Is a Penny Saved Really a Penny Earned? NOPE!
One should always think twice when questioning the wisdom of a great thinker of the past. So I shuddered a bit when I typed the above title to this blog post. However, it’s just the truth, a penny saved is NOT a penny earned! In fact, that thought was the inspiration for the name of this blog …
“Not A Penny Earned.”
Does this mean I think Ole Ben was an idiot? Absolutely not! In fact, when Ben Franklin made that statement, it was probably correct … or at least closer to correct than it is today. Let me not only explain why it is no longer true, but how knowing this will help you accumulate MORE savings than you would if you believed it.
The statement, “A penny saved is a penny earned” was penned to make the point that if you put in time to SAVE money, it’s the same as EARNING that income. For instance, if you have $100 in a savings account and you work an extra hour to make $20, you now have $120 in your account. On the other hand if you were to buy a large screen TV that would leave you with $100 in the bank, but decided on a different model, $20 cheaper, you would be left with, again, $120. So the time you put into SAVING would have the same effect on your money as the time you put into working for it.
But that’s not true!
Why not? Because, for the average person, when you work an allotted amount of time in order to earn $20, you do not actually get to put that amount into your savings account. Some or much of it will be taken for taxes. How much? That depends on how much you make. In fact, in many cases, the more you make, the more you are taxed. In some cases, that promotion and raise, if slipping you over the edge of a higher bracket, can mean you bring LESS home than you did before the promotion.
As of this writing, the average tax rate is 24%. So if you worked for $20, you would only actually bring home $15.20. Whereas, if you used that time to save $20 on a large purchase, you would wind up with $4.80 more.
So the truth is …
A penny saved is MORE than a penny earned!!!!
So next time you put some effort into saving on a purchase, consider it like a little side job that brings in some extra, tax-free, cash.
And you can take that--LITERALLY--to the bank!
