Managing Your Money

I was recently chatting with a client when she referred to herself, sheepishly, as “cheap”. Now to put this in context, she has been a client for over twenty years, so I know her quite well. She’s a lovely, kind lady who is generous with the people she cares about, both with her money and time. She is also a multi-millionaire. When she said this, in the context of “she’s too cheap to spend on house cleaning” I gently suggested she rephrase it as she is too “frugal”, not “cheap”. There’s a big difference. She thought about it for a second, and agreed that frugal sounded much better, and much more accurate.  She now proudly uses that term to describe herself and acknowledges that it is likely the basis for her financial success.

The Merriam-Webster defines “cheap” as – stingy, not generous or liberal – sparing or scant in using, giving, or spending. Synonyms include, tight-wad, miserly. And defines “frugal” as – characterized by or reflecting economy in the use of resources. Synonyms include, thrifty, careful, prudent. Cheapness is generally considered a derogatory term, whereas frugality is generally a positive trait. In fact, according to survey done by, 90 percent of people view it as an appealing trait in a partner. I think that many who don’t view frugality as a positive quality in some ways confuse it with the more undesirable characteristic of cheapness.

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This is something I continuously try to explain to my son who is constantly calling me cheap, to which I always reply confidently, stating “I am not cheap, I’m frugal”. I told him I was writing this article and asked him why he thinks I’m cheap. He explained that it’s because usually when he asks for a hot chocolate from Starbucks or Tim Hortons that I reply that we have hot chocolate at home. He went on to further explain that I always try to buy things on sale, and if it’s not on sale that I won’t buy it for him. (Doesn’t everyone love a good sale?!) Except for the “always”, what he says is true. And I’m thinking to myself – “perfect! I hope this rubs off on him, as it did on me.”

For some people, their frugality is a product of their generation, environment, or upbringing. For others it’s a necessity and not a choice. I believe that frugality can be taken too far and become cheapness, and that the intention behind the action is what defines it. Some people can have both traits and be a blend of the two. For others, just the fear of appearing cheap has them making unintended, completely irresponsible financial choices. I have heard stories from more than one person who ended up at the cash in the check-out line with an item that they thought was $xx price, but rang up at a higher price, and they bought it anyway because they were embarrassed to think they would look cheap or poor.

In my opinion the whole idea of cheapness/frugality is one of personal perception. It’s hard to be objective about it. We compare people around us to the benchmark – ourselves! Our own “normal”, being the point of reference. So, we often consider people who vacation more, buy fancier cars, bigger homes, eat out more, etc., as wasteful, and those who have less cool toys, older cars, and who spend less on entertainment as cheap or frugal.

Society and marketers have made many people believe that they need to validate their lives and feel good by having expensive items, living an expensive life, and keeping up with the “Jones”. However, many people who have managed to accumulate wealth have done so with the opposite mindset – valuing money and how they use it. Warren Buffet is the iconic example: worth about $80 Billion, he lives in a modest house, drives a modest car, eats modest food, wears modest suits, and is one of the most generous philanthropists in the world. In a CNBC interview Buffet explains “I have everything I need to have, and I don’t need any more because it doesn’t make a difference after a point.”

Having spent my career on the wealth building side of people’s lives, I can attest to the fact that most of those with whom I work have successfully built real wealth by doing it wisely, safely, and frugally. The issue is how do you become frugal? There are definitely patterns that I observe in my life and work. I have a high percentage of wealthy clients who were either brought up during or just after the depression, and high percentage of financially successful adult children whose parents were raised during the same period – myself being one of them.

Both my parents were born before or during the depression. They lived during hard times. This shaped them, and in turn shaped me.  Even though I didn’t grow up in hard economic times, my parents’ fear of being poor as they were as children, influenced how we lived and the messages that we received growing up. I struggle as a parent today to teach my children the value of money, and the importance of not wasting it. So, when my son calls me “cheap” (even though he means fugal), I figure I’m setting a good example!

One of my tricks when buying a good or service is to think of how much I’m willing to pay, before looking at the price. That helps me to evaluate its value to me, keeping in mind that different people value different things. As I watch the snow accumulating outside, I am grateful that the plow will soon come to clear my driveway.  To me, that service is priceless, and I would happily pay more than I do, to not have to go outside and shovel the driveway like my dad used to do when I was growing up. That being said, I still see people on snowy days, with their snow blowers out, doing their own driveways, so obviously it’s not a service that they value as much as I do!

The first step to frugality is embracing it. It starts with how you choose to think. It’s an admirable quality, so be proud of it, not ashamed. It’s not about worrying if other people will think you’re cheap or poor. Remember it has nothing to do with how much you have, it’s about how you choose to use it. It’s about focusing on value and not price. You can be frugal, and still be generous to yourself, and those you care about. You can be frugal, and still help those in need. I think that like with anything else, it’s important to have a balance. Warren Buffet generally lives a modest life, but he balances it by also using a private jet service (which his company owns) – as he would never waste money on owning his own private plane…pretty frugal, right?!

Lynn MacNeil, F.PL. Vice President, Investment Advisor, is a Financial Planner with Richardson GMP Limited in Montreal, with over 23 years of experience working with retirees and pre-retirees. For a private financial consultation, or more information on this topic or on any other investment or financial matter, please contact Lynn MacNeil at 514.981.5795 or [email protected]. Or visit our website at

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