.
Don't forget to follow Michael at You Can Be Free 123 on twitter