There's a fine line between frugal and cheap. Frugal people understand that paying more doesn't necessarily mean a better value. People labeled as cheap wouldn't 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 all of his or her belongings were purchased at a garage sale, is probably cheap. Here's how to avoid being labeled cheap.

SEE: Warren Buffett: How He Does It

Frugal People Know When to Pay up
Cheap people only look at price. They believe that the only way to achieve value is to pay less but they fail to take in to 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 less signs of wear.

Cheap people may not be skilled at managing their money as frugal people are. 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 where the frugal person would evaluate the energy efficiency and compare gas versus electric. He or she may research the model and read customer reviews Before a purchase is made, he or she will look for rebates and sales at other stores. The better use of his or her money may be a higher-priced model, but the cheap person may not see a need to research when the lowest price, basic model is in front of them.

SEE: 6 Spending Tips From Frugal Billionaires

Cheap People Think Everything Is Overpriced
You've been with this person. This is the person that complains to everybody about the cost of everything. If you go to a restaurant, they 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 it makes them sound cheap. Instead, frugal people don't purchase the candy bar.

SEE: 7 Tips To Move On The Cheap

Frugal People Put People Above Savings
Have you ever gone out with somebody who uses coupons to save on the price of a dinner? That's frugal and most people wouldn't see that as 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.

SEE: Be A Holiday Saver, Not A Scrooge

Cheap People Don't Buy Necessities
Have you ever met somebody who won't go to the doctor because it costs too much? How about somebody who doesn't plan to help their child with college expenses because of the price? Those may be extreme examples, but cheap people may not even pay for the basics of life where frugal people look to get the best price they can.

SEE: 5 Moves That Make You Look Cheap

Frugal People See the Higher Purpose
Frugal people love to save a buck, but that doesn't mean that they aren't generous with their money. They believe in giving to worthy causes, but will exhaustively research charities to find ones that don't have 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 kids too much money does more harm than good and because of that, has promised most of his fortune to the Bill and Melinda Gates Foundation instead of 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 gave a gift or helped when help was needed. This may lead to a strained relationship with that parent. Money appears to mean more than the relationship with others.

The Bottom Line
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 in price doesn't necessarily make it cheaper once other costs are included.

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