saving vs earning

midnight · #1 (**permalink**) 03-09-2005, 12:34 PM

OK, let me see if I have this straight. It's actually better for my finances to save money versus earning the same amount of money? How do you go about calculating this difference?

PRICEPLUS · #2 (**permalink**) 03-10-2005, 03:35 PM

There was an article pertaining to this subject but it eludes me now.

You have to travel to and from the earning place. Taxes come out of the earnings. There are other costs associated with working.

If I find the article I will post it.

terry1156 · #3 (**permalink**) 03-10-2005, 03:43 PM

There are a variety of things that go into the calculation and the exact amount will vary from person to person depending on your tax bracket, distance of commute to work and other factors. The rule of thumb is 2 to 1 - a dollar saved is worth $2 earned. I guess you could go about and make all the calculations yourself, but the rule of thumb is probably sufficient for most things.

DivaJen · #4 (**permalink**) 03-11-2005, 12:32 PM

Here's an article from Jeffrey that might shed some light on the subject:
Saving Money: The Doubling Effect

Quote:

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.

I know someone who works and works and works, and it seems to me her life might be a whole lot less hectic and stressful if she would endeavor to save a hundred dollars a month from her first job, rather than working extra hours to get another hundred dollars after taxes.