In your quest for financial independence, are you being frugal or crossing the line into cheap? There is a fine line between the two, and where being frugal is fine, cheap will be costly for your quality of life.
That’s why it’s important to understand the difference between the two and find a balance that works for you.
In this article, we’ll explore how to strike the perfect balance, with practical tips and concrete examples.
Frugal or Cheap?
I’m Dutch, and people in my country are famously frugal. Frugality is about making intentional, thoughtful financial decisions to maximize value and minimize waste.
For example, a frugal person may compare prices before buying a durable pair of shoes that will last years instead of buying the cheapest option that might wear out quickly.
Unfortunately, some find the Dutch to be cheap. I can understand, as there are indeed people who cross the line from frugal to cheap by sacrificing quality or relationships to save a couple of extra dimes.
An example: sending a Tikkie (payment request) for €1,50 after treating a colleague to a coffee during a work break. Yeah, this really happens in the Netherlands…
To sum it up:
- Frugality maximizes value for money while being cheap is solely about minimizing cost.
- Frugality respects others (e.g., tipping fairly or sharing expenses), whereas being cheap doesn’t respect other people.
Why Balance Matters in the FIRE Journey
Becoming financially independent and retiring early is hard, so it’s normal that you’re looking at your expenses and trying to minimize unnecessary spending. However, don’t fall into the pitfall of being cheap. It will hurt your relationships (which are vital for your happiness and success) and it will lead to a reduced quality of life because you’re denying yourself basic products and services out of stinginess.
Ignoring small investments in health or education may also lead to higher costs later, such as medical bills that could’ve been prevented, or missed career opportunities.
The other extreme, being too lax with spending, is also bad. Not only does it make FIRE almost impossible, but you also put yourself at risk of severe debt. There is also the environmental cost of overspending.
It’s key to find the sweet spot: practice mindful and intentional frugality. Be aware of where your money is going, and cut back on unnecessary spending, but don’t disrespect other people or cheap out on yourself or others. Let’s take a look at some strategies to find this balance.
Strategies to Find Balance
Evaluate Spending Decisions
When you buy something, do you value quality over price, or do you always pick the cheapest option, even if the quality leaves much to be desired?
If it’s the latter, it may be a good idea to rethink your approach and find a better balance between quality and price. I like to think in terms of cost-per-use: divide the cost of the item by how often you’ll use it.
That way, a $80 pair of shoes lasting 400 days of use costs $0.20 per day, whereas a $40 pair lasting only 150 days costs $0.27 per day. In this case, the more expensive and higher-quality shoes end up saving you money in the long run.
In real life, it’s not that clear and easy to calculate, but you can evaluate the quality of different options and make rough estimates based on reviews and your own experiences.
Be Mindful of Others
One big difference between being frugal and being cheap is the way it affects the people around you. Have you ever stopped to think if your money-saving habits may be hurting your relationships? It’s not just about family and friends—it’s also about how you treat the waiter at your favorite café, the delivery driver, or the cleaning staff at a hotel.
Say your friends always put thought into your birthday gifts, spending around $30–$40 on something special for you. But when it’s their birthday, you grab the first clearance item you find, something low-effort and cheap. Imagine being on the receiving end of that. That stings, right? That kind of behavior comes across as unkind or even dismissive, even if that wasn’t your intention.
Striking the right balance is simpler than you may think. A great rule of thumb is to match the effort others make for you. If your friends go the extra mile for your birthday, it’s worth doing the same for theirs.
And let’s not forget everyday moments. Tipping fairly, splitting the bill evenly, or offering to treat someone every now and then shows respect and appreciation. These small gestures not only strengthen your relationships but also reflect the best side of frugality: being resourceful without being inconsiderate.
By keeping others in mind, you’ll find that frugality feels a lot more rewarding—and you’ll build stronger bonds along the way.
Align Spending with Goals
It can be helpful to formulate more life goals besides your FIRE goal and align your spending with those goals. Say you want to improve your physical health, spending a little extra on quality food and a gym membership will bring you closer to reaching that goal without breaking the bank.
Some other examples to align your spending with goals are investing in regular dental checkups rather than skipping them to avoid costs, and allocating funds for courses that boost career skills, a decision that often pays dividends.
Begin With the End in Mind
We don’t know when, but there will be a day that you and I die. Sounds morbid, but it’s actually a powerful reminder that your time on this planet is finite and you should get the most out of your time.
If you have a million dollars in your bank account on the day of your death, wouldn’t that be a waste? Think about what that represents: all the experiences you didn’t have, the places you didn’t explore, the moments of joy you skipped, and the opportunities to help others that you let pass by. Don’t end with regret over not enjoying your life.
The point being: money itself is just a tool. Sure, it’s smart to save, invest, and plan for the future. But if you live so cheaply that you miss out on the beauty and richness of life, you’re not really winning.
So, here’s what to do: think about what really matters to you. What experiences light you up? What relationships mean the most to you? What causes do you care about? Then use your financial resources to invest in those things, as spending with intention ensures you’re making the most of your life—not just your bank balance.
Examples of Moving from Cheap to Frugal
Social Events
Cheap Behavior: Always skipping group outings because you don’t want to spend money, and saying you’re busy as an excuse, but actually feeling isolated.
Frugal Change: Setting a monthly budget for social activities, and prioritizing events you value most.
Buying Clothes
Cheap Behavior: Buying the cheapest clothes you can find, only to have them wear out quickly and needing constant replacements.
Frugal Change: Investing in higher-quality clothing during sales, so you spend a bit more upfront but save money over time by replacing items less often.
Home Repairs
Cheap Behavior: Ignoring a leaky faucet to avoid paying for a plumber, only for it to cause water damage and higher repair costs later.
Frugal Change: Learning basic DIY skills for small repairs and hiring professionals early for bigger issues to prevent expensive problems down the line.
Conclusion
Moving from cheap to frugal is an important step for both your quality of life and your relationships with others. Though achieving FIRE is a great goal, it’s healthy to balance it with other parts of your life. This way, you’ll achieve both financial freedom and long-term happiness.
I encourage you to reflect on your spending habits and evaluate whether there’s some cheapness showing up. If that’s the case, use the strategies above to shift towards balanced frugality. Good luck!
