A personal finance quote ingrained in the American psyche (or at least in mine) was coined (pun intended) by the great Benjamin Franklin. Franklin noted that “A penny saved is a penny earned.” Franklin was smart in realizing the distinct difference, but there might even be more value in a penny saved than just one penny.
Frugality and wealth building go hand in hand and Franklin’s observation noted this. However, what if you could get more than a penny from each one saved? Would that increase the attractiveness of saving money rather than spending it?
So why would a penny saved be better than a penny earned? There are four main reasons which include:
1. Lifestyle Inflation
This one is perhaps the most important of the three. People who earn more tends to spend more. You may have experienced this lifestyle inflation yourself — e.g., when you get your yearly raises, somehow you automatically found ways to spend that extra money.
2. Higher Taxes
For each penny earned you’re going to have to give Uncle Sam a cut of that copper currency. Depending on which income bracket you’re in you could be paying as much as half of that income to the government. That means that really two pennies saved would be the equivalent to one penny earned. It’s a lot harder to make twice as much rather than save one.
3. Time Value of Money
Since it’ll take your time (which is your most valuable asset) to recoup the penny spend you’re choosing to trade part of your life for the penny you spent. Keep the penny and you might be able to keep your time. That is, of course, unless you’re lucky enough to live on passive income which requires none of your time.
4. Guaranteed Pennies
If the penny is already earned you have it in your possession. However, if you spend it there are no guarantees that you’ll ever be able to recoup the penny since you may become disabled or unable in some way shape or form to recoup more pennies. What you have is real, your future earnings are not.
Although a penny may not seem like a lot it might actually be worth two or more. So the next time you find a penny, you should probably pick that penny up and save yourself the time it takes to make two.
Image from r-z