Thursday, March 1, 2007

Scrounging Pennies

I've been thinking about this idea for a while. Is it actually prudent to follow Ben Franklin's adage, "A penny saved is a penny earned"?

Personally, I think penny-pinching is less worthwhile than most people choose to believe.

Consider that there are 100 pennies in a dolllar, and 10,000 pennies in a hundred dollars. Say you can save 10 cents by turning off that light bulb. If you do it a 1,000 times, you'll have saved $100. But in that same time, you may have caused your self eye strain or bumped into a wall.

Another one of the most common penny-pinching items is driving around looking for the lowest gas prices. This has never made any sense to me. Consider that gas is about $2.50 a gallon, and the typical car can get about 25 MPG. So its about 10 cents a mile.

The typical difference between a cheap gas station and a regular gas station is about 3 cents. So if the difference in your drive is only a third of a mile, then the savings you earn by going to the cheap gas station exactly offsets the extra gasoline you consumed. If you've traveled even further, then you've actually wasted money trying to save money.

A lot of the time, focusing on such small savings in the hopes of having it add up to a large pot of gold results is a myopic goal. You forget the greater goal is to save money, not to add pennies to a jar.

Instead of these small items, start thinking of big picture items. An extra light on could save your eyes from needing expensive glasses or surgery down the road. The extra time you have by going to the nearest gas station could mean more time spent at home with loved ones.

What are pennies to any of that?

1 comment:

Stephanie said...

True, many people overthink trying to be frugal, but there is a good reason to look towards savings pennies instead of earning more: taxes. If you earn a dollar more, you haven't really earned a whole dollar more, you've earned something like 75 cents after taxes. However, if you save a dollar (say by turning off a light, or whatever), you get to keep that whole dollar, because you already paid taxes when you earned it in the first place.