As far back as the 17th century, the idiom we now know very well, “A penny saved is a penny earned,” was first quoted. And though the true author of this phrase may be up for debate, the meaning is quite clear. It is just as useful to save the money we have as it is to put our efforts into earning more. For hundreds of years this remained a solid block of financial wisdom and even just a decade ago I would say it still held true. However, given the recent changes in our economy, culture and job market, I’d like to propose a more accurate version on this longstanding proverb that may become the words of wisdom we pass along to future generations.
A penny saved is more than a penny earned.
It’s quite literally what it sounds like. Keeping a hold of the pennies we have is now more cost effective than earning more pennies and in some cases even dimes and dollars. We can do more, live more and enjoy more by cutting back than we can by taking on additional means of income to finance our spending sprees. Spending less is the new way to get rich. But what makes this true? Well, there are several compelling reasons why these little copper and zinc Lincolns are worth more in your piggy bank than they are on an additional paycheck:
We underestimate how quickly pennies can add up. I can never pass up a heads-up penny (and with this economy, I might soon be picking up the “unlucky” tails-up ones too). While this is more to fulfill my childhood good-luck-nostalgia, I laugh at how quickly my coin purse fills up from these pennies from heaven. Sure it’s hardly enough to buy a cup of coffee at the end of the month, but a penny is just the monetary amount we use as an example in this quote. Think bigger – five, ten, twenty or even a hundred dollars put aside in savings can equate to a huge cushion at the end of the year. And if done right, we will have hardly missed this extra cash. Moreover, because we don’t think pennies can ever amount to much, we’re less receptive to small ways to save them. Pack your lunch or morning coffee, commute with a friend or only buy groceries you really need (not just because they’re on sale). A quarter here, a dollar there and you’ll soon find enough spare change to finance that dinner out without taking on more work or putting yourself in debt.
A penny earned is really only a fraction of a penny. If you happen to be in the 10% tax bracket, every taxed dollar you earn is worth only $0.90. But don’t forget to tack on FICA, state and a ton of other taxes I’m too depressed to mention and that little penny begins to look a whole lot smaller. What this means is that you put a lot of energy and effort into earning just a fraction of what you’re time is really worth. By placing your focus on spending less rather than earning more, you’ll gain additional time to do something other than work and enjoy the money you do have to its fullest.
If you can fully immerse yourself in the savings lifestyle, you’ll save exponentially. When I first started my own business I went into extreme savings mode. I cut out all the financial fat that I had been wasting money on for far too long (a big cable TV package, a reserved parking spot, too large of a healthcare plan) and I found hundreds of extra dollars in my monthly budget even though I was making considerably less. Though I have slowly worked my way to a more stable income and comfortable lifestyle, I realized I didn’t really want to add back in those luxuries even when I could afford them again. We still live on a meager weekly grocery bill and I’ve all but lost my excitement for retail therapy, but I truly don’t miss it. The money we don’t spend on these little things we instead put toward travel and eating out – two luxuries that are far more memorable to me than yet another pair of shoes I don’t need. Get into the habit of living a savings lifestyle and you’ll be amazed by how you’ll find fun in the challenge of saving money and lose the love for unnecessary spending.
A penny saved gains more than just dust – it gains interest. Although interest rates aren’t great and you can’t exactly invest just pennies in the stock market, there is still great value in saving and investing your money to whatever degree you can. As mentioned above, a penny earned is worth slightly less than one cent while a penny saved and invested is worth slightly more. While earning extra pennies, you’re giving up time and energy, but saving pennies requires complete inaction. So don’t think spare change needs to sit in a pink piggy bank somewhere, put it in a savings account where it can earn (even a little bit of) money while you do nothing more than live your life.
The penny itself is worth more than one cent. Back in 2006 this New York Times article shared that it actually costs more than one cent to create a penny – 1.4 cents to be exact – because of the cost of metal and production. As the demand for certain metals continue to rise, who knows the worth of the penny now or how high it will reach before the United States Mint takes these little guys out of circulation altogether. And when that happens? Your quirky pennies that will become a relic to future generations might (might) be worth a lot more someday. This is meant more for humor than it is for financial advisement, but keep this in mind the next time you’re walking on the side walk and spot an orphaned penny – that’s at least 1.4 cents you’ve just gained!
The heads-up side of things: Learning to save your money will always be the best financial advice you can ever receive. I’ve personally found so much value in learning and living this truth because it taught me that time spent doing things I love is far more valuable than time spent earning a few extra dollars. I would much prefer to cut back on my spending and manage my wants for the ability to pursue a passionate career and live simply but happily. And while a penny earned is no longer equal to a penny saved, hearing this proverb still makes us stop and reflect on our spending habits – and for that it’s worth all the pennies in the world!