Personal Finance

Why "Cheap" Doesn't Always Mean "Inexpensive"

Share to Facebook
Share to LinkedIn
Share to Twitter
Share to Email
Share to Pinterest
Share to Email

Saving money will never be out of fashion.

Having money for emergencies, retirement, rainy days, and other future needs will always be vital. By refraining from frivolous spending and resisting unnecessary, spontaneous purchases, we are better able to save for the unknown.

“Unless you control your money, making more won’t help. You’ll just have bigger payments.”
– Dave Ramsey

However, at some point in your pursuit of saving money, you must ask yourself if an item’s price point is its only cost.

Saving money today doesn’t always mean you’re saving in the long run. This happens when you choose not to purchase an essential item or service. You can incur “invisible costs” that you don’t see until much later.

For example, skipping your six-month dental check-ups to avoid out-of-pocket costs can likely cost hundreds or thousands of dollars in dental repairs later.

Want to know the difference between “cheap” and “inexpensive?” Keep reading to find out. Plus learn how to get the most value out of purchases while remaining frugal.

Cheap vs. Frugal

You’ve heard people say, “I’m not cheap, I’m frugal!” But many people don’t understand the difference between the two.

It’s all about short-term cost vs. long-term value.

A cheap item with a low purchase price might cost more in the long run when it prematurely needs replacing. Frugal people keep this in mind. Cheap people only look at price, while frugal people also consider long-term value.

Cheap vs. Frugal: Fast Food or Home-Cooked Meals?

A cheap person will say that healthy food is more costly to purchase, and will eat fast food instead.

Meanwhile, the frugal person knows that over the long-term, a fast-food diet is bad for their health. And, since medical care is far more expensive than buying healthy food, they opt for home-cooked meals instead.

Fast food may be cheaper in the short-term, but, over time, the cost of fast food – which includes medical care for poor health – surpasses the cost of healthy, home-cooked meals.

Cheap vs. Frugal: Fast Fashion or Durable Clothes?

The debate over fashion costs is a long-standing one. People might look at two shirts – both similar in appearance, but with very different price tags – and wonder why anyone would buy the more expensive one.

"The bitterness of poor quality remains long after the sweetness of low price is forgotten.
– Benjamin Franklin

The cheap person will look at fast fashion and focus on the lower purchase price. The frugal shopper, however, will focus on the higher quality of an expensive item. That’s because items that are better made usually last longer.

Let’s look at an example:

Suppose you spend $20 on a blouse, while your frugal friend spends $40 on a similar, but higher-quality item. In two years’ time, you may need to replace the cheap blouse twice, at a long-term cost of $60. Your frugal friend, however, may still have the original shirt purchased for $40.

While cheaper fashion items might cost less upfront, they may cost more in the long run.

Cheap vs. Frugal: Skip or Purchase Insurance?

Insurance is a classic example of people choosing cheaper, short-term options to “save money” while others pay higher premiums to lower long-term costs. The cheap person might think, “Mishaps won’t happen to me,” while the frugal person knows that unfortunate events can happen to anyone, anytime, and anywhere.

The cheap person will pass on insurance, while the frugal person knows that paying premiums is cheaper than the out-of-pocket costs of an auto accident, house fire, total cell phone loss, or an apartment flood.

How to Be Frugal (Instead of Cheap)

Frugality is all about remembering the big picture and focusing on the long term. The point of saving money is to have enough to live comfortably in the future. However, this doesn’t mean you can’t live comfortably today, too.

“I love to go and see all the things I am happy without.”
– Socrates, on why he enjoyed going to the market during his frugal, simple life

If an item or service incurs a cost but would improve the quality of your life, it may be a cost worth considering. Never purchase spontaneously - give yourself a week to decide if it’s truly worth buying. Perhaps, you may even be able to buy it on sale or at a discount.

Look at more than just an item’s immediate cost. Ask yourself what other possible costs you might incur if you don’t buy the item now.

“Cheap” Isn’t Always a Value

An old proverb says, “The art is not in making money, but in keeping it.” As you’re looking to be smarter with your purchases, it’s important to be smart in your savings too. And we’re here to help. Use a high-yield savings account from Axos Bank to earn the most value from your hard-earned money.


Why “Cheap” Doesn’t Always Mean “Inexpensive”

This blog post was published by Axos Editorial Team on February 12, 2021 and last updated on February 12, 2021.

Get Axos Digest
Sign up to receive insightful content every two weeks.