The Biggest Cost Savings Lie IN HISTORY
First, a quick lesson on “Lying”…
In general, most people would agree that lying is often a bad thing. Misrepresenting the truth to get what you want isn’t a trait that most people seek out in their peers (I’m looking at you, Mr. Trump). What’s interesting is that from 2 years of age, humans understand and can implement the concept of a lie. Which isn’t super surprising if you’ve every known a 2 year old; they’re sneaky lil’ bastards when they want to be.
On the other hand, sometimes lies are a good thing. I wasn’t thrilled to learn that every 25th of December some fat elf WASN’T breaking and entering into my house and trying to make up for it with fashionable toys. I loved that there was a genetically altered super rabbit that would leave me chocolate on the day of our lords death. When my parents told me that I, ” Could do whatever you set your mind to, Paul.” I believed them right up until I was cut from the basketball team for the 3rd year in a row.
Lies are often necessary to preserve happiness or keep the ones you love safe (maybe from you, you fucking heartbreaker). But when it comes to your finances, there is one lie I can’t stand anymore. This is the lie that is probably one of the most detrimental in the world of personal finance, and simply put, I can’t take it anymore. If everyone would just stop believing in this myth, it would save them literally thousands of dollars a year.
Here it is…
The biggest lie you’ve ever been told about your finances is….
“A Penny Saved is a Penny Earned” – The Biggest Cost Savings Lie in Human History
How could “A Penny Saved is a Penny Earned” possibly be the most scandalous cost savings deceit in the world? It’s so cute and easy to remember! Yeah, that’s what they’d want you to think. But just like Taylor Swift, just because it’s cute doesn’t mean that it’s not evil. (JK TSwizzle, we love you…)
So why could believing in “A Penny Saved is a Penny Earned” be so detrimental to your finances? Because a penny saved is WAY more than a penny earned! In fact, it’s probably more like ” apenny saved is 20 pennies earned.” Allow me to expound upon this revelation…#fancyfuckingwords.
“Cost Savings” is NOT the same thing as “Earnings”
So when most of you think of cost savings, what probably comes to mind is, “I’ll just get a small latte today instead of the gallon-sized monstrosity from Starbucks that’s sure to get my heart racing like Seabiscuit.” You end up feeling good about your choice, though your caffeine-withdrawal headache might allow some regret to seep through. But for the most part, you saved maybe two bucks and you’re feeling great about the money you saved.
You then head off to work where you earn roughly $20/hour doing whatever it is you do (you do you, honey). By the end of the day, you’re about $160-$200 richer and feeling like a veritable Bill Gates #fatstacks #yo.
Allright, class. Does anyone see the difference between cost savings and earnings?
…no one? Ok, let’s keep going….
Earnings involves two relevant measures: money and time. When you’re thinking about cost savings, only one thing really comes to mind: the amount of money you saved. The huge problem with a penny saved is a penny earned is that it doesn’t consider the amount of time it takes to save money. And I personally, 100% money-back, would be willing to best my first-born’s soul, guarantee that when you act in a cost saving capacity, you earn more per hour than you do at your job.
Unless you really are Bill Gates, which if that’s the case… Hey, Bill! Thanks for checking out the blog!
Ok, moving on…
Just in case you don’t believe me (which at this point, you should) I’m going to go through some examples of how exactly you make WAY more money cutting costs than you do at a normal job. Just for arguments sake, let’s say you really do earn $20/hour. I know some of you reading probably make more, and that’s fine. You’ll see that on a per hour basis, you will always make more by cutting costs then by trying to earn more.
Example the First: The Wal-Mart Phone Call
A few weeks ago, my girlfriend ordered a mattress from walmart.com. It was a $300 king sized mattress and frankly it feels like I’m sleeping on cotton candy, minus the sticky. In any case, she had paid for express shipping so that it would arrive in two days after placing the order. Well, sad to say that even though we paid, it did not show up on time.
Seeing as I’m the one that writes the personal finance blog, I was “chosen” (#voluntold) to call them up and ask them to reimburse the price of the express shipping. Here’s the kicker…
They didn’t even put up a fight. The representative straight up said, “Ok sir, we’ve just reimbursed the credit card. It should show up in a day or two. Have a nice day!”… and that was it.
The Math: The phone call took me 5 minutes, and saved us $4.38 (I know, it doesn’t sound like much, but it’s the principal, you know?…) So, on a per hour basis, I made $52.56 ( 60 minutes in an hour / 5 minutes X $4.38). If I were earning $20 an hour at my job, then my rate for making the phone call was roughly 2.5x as much as I would have made at work. Not bad!
Example the Second: A Cost-Savings Carnivore
This one is so simple, all you need are eyes! I was shopping at my local grocery chain, and was looking to pick up some steak. I noticed there were two brands to choose from: one with fancy labelling and one without. After comparing the prices of the two, I realized I would save about $3 by picking the less fancy brand. Same cut, same amount, just different prices.
The Math: Well, it took me about 2 minutes to walk over and compare the two steaks. 60/2 minutes is 30, and then you multiply that by the $3 I saved. My savings rate per hour was then roughly $90/hour, just because I did a quick cost comparison. That’s 4.5 times as much as one would make in a $20/hour job. Booyah.
Example the Third : Apple Watch (…me find a better price!)
Again, this one has to do with my lady friend. She had been hemming and hawing about buying an Apple Watch for quite some time, and finally decided that she wanted to pull the trigger. I knew she was super eager to just get to the Apple store and get the watch, but me in my infinite wisdom told her, “Hey, why don’t we just do a quick Google search and see if we can find a better price?” She huffed and puffed and almost blew the house down, but agreed that it made sense to do a quick check.
We found that BestBuy had a deal going on where they were given a $50 discount on the Apple Watch. So we went over, bought the watch, and never has my girlfriends wrist looked so damn fancy.
The Math: This was a huge one. It took no more than 3 minutes to find out that BestBuy was, indeed, the best buy. The earnings rate for this particular scenario was (wait for it….) $1,000/hour. How, you ask? Well, 60/3 minutes is 20, then multiplied by the $50 I saved gets you $1,000. Yeah, all because of a simple google search. and I KNOW no one reading this blog makes that much. This is some serious shit, y’all.
Example the Fourth: Financial Lesson from Books
As I’m sure is the case for most bloggers, I tend to be a pretty avid reader. I’ve read like all of the Dr. Seuss books, and now I read books that don’t even have pictures… PSYCHE! Seriously though, I do love reading.
A few weeks ago I was downtown and went into a “used” bookstore. I say “used” because I couldn’t find any mark of use on the books I looked at; I think a better term would have been “previously owned but never touched.” I looked for a couple of books that I’ve been interested in for a while, and I couldn’t believe the prices! My savings was about $25 buying them at the store as opposed to Amazon.
The Math: This get’s a little tricky, but I would estimate that I spent 30 more minutes finding this deal than I would have looking for it online. I made $50/hour just by going to this book store!
The Process For Determining If Cost Savings Is Worth It
I can hear you now… “Paul, this rocks!!! How do I implement this in my daily life?” Well dear reader, allow me to explain.
- Estimate your earnings per hour – The easiest way to do this is by taking your annual salary and dividing it by 2000. The number 2,000 is roughly the number of hours you work in any given year (50 weeks X 40 hours per week = 2000) If you want to get more into detail, then go for it, but this is an estimate, not a science! If you earn $60,000 a year, then you earn roughly $30/hour. 30 for you Glen Coco, you go, Glen Coco!
- Estimate the cost savings – Figure out how much you stand to save. If you’re looking for a new laptop, it’s safe to assume that you could probably save at least $50 by doing a little bit of research. Maybe saving 10 cents/gallon on gas would save you $2 per tank, so it’s worth asking Siri where the cheapest gas stations are.
- Estimate the amount of time needed – That research for the laptop? It shouldn’t take you more than an hour of looking online to find the best price. For the gas station, Siri should be able to find it within seconds, but let’s say it takes 2 minutes to actually compare the prices, and put the gas station address into your GPS.
- Compare – If it takes you an hour to look for a better price on the laptop, then you’d be “earning” $50/hour, which is way more than the $30/hour you earn at your job. And saving that $2 on a tank of gas from a quick query to Siri? Well, since it took you 2 minutes to save 2 dollars, you’re “earning” a dollar a minute, or $60/hour. That’s twice as much as you earn at your job! In case you need the actual formula, here it is:
60 minutes / # of minutes to complete the task X the amount you’ll save = Savings per Hour
The Biggest Cost Savings Lie in History – The Wrap Up
The following should be etched in your brain: “A penny saved is NEVER a penny earned.” Often, a penny saved is worth way more than a penny earned, and we know because we rarely consider the cost of time when it comes to cost savings. Once you consider the amount of time it takes to save even a couple dollars, you’ll always save more “per hour” than you earn “per hour”.
Now I want to hear from you! What’s been your biggest cost savings? How much did you save per hour? Did you get anywhere close to saving $1,000 per hour? Comment below and let me know!
For more tips and tricks on how to achieve your version of financial freedom, check out:
- The Seven Steps to Avoid Being a Money Moron
- The 7 Vegetarian Meals That Are Saving My Budget
- How Much Is Half A Million Dollars?
- The 10 Best Finance Books Money Can Buy
- 9 Credit Score Hacks You Must Know
- Why I Never Want To Retire
- The Laziest Way to Riches – Investing In Index Funds
- Budgeting Basics – Allocating $$$ Like A Boss
- Fuck You, Frugality
- Why A Million Budgeting Tips Will Never Be Enough
Keep trying to crack the code,
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