5 Major Differences Between Cheap and Frugal

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:

%VIRTUAL-WSSCourseInline-821%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.