Benjamin Franklin popularized the expression: “A penny saved is a penny earned.” However, Ben got this one wrong because a penny saved is much better than a penny earned! This is one reason why being frugal is such an important aspect of wealth building. Of course, frugality on steroid is even better — i.e., save more and earn more.
Thomas Stanley and William Danko in The Millionaire Next Door
“Being frugal is the cornerstone of wealth-building.”
So why is a dollar saved better than a dollar earned?
Each additional dollar you earned is taxed at your marginal tax rate, along with myriad other taxes. In fact, My Money Blog has a great pictorial demonstration of your take home pay after taxes. For most of us, we are taking home just a bit less than 60 cents on every dollar we earned at the marginal tax rate.
3. Inflation of Lifestyle
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 automagically found ways to spend that extra money.
So it pays to be frugal and start implementing some frugal living ideas. While you are at it, also learn how to earn more money with these alternative income ideas.
Here are a few more related articles from other blogs:
- A Penny Saved is Worth More Than a Penny Earned at Cash Money Life
- Save More vs. Earn More: A Dollar Saved Is Two Dollars Earned at My Money Blog
- Spend less than you earn – the wrong way to think at Brip Blap
Pinyo is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.