A penny saved is a penny earned and penny-pincher are two common terms that are used to describe someone that is most likely frugal. I would admit I am one of those individuals that aspires to both phrases – and it’s not out of accident.
I am one of those folks who will pick up a penny (heads or tails showing – no superstitions here) when walking down the street and put it in my pocket. That penny, nickel, or quarter (in rare cases a one-dollar bill or even higher) will usually make its way into my piggy bank or more likely one of my daughters’ porcelain pigs.
I pick up the loose change for one of two reasons:
- It’s literally free money. To not pick it up is asinine.
- Little amounts add up.
Think of it this way – a penny is 1% of a dollar. A dollar is 1% of a hundred dollars, and a hundred dollars is 1% of ten-thousand dollars. 1% seems small, but 1% added and then compounded grows exponentially.
When it comes to saving an extra 1% – it’s easy. If you make $50,000 a year, 1% of that is $500. Next year, save another 1% (for a total of 2%) and now you’re saving $1,000. And that’s annually. Broken down into monthly, that’s about $42 per month – or $10.50 a week – or $1.50 a day – or 6 pennies an hour.
If we look at the bigger chunks when it comes to savings – the amount can seem daunting, but when we break it down – in this case literally 1%, it becomes much more doable.
If you’re not saving now, commit to saving 1%. If you’re currently saving, save 1% more. It might not seem like much, but remember that avalanches are caused by many, many little snowflakes.
Sterling Raskie, MSFS, CFP®, ChFC®
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