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A Dollar Saved is Two Dollars Earned


Have you ever heard the phrase, a penny saved is a penny earned? Well first of all, a penny is hardly worth talking about these days (because it’s basically worthless) and secondly, a penny saved is actually more than a penny earned because you don’t have to pay 20120504 - stop borrowing moneytaxes or fees on your savings. Since I am budgeting like a crazy man this year, I have really taken this phrase to heart: “A dollar saved is two dollars earned.”

If You’re Having Trouble Earning More, Focus on Saving

It has always been my motto to worry more about making money than pinching pennies. After all, one can only save so much money (you know, since you can’t possibly save more than you can earn), but your earnings potential is theoretically unlimited. However, for those of you that feel as though you have hit your “glass ceiling” with your income, perhaps it is time to focus on saving money instead. After all, if you are able to save a dollar, you are actually saving much more than that!

What Does This Phrase Really Mean?

The old phrase was, “A penny saved is a penny earned.” I have transformed this saying to, “A dollar saved is two dollars earned.” How can this possibly be? After all, you don’t magically get two dollars in your hand after you save a buck…or do you?

How much money do you earn per hour? For those of you that are salaried, how much money do you earn when you break it down to the hour? Over the course of one week, lets say that your hourly wages add up to a total of $1,500. Is this the amount that you see in your check? Nope. Not even close. Before you see your hard-earned money, the government takes out federal taxes, state taxes, social security, and possibly some other money as well. By the time you end up getting your share, you will likely only receive about half of what your gross payment shows. In other words, after taxes, instead of putting that $1,500 in your bank account, you will only receive about $750.

So, when you save a dollar, think about how much you would have to earn in order to make a dollar? That’s right. When you save one dollar it is just like earning two dollars before the taxes are taken out. So, before you just blow ten bucks, think about how much time it would take you to earn double that amount.

Real Life Examples

smartphoneI have been doing my best to save money already this year (call it a New Year’s resolution if you will), and one of my recent examples of this has been to save money on my cell phone bill. With the nature of my work and my side job, it is necessary for me to have a smartphone, but I finally realized that it wasn’t necessary to pay $85 a month for it. So, I contacted Verizon and was able to reduce my monthly expenses to $65 a month instead! By reducing my bill by $20 a month, it was basically the same as increasing my salary by $500 this year! Not too shabby for one phone call huh?

Need another example? My girlfriend and I are getting into cross country skiing, so much so that I was considering buying some skis so we can go anytime and anywhere we want (without having to pay for the rentals each time). Instead of just buying the first pair of new skis I could find, I have been watching Craigslist and getting a feel for the best prices out there. Then, it just so happened that I saw a pair of skis in a local thrift store that would fit me perfectly and were half the price of anything else I had seen. After a little negotiation (because there is always leeway in thrift store prices), I walked out of there with skis and poles for just $15. That was probably a savings of at least $35 from the best Craigslist price! It was a great buy and I can’t wait to try them out soon.

How have you saved money lately?

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AUTHOR Derek Sall

Derek has a Bachelor's degree in Finance and a Master's in Business. As a finance manager in the corporate world, he regularly identified and solved problems at the C-suite level. Today, Derek isn't interested in helping big companies. Instead, he's helping individuals win financially--one email, one article, one person at a time.


  1. The phone thing – I got mine from Walmart, its a Samsung Galaxy SII – I haven’t found anything it won’t do, its unlimited everything, no contract, $49.95 a month…

    • Sounds pretty good Nancy! I know I don’t have the best plan in the world, but I love Verizon’s network and I also love that I didn’t have to pay for my new phone! Great job getting a great deal Nancy.

  2. Personally I’m loving buying 2nd hand books off Amazon at the moment. It’s amazing just how much money you can save if you’re willing to go 2nd hand!

    • Definitely! I just bought a book for $0.01 (plus $3.95 S&H of course)! Check out if you’re looking to buy more – I have found some great deals there.

  3. Richard,
    Have you considered getting a kindle fire hd for $139? Once you do you can get ALL kinds of free books. You can even get a weekly update telling you which books are free.

    • That’s a pretty neat idea Jim, especially if you are buying a large number of books. Thanks for the comment!

  4. We cut our cable bill last year from $190/mo to $60/mo by going to the Basic TV plan, and removing our land line telephone. We kept our Internet service unchanged. $130/mo saved in after tax dollars. If you want to look at it as before tax (approximating all income & payroll taxes as 50%) we saved $3,120 per year in salary.

    I don’t really agree with the 50% figure for all taxes levied on a person’s salary, though. Assuming we will live into retirement, we should get a large portion of our payroll taxes back in the form of Social Security distributions, and Medicare subsidies. I would say that the taxes on our salaries are closer to our effective tax rate, which for us in 2012 was only 11.4% (line 61 divided by line 37 on our 1040).

    I do agree with what you are saying, in that saving in tax deferred accounts (i.e., before tax) is worth much more than spending the money on something that we don’t really need.

    • Nice job on reducing your cable bill Bryce! Yes, I realize that the 50% isn’t a perfect rate for everyone, but it makes the math nice and easy, as well as an easy-to-understand concept. Thanks for the comment though!

  5. I usually browse on the local ad website for items that can be bought 2nd hand. I can actually save up to half the prices compared to being brought in stores and the quality are just the same.

    • Definitely. I look for second hand items all the time – especially for things like home decor. Nobody will ever know if they are second hand or not!

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