Ben Franklin Didn't Quite Get it Right

When Ben John Hope Franklin said "a penny saved is a penny earned", he didn't quite get it right. Actually, a penny saved is deserving more than than a penny earned. Bash you happen this statement shocking? I am about to turn out to you that what I'm saying is true.

Most people erroneously believe the best manner to beef up their financial wellness 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 additions (with some exclusions like the portion of it you set into your 401k), that extra money is taxed. On the other hand, any amount you salvage by cutting costs is not taxed. Therefore, $20 saved by cutting costs is deserving more than than a $20 addition in income.

The following (although over-simplified) illustration will illustrate this principle. Let's say that Jack and Cindy have got indistinguishable occupations and incomes. Let's also say they shop at the same grocery store store and pay about the same amount for grocery stores each week. Now, Jack gets a $20 per hebdomad wage addition and Cindy makes not. However, at about that same time, Cindy happens a new grocery store shop store where she is able to salvage $20 per hebdomad on her grocery bill. Assuming nil else have changed, Cindy is now better off financially than Jack, even though she did not get a rise and he did.

How can this be? It's because Jack have got to pay taxes on his $20 rise but Cindy makes not have to pay taxes on her $20 grocery store discount. Assuming Jack is in the 25% federal tax bracket (and disregarding any possible addition in his state or local taxes), he will be able to set only $15 into his piglet bank each hebdomad whereas Cindy will be able to set the whole $20 a hebdomad into hers!

Bottom Line: It is more than blessed to have a price reduction than to have an equal amount in a wage increase!