Cost effective: Britannica Dictionary definition – producing good results without costing a lot of money. In other words, to have more benefit than the costs involved. Cost-effective is having more long-term perspective.

For instance, a $5,000 investment in a piece of equipment that helped you generate $55,000 in revenues could a cost-effective purchase. (I say could be because it depends on your other costs but that’s a discussion for another post.)

Cheap is merely low price relative to another product in that category and is generally associated with short-term decisions. If you’re buying something merely because it’s cheaper without weighing the true costs, then you could be making a poor investment decision merely because, upon comparison, it’s cheaper than a competitor.

Cost-effective usually requires less time commitment than something cheaper.
Cost-effective generally provides more peace than something cheaper.
Cost-effective usually requires more investment up front for better returns over a longer period of time. Cheap generally costs less up front but will require you to replace that cheaper item/service/investment sooner, which has other costs associated with it, effectively costing you more in the long run.

Weigh your purchasing decisions wisely.