Imagine you’re walking down an abandoned street with no-one in sight. Enjoying the beautiful and peaceful day, you spot a penny on the ground. Would you pick up the penny and put it in your pocket? What if that penny was a nickel, a dime, a quarter? Play this mental game all the way up to Ben Franklin’s smiling face on a $100 bill. At what point would you pick up the free money at your feet?

Now imagine the same scenario, but let’s morph the abandoned street into 5^th Avenue in Manhattan. I’m willing to bet your “pick up the money” threshold will be different in this scenario. This is because bending over to pick up some pocket change in private is one thing, but doing the same in public could be embarrassing.

But no matter when you decide to pick them up, do these actions count as being cheap or being frugal?

Frugality and cheapness have long gone hand and hand and the line that separates the two is unclear. You probably have a friend or family member who saves wrapping paper to reuse. Or maybe you know someone who saves the condiments and utensils from fast food restaurants to use at picnics. Do these people count as frugal or just plain cheap?

I suppose the answer depends on their financial situation, but even that might make the answer more complicated. A millionaire who saves wrapping paper is almost certainly cheap. But we’d probably classify a single mother of three working two jobs as frugal for taking the same actions. So perhaps the definition changes depending on circumstances.

It’s common for personal finance bloggers to define any action that saves a little money as frugality. But I don’t think that’s accurate.

Sure, spending 10 minutes online to find a coupon code for your next purchase makes sense. but should you spend all day finding the same coupon? That might cross the line into being cheap.

Why am I concerned about this? Because the ultimate goal of saving money isn’t to save as much as possible by whatever means possible. The goal of being wise with your money is to enjoy your life more. You can be frugal and enjoy life. But once you cross that line to cheapness, you start enjoying your life less and less. Then what’s the point?

When Does Frugality Turn Into Being Cheap?

When you have money budgeted but refuse to spend it – For the last six months, I’ve been squirreling away money. In September, during the Labor Day sales season, I plan to go shopping for a much-needed snowblower.  Every winter, I spend 6-8 hours shoveling snow every single time it snows six inches or more. Beyond the time wasted, it’s backbreaking work. Every year, I promise myself I’m getting a snowblower. Then November rolls around and I say “Ahhh, I’ll save the money and just shovel it.” Mistake.

My livelihood (and health) are much more important than the $800 or so I stand to save by not buying a snowblower. After bending over and picking up that heavy snow a thousand times, my back does me no favors. Admittedly, I’ve been cheap trying to avoid this much-needed purchase. So this year, I’m sticking to my guns and buying a good snowblower.

Using your valuable time to save pennies on the dollar – Back to the snowblower example. In 2013 and 2014, the winters in Connecticut were bad. Very bad. One snowstorm actually dropped 38 inches on our house, and we were literally snowed in for a week. In totality, it took me two eight hour days to be able to dig a simple path from our house to civilization. It took me another three hours to clear the driveway well enough to get a car out. That single storm alone set me back 40 man hours. Had I owned a quality snowblower, I probably could have done the job in half that.

I lost 20 hours of my life that I could have spent doing something else. Not smart considering I can make good money working. Or I could have just spend time relaxing and spending quality time with my family. Divide the cost of a snowblower by the time I could have saved in those two years, and my hard-won time was worth about three bucks an hour.

Sacrificing quality – In my opinion, this is the most detrimental decision people make when debating frugality versus cheapness. When you own products that are not working properly, are unsafe, are a health hazard etc. and and are necessities, life can get dangerous. A car that leaks oil, a toilet that leaks water… These are just a few examples of things that you can let go by and rationalize, saying, “I don’t need to fix that right now.”

Often times, these kinds of fixes will only lead to bigger, more expensive fixes. So the justification may be to let them slide, but that would be unwise. If you can find a way to save and pay for these expenses, do it. Spending a little bit early on the products and dwellings you depend on goes a long way towards saving big money later on.

Are You Frugal?

The bottom line is that for me, frugality is the act of saving money when money I have to spend some money or significant time. Shopping online using rebates or coupon codes is a perfect example, as is buying the grocery items on sale. You cross the line of frugality when your opportunity cost or future cost outweighs any gains you might save.

Take a few minutes before any purchase and think about how you might be able to save money without sacrificing time or quality. Online coupons, using a cash back credit card, or waiting for discounted prices is a great place to start.

Topics: Smart Spending

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