Benjamin Franklin said, “A penny saved is a penny earned.” I’m sure you’ve heard that phrase, but you may not realize that it’s a crucial insight into good money management. And just ahead, Rob explains why that’s so.
Benjamin Franklin said, “A penny saved is a penny earned.” That is a crucial insight into good money management. We’ll explain why today on MoneyWise. On Mondays, as we start our broadcast week, we sometimes like to go “back to basics” and talk about one of the five things you can do with money: You can earn money, you can live on it, you can give it away, you can owe it to someone, and you save and invest it. So those are the five: earn, live, give, owe, and grow. Today, we’ll focus on the first of those: earning — but we’ll do it today in a non-typical way.
Normally, when you think about earning, you think of getting a paycheck or perhaps receiving a pension or a benefit. But we want to home in on Ben Franklin’s words that I quoted a minute ago: “A penny saved is a penny earned.”
Now, if Mr. Franklin was living today, he might say, “A dollar saved is a dollar earned,” but the principle is the same.
A DOLLAR SAVED …
Let me give you an example — and this is a real-life example from a MoneyWise listener.* His monthly cellphone bill was about $125. He thought he might be able to find a cheaper plan, so he shopped around and compared plans offered by several companies. He found one that met his needs that was only $50 a month.
So he made the change and was able to save $75 a month. That works out to $900 a year.
Now, to return to Ben Franklin’s principle, saving $900 a year is equivalent to earning an extra $900 a year. In fact, it’s slightly better than earning it because if the employer of this MoneyWise listener paid him an extra $900, some of that money would have been taxed away. So $900 dollars saved was a tad better than the same amount earned.
When looking at your overall financial picture, it’s helpful to view things through this lens. Always be asking, “Are there steps I can take to cut my cost of living?” If you can reduce your expenses. That’s just like earning extra money, or even better.
Now, I know what you’re probably thinking: “In a time of rapid inflation, how can I cut costs?” Well, first, think about goods or services where there tends to be a lot of competition, get a better deal from your current provider if you ask, or you might save by switching to another company. But you have to take the initiative and shop around.
FINDING COST SAVINGS
What about insurance? This is an area in which you might be able to save substantially by comparison shopping, not only for car insurance but also homeowner's insurance, or perhaps a Medigap plan or Medicare prescription coverage. It is not uncommon to find wide price variations in plans and policies that are quite similar.
Another place to cut costs is at the grocery store. The fact is, some grocery chains are more expensive than others, typically because they offer more variety. Try buying all your staple items at a discount grocer and your savings will really add up over time.
Now, you can’t cut your expenses down to nothing. But you may be able to cut more than you realize if you apply yourself. Don’t give up without trying. Who knows how much you might be able to save?
So when it comes to earning money, always consider both sides of the balance sheet. And remember the principle from Ben Franklin: “A penny saved is a penny earned.”
On this program, Rob also answers listener questions:
How do you determine when it’s the right time to sell your home?
What is the wisest way to manage or invest a large commission check?
Is it biblically ethical to take advantage of the federal public service student loan forgiveness program?
How do you figure out the best thing to do with an inherited property shared six ways?
Does it make sense to sell your car to pay off high-interest debt?
Remember, you can call in to ask your questions most days at (800) 525-7000 or email them to Questions@MoneyWise.org. Also, visit our website at MoneyWise.org where you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise app
