Ben Franklin Didnt Quite Get it Right

When Ben Franklin said "a penny saved is a penny earned", he didn't quite get it right. Actually, a penny saved is worth more than a penny earned. Do you find this statement shocking? I am about to prove to you that what I'm saying is true.

Most people erroneously believe the best way to strengthen their financial health is to increase their income. On the contrary, saving money by cutting costs will get you there quicker. You see, it's very simple. When your income increases (with some exceptions like the part of it you put into your 401k), that extra money is taxed. On the other hand, any amount you save by cutting costs is not taxed. Therefore, $20 saved by cutting costs is worth more than a $20 increase in income.

The following (although over-simplified) example will illustrate this principle. Let's suppose that Jack and Cindy have identical jobs and incomes. Let's also suppose they shop at the same grocery store and pay about the same amount for groceries each week. Now, Jack gets a $20 per week pay increase and Cindy does not. However, at about that same time, Cindy finds a new grocery store where she is able to save $20 per week on her grocery bill. Assuming nothing else has changed, Cindy is now better off financially than Jack, even though she did not get a raise and he did.

How can this be? It's because Jack has to pay taxes on his $20 raise but Cindy does not have to pay taxes on her $20 grocery discount. Assuming Jack is in the 25% federal tax bracket (and disregarding any possible increase in his state or local taxes), he will be able to put only $15 into his piggy bank each week whereas Cindy will be able to put the whole $20 a week into hers!

Bottom Line: It is more blessed to receive a discount than to receive an equal amount in a pay increase!

Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.

---

10 Ways To Find The Money Hiding In Your Paycheck

No matter how tight things are financially for you; no... Read More

Plan For Wealth

One very important wealth creating habit is to set up... Read More

Retirement ? Can You Afford It?

Every day you work is one day closer to your... Read More

Simple Strategies to Making Financial Gain

Now is a great time to make it a habit... Read More

Building Blocks of a Financial Foundation

You can't build a house from the roof down, and... Read More

Investment Techniques For Creating Passive Income

There are many wealth creation strategies and investment techniques available... Read More

A College Degree or an MBA is NOT NEEDED to be Financially Free

Look at Forbes' top 10 United States wealthiest people. Notice... Read More

Understanding the Three Different Types of Income

Part of learning to become financially free is to begin... Read More

The Wealthy Mindset

What is the difference between wealthy people and poor (even... Read More

WARNING: The Biggest Lie About Social Security

Like I said, If you are poor and on social... Read More

Ben Franklin Didnt Quite Get it Right

When Ben Franklin said "a penny saved is a penny... Read More

Super-charge Your Dream of Retiring Rich with the Roth 401K!

This retirement account is so new and unique that you... Read More

Start A Cashflow Club

The cashflow board games, Cashflow 101, Cashflow 202, and Cashflow... Read More

7 Golden Rules to Financial Prosperity

Not Enough Money?I believe that most people haven't got enough... Read More

Learn How to Bank Like a Banker

The business of banking has changed dramatically over the last... Read More

3 Steps To Increasing Your Income

Most accountants, financial planners and wealth-building experts agree that there... Read More

Business After The Iraqi War

The rewarding of high compensation packages to top executives who... Read More

Residual Income - The Myth

"Join our program and retire in 3 months..." yeah, right.We... Read More

Top 10 Secrets of Getting Rich!

As many people have observed, "Success leaves clues." If you... Read More

Wealth Secrets: Saving Your Way to a Fortune

SCENE 1: Pharaoh has just woken up from a very... Read More

What Do You Mean By Diversity?

The word 'diversity' is a unique one. It can represent... Read More

Wealth - 10 Basic Steps to Achieving It

Everyone wants to be wealthy. Only a few actually achieve... Read More

Residual Income - 3 Ideas for Long Term Profits

A residual income is one that comes in no matter... Read More

Controversial Wealth Audit Reveals Over 90 Percent of Us Could End Up Working Forever...Are You One

Results from a new tool developed by UK based firm,... Read More

Why Get Rich When You Can Be Wealthy?

"Any fool can rich, the wise get wealthy." Chris WidenerGetting... Read More

Your Wealth Cycle Foundation

The four main steps in building a wealth cycle foundation... Read More

How To Be A Millionaire - The Top Secret Of Wealth Creation

Have you any idea how many people search Google every... Read More

Surefire Ways to Attain Moneymaking Success

You have probably heard other people say that "Money isn't... Read More

How I made $122,000 and lost $132,000 - A lesson in Assets vs Liabilities

This is a true story from my own experience that... Read More

Creating Money, Prosperity, and Abundance Now (Part 2)

Giving and ReceivingIt seems that people generally find it easy... Read More

The Secret Barrier To Wealth - Underearning

Is the ghost of "Money Past" haunting you? Do you... Read More

Residual Income - Part Three Finding Leaders

In my last article on Creating Residual Income I mentioned... Read More

Lesson 1 - Why Arent You Wealthy?

We will start the Financial Fitness System with the assumption... Read More