I was having coffee with a friend of mine the other day and she was telling me how she saved over $200/month by taking the train into work.
“How frugal of you.” I complimented.
But she did not look like a person who had just received a compliment. Not at all. Instead there was a confused anger to her face as if I’d just insulted her in a horrible way. “I’m not- FRUGAL, you know!” She finally spat at me.
She obviously misinterpreted what I meant. But more confusingly: since when did people get offended by being called frugal? It’s supposed to a good thing!
Frugal doesn’t mean cheap
After we cleared up our little miscommunication, it became clear she thought I accused her of being cheap. “On the contrary,” I suggested. “I mean it as a compliment. It’s wasteful for you to drive to work every day. What you’re saving could pay for your car! That’s not cheap, that’s smart. It’s frugal.”
It got me thinking, too, about the difference between frugality and cheapness:
- A cheap person doesn’t see value in spending money. A frugal person can.
- A cheap person would buy the least expensive car that can get him from point A to point B.
- A frugal person would buy the car that’s going to get him from point A to point B for the least overall cost, taking into consideration longevity, maintenance fees, gas mileage, etc.
- Frugality is thoughtful, cheapness is stingy.
Frugal means stretching all your resources to their fullest
Being frugal is less about how much money you spend and more about how far you can stretch each dollar. It means getting the most out of all purchases, possessions and resources.
Just like my friend is doing. Not only is she saving a ton of money on gas and parking each day, but by not using her car for her daily commute it’s going to last longer and retain its resale value better, too.
Believe it or not, her commute is actually quicker too (usually). So she can even sleep later and gets home earlier each day. That’s frugality at its best, because guess what: time is a precious resource.
Frugality isn’t just about the savings
Savings isn’t the only thing that’s important to a frugal minded person. Putting your resources, money, and time to work for you is also a part of it. It could be renting out an extra room or apartment. It could be paying down debt or investing with extra cash. Or it could be getting a second job or starting a small business with your extra time.
Frugality isn’t limited to your costs, it’s also about your income. It may be less expensive to make your own candles at home, but if you could spend the same time making some extra cash (more money than you saved by making candles), you’re better off buying store bought candles and using that time more wisely.
Frugal is efficient
Frugality is also about improving efficiency. That often includes initial investments for future returns. Investments that can and will pay for themselves through a greater efficiency. Not only from a resources standpoint, but also financial efficiency. For example:
When I bought my house, it had an ancient oil furnace, and an aging electric water heater. The first thing I did was switch to a natural gas furnace. Not only was natural gas less expensive, but the new burner was tremendously efficient. Next, I switched to a tank-less hot water heater (also gas) that only heats the water as I need it. Not only does this mean endless hot showers (if we need it), but it means efficiency of not having to keep a tank of water heated 24-7 (which is particularly expensive in the winter). I spent a total of $6000 between the two. But I average between $100 of savings per month (closer to $100 today with the price of oil). That was 3 years ago…by now I’ve saved over $2000. Both will have paid for themselves within another 5 years.
Frugal is responsible
Being frugal is not exclusively a short-term mindset, either. It’s about considering all the implications of your financial decisions, both short and long term. A frugal person considers retirement, saving for future purchases, paying down principal debt for interest savings, future value of assets, and diminishing value of disposable purchases. Through considering the factors of each finds the best way to allocate their funds for maximum possible benefit.
Frugal responsibility also means being diligent about goals and financial responsibilities. It means paying bills on time, being organized, and (most importantly) well informed. There’s few things more wasteful than irresponsibility, particularly when it comes to finances.
Waste is the antithesis of frugality.