Cheap versus Frugal?

Yes, there is a difference – a difference that I didn’t realize until I left my cushy life on Wall Street and became a graduate student.

I am not cheap, but as a graduate student I learned to become frugal so I can use the incremental value I gain to do other things. I asked several people the difference between being cheap and being frugal. Below are some responses (interestingly, most of the responses center around food):

“Frugal is buying the ready-made sushi in Spangler rather than waiting to buy the made-to-order sushi in line. You save a little money by doing so but still get high quality sushi.”

“Being frugal is going to a nice restaurant. Being cheap is going to a nice restaurant and giving less than 20% tip.”

“Frugal is taking the Bolt or Greyhound bus to New York. Cheap is taking the Chinatown bus to New York. The former is better value for a slightly more expensive price.”

“Cheap is not going out to dinner to meet a friend because it will cost too much.ÿ Frugal is going and not ordering a bottle of wine.”

“Cheap is taking someone on a first date to Spangler and splitting the bill with Crimson Cash. Frugal is taking someone on a first date to Spangler, ordering a burger instead of steak, drinking tap water and in the end splitting the bill with Crimson Cash while you jot down the total on your expense tracker.”

Clearly, there are many different interpretations of what each of the words means. According to Merriam-Webster’s Online Dictionary, frugal means “characterized by or reflecting economy in the use of resources.” The definition for cheap is “purchasable below the going price or the real value; charging or obtainable at a low price; gained or done with little effort.”

Personally, being frugal is protecting my money by seeking ways to maximize the value from everything I purchase and saving on the things I want and need. I define being cheap as spending as little money as possible all the time or frequently to the point where one’s brain only views items in terms of dollars decremented from the bank account and not value gained from the experience.

Without a doubt, this recession has made many people cut out the events, experiences, and material things they enjoy. Below are four ways to learn to be frugal in your day-to-day life.

If you cut out things you love because you want to save money, you will go crazy. We are all human, and part of being human is buying things we want and not just need. Being frugal means spending your hard-earned money on the things you cherish and love and that will make you or your loved ones really happy BUT then severely slashing the costs on the things that don’t bring you the same level of joy and happiness. So take that expensive J-term vacation to Asia or Africa, but just be mindful of ways you can save money on activities you don’t care that much about while you are there.

The worst is when you are hanging around a cheap person and their cheapness makes you feel uncomfortable or awkward. When you are frugal, you are the only one who is affected by your frugality. Your purchasing decisions should not adversely affect your friends. The fact that you decide to get tap water instead of bottled sparkling water shouldn’t make your friends feel uncomfortable.

To be frugal, start thinking of experiences and things in terms of their long-term value and not short-term value. For example, you can easily buy a cashmere sweater from H&M for under $50, but chances are you will only be able to wear it a handful of times because of the inherent quality of the fabric, design and craftsmanship. You are acting cheaply because you are looking for the most inexpensive item while ignoring quality. However, if you invested more money up front, you could buy a higher quality cashmere sweater that would last you for a longer period of time. It’s tough to think long-term about value when short-term value can be provocative, but doing so will more likely save you money in the long-term since you won’t have to constantly replace your items.

I understand that not everyone has the luxury to act frugally over cheaply. But, if you do a little homework it can make a huge difference in your spending. For example:

Look for Sales: Research when your favorite retailers and brands are having sales both in the store and online, and spend your money during those time periods. I personally sign up to receive emails from my favorite shopping boutiques to learn when they will be having huge discounts on the quality items I love.

Know the Store you Love: It’s helpful to understand a store’s policy on sales, discounts and returns. Just last week, I bought a new pair of jeans from Guess at standard price, but two days later they went on sale. I went to the store, and they granted me the price difference.

Bulk It Up: If there are items you know you love, buy them in bulk. Often stores run discounts on these items. I have a friend who always buys L’Oreal lipsticks in bulk from CVS during their promotional events. Also, buy items you love from the same place and use your discount card because stores such as CVS and Walgreens track what you buy and can tailor specific coupons to your purchasing behaviors.

Think Ahead: A little foresight can go a long way. For example, if you tend to give your family and friends presents for birthdays, holidays and other momentous occasions, consider buying these presents as you see them during the year on sale, rather than the day before the event when items may not be on sale. It’s pretty simple to store these gifts in your room until you are ready to give them.

Hopefully these tips will allow you to be more frugal in your everyday life!
Your HBS Money Honey,
Mia Saini

Mia Saini is a born and raised California girl. She is earning her MBA at HBS. She graduated from MIT and went straight to the sales floor at Goldman Sachs. She honed her journalism skills at CNN, WB, CNBC, and as a TV reporter at Jim Cramer’s She is the founder of HBS TV and is a video host for MBA PodTV on Each week she writes a “Money with Mia” column about money, business and personal finance, so email HBS’s Money Honey your questions, story ideas and feedback.