Did you know that we’re now on Periscope? You don’t want to miss us live streaming from Italy this week. Follow us there @ClubThrifty! While we’re away, here’s a great piece from guest contributor Kristi. Enjoy!

Cheapskate, tightwad, miser, and scrooge… chances are that you’ve tossed one of those terms around as a moniker for either yourself or someone else. Did you really mean it though? Cheapskates have bad reputations for  good reason: they will cross over morally gray areas in the name of saving a buck.

What about frugal, economical, prudent, or careful? Do any of those terms come to mind when you’re discussing your spending habits or the spending habits of others? Frugal spenders tend to get unfairly lumped into the same category as cheapskates, even when they’re typically just goal oriented and passionate about saving money for big purchases or to get out of debt.

The truth is that there is a fine line between being cheap and being frugal. How can you be sure your living your life prudently without turning into a Scrooge?

The key is knowing the difference, and guiding your actions accordingly.

Short-Term vs. Long-Term

A frugal person can sometimes be a bit of self-proclaimed “tightwad.” It’s usually only in the name of maximizing their income though. Frugal tightwads save their money so that they can spend it on more valuable goals and experiences down the road. Cheap people don’t always have any clearly defined goals as to why they’re saving money. They just hate spending money at all. The less they can spend the better.

Frugal people, on the other hand, have chosen to live a life of conscientious, goal-oriented spending. Frugality isn’t about saving money at all costs. It’s about saving money on the things that don’t matter so that you can spend your money on the things that do matter.

[bctt tweet=”Frugality is about saving on things that don’t matter so you can spend on things that do!”]

Being frugal is awesome, because frugality is tool to help you prioritize your spending. Frugality helps you to reach your long-term goals. Being cheap just saves you money today.

Cost vs. Value

Frugal people aren’t willing to compromise on quality. If they want to buy something nice, they save for it. Quality doesn’t matter as much to a cheap person. They will buy second-rate items all in the name of saving a buck, or they’ll do what they can to get the quality item for very little.

Cheap people only care about the bottom line, not the quality or value of something. The number they spend needs to be as close to zero as possible, whether or not they actually care about the item. It all boils down to what an item costs, not what the value is.

Frugal people do care about the value of the things they buy. They’re willing to save their money on other less valuable things, so that they can afford to spend their money on the things that are most important to them. For example, frugal people are more likely to be seen driving a new car instead of clunker, or building a dream house instead of living in a trailer home.

Dishonesty vs. Honesty

Cheapskates have a reputation for being sneaky and under-handed. They will go to any lengths to save a buck, even if it’s at the cost of another person. Even the very etymology of the word cheapskate shows that a cheap person is, “a mean, contemptible, or dishonest person.”

A cheap person will find a way to dishonestly get a service for free, with things like black market products, illegal devices, and pirating. A frugal person will either just stop using a product in order to save money, or they will wait until they find a good deal so that they can use the product for less. They aren’t willing to steal a product or service in the name of saving money.

For example, if you have decided to stop paying for cable so that you can save money, you’re being frugal. If you decide to stop paying for cable, but choose to use an illegal descrambler cable box so that you can get cable for free, you’re a cheapskate.

Opportunity vs. Priority

Cheap people will never pass up a free item, whether or not they actually need or want it. Those who are frugal try to get a deal only on things they need or have use for. Frugal people also won’t just take something because they feel entitled to it, or they could “get away with it” without any repercussions.

For example, going in to a restaurant and taking ketchup packets when you didn’t buy anything from the store is cheap. Saving the extra ketchup packets that came from your fast food lunch bag and using them later is frugal.

Walk the Line, but Don’t Cross It

Frugal people will sometimes question whether they’re being cheap. Cheap people know they’re cheapskates. It’s OK to walk the line between the two, but you probably don’t want to cross it – unless you don’t care if people perceive you as underhanded or dishonest.

Cut out the things you don’t need, stop paying for things you don’t use, and save your money for the bigger picture items or experiences that mean more to you. Just don’t try to save a buck at the expense of someone else.

Kristi Muse is a family finance writer who loves talking about strategies to save money, get out of debt, and live a frugal life. She shares her experiences about debt, parenthood, and life as a law-enforcement family on her blog Moderate Muse. You can also follow her on Twitter.