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The Psychology of Being an Extreme Cheapskate: The Mindset Behind Penny Pinching
- Elle Tencer
- Jun 16
- 6 min read
By Elle Tencer
Would you live with rats and cockroaches to save money? Most people would probably say no. But, what if the rent was only $80 a month? When I think about penny-pinching, I don't just think about reality television and what we see in the media. I think about my Mom back when she was my age completing university.
At 18 years old, she left her small hometown and moved to Toronto for school with very little money. To afford living in the city, she moved into government-subsidized housing where rent was only $80 a month. At the time, this made complete sense. She was a student trying to survive in an expensive city.
What I find fascinating, however, is what happened after she graduated. Even once she had secured a full-time job and could comfortably afford to move elsewhere, she continued living there for another six years. The living conditions were far from ideal; the building was infested with cockroaches, mice and rats. Yet she stayed because the rent was simply too good to give up. Looking back, I often wonder whether this decision was really about the money. Or was it about the sense of security that came from knowing she would always have enough?
The more I reflected on her experience, the more I realized that this way of thinking isn't unique. Reality TV shows such as TLC's Extreme Cheapskates have long been fascinated with showcasing people who go to extraordinary lengths to save money, whether that means refusing to buy toilet paper, eating cat food, or finding increasingly creative ways to avoid spending. While these behaviours are often portrayed as entertaining, they raise an important psychological question: what drives someone to become so afraid of spending money?
For some people spending money is not just a simple transaction, it becomes closely tied to feelings of safety, control and stability. Even making small purchases feels heavy and can trigger deep guilt, anxiety and fear rather than satisfaction.
This blog explores the idea on how penny pinching is not always as simple as just being financially responsible, but reflects a more complex psychological relationship with early upbringing, a scarcity mindset, being hyper-analytical and overly-controlling.
Just Financially Responsible or Penny Pincher?
It’s easy to assume that being good with money simply means spending as little as possible. But what if saving every dollar isn’t actually the smartest financial strategy? In reality, there’s a big difference between being financially responsible and being a penny pincher, and that difference often comes down to your mindset, not money (Brown, 2024).
The Reasons Behind Being An Extreme Cheapskate: Early Life, Scarcity Mindset, Analysis Paralysis and Control.
You might assume that extreme penny pinching is always driven by financial necessity, that people are simply trying to make ends meet. However, this is not always the case. In some situations, individuals who engage in extreme saving behaviours may actually earn high incomes and appear financially secure on paper.
For example, on TLC’s Extreme Cheapskates, one case that stood out to me was entrepreneur Amy Elizabeth, who reportedly has a net worth of five million dollars yet still demonstrates highly restrictive spending habits. Similarly, a more historical example is Hetty Green, often considered America’s richest woman at the time, who was infamous for her extreme frugality. One of the most commonly told stories about her is that she refused to seek urgent medical care for her son's leg injury because of the cost, which ultimately backfired and led to the amputation of his leg (Weisberg, 2024).
These examples raise an interesting question: if financial necessity is no longer the issue, what is driving the behaviour? The answer may lie less in a person's bank account and more in the psychological beliefs and experiences that shape their relationship with money.
Early life shapes mindset.
One theory you may already be familiar with is Bandura’s Social Learning Theory, which proposes that people acquire behaviours during childhood by observing and imitating others, particularly their caregivers. This same concept can be applied to financial habits (Klontz et al., 2011).
During childhood, people begin developing beliefs, attitudes, and behaviours surrounding money by observing their caregivers’ relationship with spending, saving, and financial stress. These learned patterns are often carried into adulthood (Klontz et al., 2011). Early experiences with financial stress, scarcity, or highly cautious caregivers can shape the beliefs people develop about money. Over time, these experiences may lead individuals to associate saving with safety and spending with risk, creating habits and mindsets that persist well into adulthood (Klontz et al., 2011).
Scarcity: When “Not Enough” Becomes a Mindset
“I don’t have enough”
“I must protect what I have at all costs”
At the root of many penny-pinching habits is a scarcity mindset—a belief that there is never quite enough, which can keep people stuck in a constant state of financial self-protection.
Knutson et al. (2012) found that when people feel resources are limited, they can fall into a mental state called tunneling. Instead of seeing the bigger picture, their attention becomes consumed by the immediate problem, such as not having enough money in the present moment. This narrowed focus can make it difficult to consider long-term goals, alternative options, or financial decisions that may be more beneficial in the future.
Analysis Paralysis
“What if I choose the wrong option and waste money?”
“I need to make sure I’m getting the absolute best deal possible”
People who penny pinch are often overly analytical and obsessed with minor details. These individuals spend more time than usual in "system 2" level thinking. This is the area of processing that forces your brain into a slow and analytical mode when mapping out decisions (McClure, 2021). This may show up in various ways for penny pinchers such as over-researching minor purchases or maybe even spending days evaluating different toasters for the best price (McClure, 2021).
For some people, finding the best deal can become more than just a smart money habit, it can turn into an obsession. Hours may be spent comparing prices, searching for discounts, and second-guessing purchases to save a few dollars. According to Griffiths (2015), this behaviour can sometimes have addictive qualities. Every time someone scores a bargain, their brain gets a small boost of dopamine, the chemical linked to feelings of reward and pleasure. Over time, the thrill of finding a deal can become rewarding on its own, causing people to chase discounts and savings while mistaking that temporary rush for real financial security.
Illusion of control
“Saving more will make me feel less anxious”
“If I can minimize every expense, I’ll stay in control”
For penny-pinchers, an obsession with minor details is rarely about the money. In reality, it is a way to bandage unresolved anxiety and a fear of losing control. McClure (2021) explains that obsessing over exact numbers gives these individuals a false sense of security and a temporary illusion of control in an unpredictable world. Tracking every single cent makes them feel in charge, offering momentary comfort without ever addressing the deeper emotional triggers driving the behavior.
Wow! Amazing work
A very insightful article! Great read.
Very Interesting!!!
Great Read!