A Penny Saved is 1.62 Pennies Earned

Joseph-Siffrède Duplessis (French, 1725-1802) | The Library of Congress, Washington, D.C.

The saying “A penny saved is a penny earned” is attributed to Benjamin Franklin (although the exact quote from Poor Richard’s Almanack is slightly different). With due respect to Mr. Franklin, this saying is not quite accurate. For many teachers in Colorado, for example, a penny saved is worth 1.62 pennies earned. Here’s why.

When you save a penny you end up with one more penny than you had before. (Thanks, Karl, for pointing that out; this is why I come to this blog, for such in-depth observations.) But when you earn a penny, you don’t actually end up with one penny more because you have to contribute some of that penny to other places. Most Colorado teachers are in the 22% marginal tax bracket for their federal taxes, Colorado has a flat state income tax rate of 4.55%, teachers are currently contributing 10.5% to PERA (going up to 11% on July 1), and 1.45% to Medicare. That’s a total of 38.5%, which means if they earn one more penny, they only get to keep 0.615 of that penny. When you do the math, that means that in order to net one penny, they actually have to earn about 1.62 pennies.

So I thought it might be helpful for folks to share their #1 tip (or two or three if you’d like) for ways you’ve found to save money on your spending. I’ll start by sharing two.

  1. Cell Phone
    When we first got our cell phones, we went with Verizon because they had the best coverage, and then just kind of stuck with them for a while. Then about two years ago we discovered Xfinity Mobile. It turns out that Xfinity uses Verizon’s towers, so there is no difference in coverage (the only difference is that during high traffic times, Verizon phones get faster data access over cellular). But what is different is the price. We currently have 5 phones on our plan and we pay $30 a month. Total.

    Part of the reason we can do that is that we don’t use a lot of data over cellular. Most of the time that we use our phones for data, we are either at home or at school, where we have wifi. (And lots of other places where we might occasionally use data offer free wifi as well). So we have a shared data plan of 3 GB per month. On the rare occasions we go over that, they charge us an additional $15 for each gigabyte over that (we’ve never gone over 4 GB), which means we end up paying $45 for that month (which is what many folks are paying each month for just one phone).

    You do have to have Xfinity (Comcast) for either internet or cable (we just have internet) in order to get Xfinity Mobile. If you are interested, check out the link above or you can use my referral link which can sometimes get you an extra bonus (sometimes it’s no different than their regular offer).

    If you don’t have Xfinity and therefore can’t take advantage of this offer, check out this link for some other alternatives that might save you a lot on your cell phone bill.
  1. Drink Water
    Sometimes when I’m asked what the secret of our financial “success” is, I somewhat jokingly answer “drinking water”. But I am also being serious. While tap water isn’t “free”, it is much, much less expensive than soft drinks, alcohol, coffee, bottled water, etc. (and even more so if you’re purchasing those at a restaurant).

    Now I want to be clear, this is not trying to shame anyone for liking to drink something else. If you value that coffee (or whatever) and really enjoy it, then you should definitely spend the money on it. Just make sure you really do value and enjoy it and aren’t just getting it on autopilot. For example, when we first moved out on our own and went out to eat, we would generally order soft drinks with our dinner (and bought 2 liter bottles at the grocery store for drinking it at home). As we got older, we cut that out mostly for health reasons and discovered that we didn’t really miss it. In fact, now we don’t even like soft drinks when we occasionally have them at someone’s house or something. We had just been ordering them out of “habit” and because we “could.”

    While I don’t have any kind of exact number, my best guess is that by drinking water our net worth is likely in the range of six-figures higher than if we typically drank those other types of drinks. That comes from not only saving money on the purchase, but then being able to invest that money and earn more over time.

    So, again, this is not meant to make you feel guilty if you like to drink Sprite with your pizza. But just make sure you are being intentional about your drink purchases (especially when eating out), and perhaps there are times when you can switch to drinking water, which will not only improve your finances, but likely your health as well.

It would be great if you would consider sharing your top tip (or two) on how you save money on spending in the comments, so that we can all benefit from each other’s experiences. Just like my two tips above, not every tip will work for everyone, but even those that don’t might spur a related idea for somebody.

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