Changing times have made some popular frugal sayings obsolete. Benjamin Franklin would certainly have to revise his famous "a penny saved is a penny earned" phrase in today's environment. That is because back when he made that statement, there weren't a lot of government agencies and programs claiming their share of your hard earned money.
The truth is that a penny saved is actually 2 cents earned today. That means every $1 saved is the equivalent of $2 earned, every $5 saved is $10 earned and every $100.00 saved is the same as $200 earned. It also means that saving any amount of money is 100% more efficient than earning that same amount.
What makes saving money so much more valuable than earning it? It comes from the fact that the money you save is after tax dollars while the money you earn is counted before taxes are taken out. When you consider the federal, state and local taxes your must pay in addition to social security and Medicare deductions, a large portion of your earnings are not ending up in your own pocket. Add on the costs associated with work such as clothing and commuting and it ends up that you get to take home roughly $0.50 for every $1.00 you earn. The money you save, however, has already had all those expenses taken out.
The aspect that makes saving versus earning highly advantageous is that saving often takes much less time. Take, for example, the purchase of a new TV. If you went down to your local appliance store on the day you decided to purchase a TV, it is likely that you would come home having paid full retail price. Simply spending an hour or two on the phone calling all the stores in your area to see if there were any sales or other discounts available to get the best price would likely save you $100 or more. In this scenario, that one hour on the telephone would be the same as earning $200 in you job...that's right, $200. If you make $10 an hour at your job, your hour on the phone was equivalent to working an extra 2.5 days on an 8 hour shift. That is the power that taking the time to save can have.
You can look at it from another perspective. If your boss came up to you and said, "I've been thinking a lot lately. You have been working hard. I will give you a $2,400 bonus this year if you make your own coffee and take it to work instead of buying it at the fancy cafe on your way to work each day." Would you take the offer? You can because that is what you would save.
When you view money in this light, taking a few hours to plot out ways to save money can result in a much higher return than getting a significant raise at work. If you are able to $5 a day, you have done the equivalent of receiving a $300 a month raise or a $3,600 a year raise. Anyone can achieve $5 a day in saving with a little effort (there are plenty of
money saving tips on this site or you can sign up for the
Daily Money Saving Challenge to have the information sent right to your email box) and with much less time and sweat than you would need to put in at your regular job.
Saving Money: The Doubling Effect
