5 Major Differences Between Cheap and Frugal

If you're cheap, then you might be wasting your time.

money going down the drain
ShutterstockBeing frugal means being resourceful with your cash.
By Stefanie O'Connell

In response to my recent post about splitting expenses with friends, one commenter wrote that there is a fine line between cheap and frugal. I happen to agree.

For example, when dining in a group, I recommend that each individual calculate tax and tip based on what they ordered, but I would never dream of leaving less than a 18 percent tip on my tab, unless service was abysmal. I skip the drink order and stick to an appetizer to save money myself, but saving money at the expense of the wait staff or my other friends by failing to account for taxes or "forgetting" to leave a tip would just be cheap. Here are five more key differences between cheap and frugal:

1. Cheap and frugal people both love to save money, but frugal people won't do so at the expense of others. My boyfriend and I were strolling around Best Buy (BBY) yesterday when he found a used version of a game he had been wanting for his PlayStation. While walking to checkout, he found that the same game could be purchased online, brand new, and for $4 less. We put the game back on the shelf and placed an online order. The savings weren't huge, but the savings, combined with the fact that it was a totally new product, and that he had Amazon (AMZN) credit waiting to be used, made the online option the clear choice, even if it meant waiting an extra day or two to play the game.

2. Frugality is about assessing the bigger picture and having the patience to cash in on the simple savings strategies. As an avid runner, I'm not willing to buy second-hand, worn-out running shoes. I buy a new pair of sneakers at least once a year because I value the health of my feet and my joints and I'm not willing to sacrifice that to save a hundred bucks a year. I will, however, gladly buy the children's version of the same shoe or wait until last season's model goes on sale to get the cheaper price.

I adopt a similar philosophy with the rest of my workout clothes. After buying cheap yoga pants from Express (EXPR) or Gap (GPS) every year and watching them fall apart after a few uses and washes, I made the switch to more expensive, but quality workout wear. Sure, I try to cash in on a sale or even try to find those items cheaper on eBay (EBAY), but I'm happy to spend more money to ensure better product quality with a longer shelf life. In the end, it's a better value.

3. Cheapness uses price as a bottom line; frugality uses value as a bottom line. TLC's reality TV show "Extreme Cheapskates" is possibly one of the best examples of cheap versus frugal I've ever seen. In one episode, a man spends several hours searching for change around his home and around town. By the end of his search, he's come up with over $7, which is admittedly impressive, but begs the question, "Is your time really worth less than $7 an hour?"

4. Cheap people are driven by saving money regardless of the cost; frugal people are driven by maximizing total value, including the value of their time. I stick to water at restaurants, I make my coffee at home, I opt for running year-round rather than paying for a gym membership and I find small savings strategies in my day-to-day life so that I can allocate my resources to bigger dreams. Those include my career in theater, retirement and travel. While I haven't bought a new article of clothing in over a year, I'm vacationing in Mexico next week.

5. Being cheap is about spending less; being frugal is about prioritizing your spending so that you can have more of the things you really care about. Those who are cheap are often afraid to spend money. They are willing to sacrifice quality, value and time in order to cash in on some short-term savings. Those who are frugal are resourceful with their spending, maximizing their dollars, so that they can fund big picture wants and dreams.

So yes, there is a fine line between cheap and frugal, and the side on which you fall can make all the difference.

Stefanie O'Connell is a New York City based actress and freelance writer. She chronicles her struggle to "live the dream" on a starving artists' budget at thebrokeandbeautifullife.com.

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To me, cheap means making short term crappy decisions to save a few bucks, while frugality implies being smart and making wise long term decisions with your money. Here is an example of being frugal:

1. I eat out at least 1 less time per week, This saves 50-$100 per week minimum, and if you skip fancy meals it saves even more.
2. I buy dry groceries online from WalMart, and I have no problem stocking up on things at BJs or Costco.
3. It's embarrassing to admit what I was paying, but some hotshot financial advisor sold me this life insurance policy for $290 a month. I understand it saves a cash value, but it was ridiculously expensive, and I can get a higher return investing that money in other places. After doing some research I realized that you can get Term policies for the same coverage online for way less. I got mine from Life Ant Insurance and it only costs about $14 a month. At least the wife and kids are protected if something happens to me.
4. I got rid of my financial advisor, and switched all my funds to low cost Vanguard investments. Over time between fund fees and financial advisor fees I will hopefully accrue an amazing amount of more money.
5. I was able to negotiate a better deal on both rent and cable. I didn't even know that cable companies negotiate with you until my friend told me. Between the two I save an extra $55 a month. Not huge but over time its going to add up big time.

June 21 2014 at 5:54 PM Report abuse rate up rate down Reply

What is so "frugal" about blowing money to buy yet another "gotta have it" Playstation video game??? In a couple of weeks, that game will be tossed aside, and they will be shopping for "something new" again.

June 20 2014 at 8:07 PM Report abuse +2 rate up rate down Reply

Aside from being someone I would never go out to dinner with, the writer is generally correct, but a simpler way to put it is: a cheapskate knows the cost of everything and the value of nothing. A cheapskate does not get the irony of: being penny wise and pound foolish. I've known some people I wish I could pound some sense into.

There are times and restaurants that implore me to splurge. That means the obigatory Tanqueray Martini to start, a good bottle or two of wine and coffee to finish it off. And I tip accordingly.You'd be surprised, by the way, how fast an upscale joint catches on to a regular as being a good tipper.

June 20 2014 at 4:44 PM Report abuse rate up rate down Reply
Master of my fate..

When the kids where young and we did not have much money, we would make a deal with the kids when going out to eat. Drink water with your meal instead of Soda which is basically suger water anyway. Then on the way home we would stop for ice-cream cones.

June 20 2014 at 2:34 PM Report abuse rate up rate down Reply

Cheap = Liberal Democrat. Always wanting something for nothing.

June 20 2014 at 1:19 PM Report abuse -3 rate up rate down Reply
2 replies to alfrankenfool's comment

There's always one jerk who needs to inject politics into every conversation. Give it a rest already. Find a new hobby.

June 20 2014 at 2:30 PM Report abuse +2 rate up rate down Reply

with your money.

June 20 2014 at 3:23 PM Report abuse +2 rate up rate down Reply

Amen about cheap and frugal. You get what you pay for, and junk is junk. I collect expensive fountain pens, brief cases, shoes, watches, etc. My Rolex, won it in a contest at work, just took a lot of hard work, My fountain pens? probably 60 or more from 90 dollars to over 2000 a pen, but I shop sales, shop on line for barely used ones at deep discounts, leather briefcases the same deals are out there, and shoes and clothes are the best example, I used to shop at a place called "odd lot shoes in Milwaukee. He would buy shoes from major wholesaler/retailers that were last years model in LA and New york, many missing heels and such, and he would fix them and resell. All were new, and classic styles, wingtips, etc. I bought Bally, Allen Edmonds, Johnston Murphy, Bruno Magli, Capporici and many others, often in alligator, lizard, french veal, and many have lasted 20 or more years with 4-7 re soling and new heals. Buy Junk, and its always Junk, buy quality without paying for the Nameand get a great deal. I dont buy Louix Vitton, or Mont Blanc any more because they are great products but never on sale. Have fun shopping

June 20 2014 at 12:49 PM Report abuse rate up rate down Reply

Being frugal = wealth maximization!

Being cheap = character flaw.

June 20 2014 at 12:31 PM Report abuse +2 rate up rate down Reply
1 reply to cimontesjr's comment
Nguyen Julia

I really like it when folks get together and share ideas. Great site, stick with it!

June 20 2014 at 1:34 PM Report abuse -2 rate up rate down Reply