Monday, June 11, 2007

What is the difference between being Cheap and being Frugal?

Everybody knows a cheap person and probably hates them. But I think we often mislabel frugal people as being cheap. I started thinking about this the other night after listening to a “lecture” from my dad about how to manage our phone service.

The topic came up because periodically during our phone conversation he was not able to hear me. I explained that we have had this problem several times since switching our phone service to Comcast, several months ago.

He went on to explain that they only use basic phone service with no additional features. Yes, that means no call waiting and no caller ID! He then went on to tell me that during the week they only call me and my brother using their cell phone minutes, and calls everyone else that he needs to talk to either at night or on the weekend from his cell phone, since those minutes are free.

Now this is a man who had money saved for his kids to go to college, lives in a beautiful home and drives nice cars, has no credit card debt and never makes us pay for dinner when he is in town, but he is worried about minimal charges on his phone bill.

My father is not cheap, he just enjoys saving money, when he can. Saving money and being cheap are two totally different concepts. So different that, well, maybe another couple examples will help.

I like to buy decent clothing. It’s not always cheap, but I like to make sure I buy it on sale. The more on sale an item is, the better I like it. In fact, if two dresses are on sale, I can buy two good dresses instead of one expensive one. Does that qualify as being cheap?

I just have a hard time buying things at regular price when in a few weeks it will be on sale (which is the price it should’ve been in the first place, in my opinion).

Here’s another example…

Let’s say you need to put gas in your car and on the way to going somewhere you were going anyway you pass two gas stations right next to one another. Gas is $3.45 a gallon at one and at least $3.55 a gallon at the other.

All other factors being equal, you’d have to be a total idiot not to buy the$3.45 a gallon gas…
That’s managing your money well.

On the other hand…

To kill a half an hour of your time driving clear across town, way out of your way, just to “save” a buck or two would be “being cheap”.

Yes, that would be me sometimes! I hate to admit this, but I have driven to Costco for gas, which is a good 20 minutes from our house.

Although there is sometimes a fine line between the two, there’s a distinct difference between “being cheap” and managing your money well and it is important for us to know and understand the difference between the two.

Knowing and understanding this difference and applying this principle to our lives can make the difference between us having money or being poor.

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