Sunday, March 8, 2009

A Penny Saved is a Penny Earned: WRONG!!!

We've all heard the saying. Mom and Dad swore up and down that a penny saved is as good as a penny earned. This means of course that if you save that penny/dollar, it's as if you've just earned one. I'm going to apologise in advance to those folks who believe this but that notion is WRONG!!!

A dollar saved in actuality is worth two dollars earned. So, what do I mean by that? Every time you spend a dollar, it's a dollar: 100 cents absolute. But what does it take to earn that dollar back? If you go to work in a regular job you will be taxed on that dollar at (let's say) 30%. So, right out of the gate we know it will take about $1.50 worth of work to earn back that dollar. Ah, but there's more...

Now we must incorporate the costs of going to work each day. That cuts into your eventual take home pay. Things like wardrobe: Would you need to spend hundreds/thousands on professional clothes if not for the job? No. Therefore it is a cost to include. Car/gas/insurance/repairs etc. Think about this one. Do you need a car for anything other than going to work? Some may say yes, others no. However, in every case you must factor in the fuel cost of going to work each pay period. You get the idea.

Here's a list of hidden costs of working that will show you that saving that dollar is like doing two dollars worth of work.

Wardrobe/Dry Cleaning
Union/Assn. Dues
Steel Toes
Social/Gift Fund*
Staff Lunches/Outings*

*Some of these you may be able to opt out of. But let's be frank, if you opt out of these things too often you will likely be labeled cheap. Which we are not. We are frugal. We will discuss the difference in coming weeks.

There are undoubtedly many other hidden costs of going to work each day. Crunch the numbers on what it costs you for each of them to find what you actually take home in the end.

So when you see the quarter on the street, consider in 50 cents. That five dollar meal sounds like a good deal, but it'll take $10 to make it up. That $25 dollar mail-in rebate you might get around to sending in. Send it! It's $50 of your sweat and time.

Maybe this is too complicated to fit into a catch-phrase old saying. So many continue to say "A penny saved is a penny earned." When someone tells me something like "It's only 20 bucks." The reply is "20 will cost you 40."

Feel free to use it.

Next: Make it Painful

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