There’s a fine line between frugal and cheap. Frugal people understand that paying more does not necessarily mean better value. People labeled as cheap would not pay a premium price regardless of the value.

Billionaire investor Warren Buffett is often labeled as frugal. Your neighbor, whose claim to fame is the fact that of their belongings were purchased at garage sales, is probably cheap. Here’s how to save money, but avoid being labeled cheap.

Cheap people believe that the only way to achieve value is to pay less, but they do not consider other factors that create value, such as quality.
Frugal people know that, sometimes, it is better to pay more and get better value.
Cheap people may be less skilled at managing their money than frugal people.

Cheap people only look at the price. They believe that the only way to achieve value is to pay less, but they fail to take into account other factors. Frugal people know that, sometimes, it’s best to pay up. A quality mattress may cost more, but the added support and ergonomics may help somebody with back pain. Paying the extra money for a pair of timeless jeans from a premium store may result in longer life and fewer signs of wear.

Cheap people may not be as skilled at managing their money as frugal people. Let’s assume that a cheap person and a frugal person head into an appliance store to purchase a dryer. The cheap person would look for the lowest priced model; the frugal person would evaluate the energy efficiency and compare gas versus electric.

The frugal person may research the model and read customer reviews. Before buying, frugal shoppers will look for rebates and sales at other stores. A higher-priced mode may represent better value, but cheap people may not see a need to research when the lowest price and the basic model is in front of them.

There is always an individual who complains to everybody about the cost of everything. If you go to a restaurant, such people don’t understand why a burger is $10. If you take them to a baseball game, they complain about the price of the ticket. Even the candy bar at the gas station is too much. Frugal people may be thinking the same thing, but they understand that voicing their concerns makes them sound cheap. Instead, frugal people don’t purchase the candy bar.

Have you ever gone out with somebody who uses coupons to save on the price of a dinner? That’s frugal, and most people would not consider the practice cheap. But how about the person who uses the coupon and then tips based on the amount after the coupon instead of the original price? Frugal people love to save a buck, but they won’t take money away from others to do it.

Have you ever met someone who won’t go to the doctor because it costs too much? How about parents who don’t plan to help their child with college expenses because of the price? Those may be extreme examples, but cheap people may not even want to pay for the basics in life while frugal people look to get the best price they can.

Frugal people love to save a buck, but that does not mean that they aren’t generous with their money. Frugal people often believe in giving to worthy causes. They will, however, exhaustively research charities to find ones without high administrative costs. Or they might forgo organized charity and give only to family and friends with a real need.

Warren Buffett believes that giving children too much money does more harm than good. Because of that, he has promised most of his fortune to the Bill & Melinda Gates Foundation instead of to his children.

Cheap people may have a different mindset. They see their money as theirs, and they may hold it for the rest of their life. Their children may speak of them as somebody who would rarely give a gift or help when help was needed. This may lead to a strained relationship with that parent. Money appears to mean more to cheap people than their relationship with others.

We admit, there is no scientific way to distinguish between cheap and frugal people. There are cheap people we love and frugal people we dislike, but perhaps the best distinction comes from understanding value. Just because something is less expensive does not necessarily make it cheaper once other costs are included.

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