A Penny Saved

It was Benjamin Franklin who said, “A penny saved is a penny earned.” What does it mean? Saving money requires effort and self-discipline, such that when you are successful at saving money, you deserve to have that money not just because you earned it but also because you had to work, or to take an action, or to be emotionally mature, to save it.

I heard someone say once, “What is the point of saving money if you can never spend it?” Another person says that he wants to spend his last dollar on the day he dies, adding that you cannot take it with you. Such thinking seems to place an emphasis upon spending money. We see people who spend their “extra” money entertaining themselves, on clothes that make them feel more successful or more attractive, on food that they do not need. But these same people are in debt, or broke, such that they have no net worth. These people are not doing well financially, and I have learned that when people are not doing well, it is usually because they do not know how.

Why save money? One wise man said that when you have money, you have options. Having money in savings and investing means that the money is available in the future when an emergency expense arises, or when there is an opportunity to purchase something that one could not purchase without that money in savings.

Another wise man would say that the purpose of saying money is to become financially independent. In a worst case scenario, such as with loss of income, it is money that has been saved and invested that can be used until income is restored, whereas without that money, one has to depend upon other people or on government welfare to survive, or become homeless. Obviously, we would want to avoid such a catastrophe, but we will not be able to if we have spent all of our income.

How does one save money? The Richest Man in Babylon by George Clason, published first in 1926, is a small and entertaining book which many consider to be the first and most important of the books on wealth building, an important exception being the Bible. These books teach the value of hard work, and they teach the value of saving 10% of one’s income, investing wisely and conservatively such that the money is never put at risk of losing it. It is the accumulation of wealth that leads to financial security and independence.

One could develop the habit of saving money using the principle, “Pay yourself first”. When money comes in, take 10% and put it into savings first. Then use the remaining 90% to live on. For those who tithe, that 10% might be the second thing you do with your income.

When you are wise enough to save a penny, then you have earned it. You deserve to keep it and to watch it grow.

Saving and investing is what successful people do.