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A Penny Saved is Two Pence Clear

A Penny Saved is Two Pence Clear - Benjamin Franklin in 1737

You may be familiar with the phrase “A penny saved is a penny earned” But, the popular quote from Poor Richard’s Almanack is often misquoted.  Published by Benjamin Franklin in 1737: “A penny saved is two pence clear.”  Each dollar you save will be vastly more impactful than earning 1 extra dollar.

There are many reasons for this, a few big ones are; 1. Taxes, 2. Lifestyle Inflation and 3. Compounding 


When you earn $1, the government gets their share first. If you are in the 22% tax bracket (which starts at $41,776 for a single individual, and double that for a married couple) then you are only keeping .78 per dollar earned.

But it gets worse! On top of federal taxes, most of us also have state taxes.  Here in North Carolina, we have a state tax of 5.25%.  But it gets even worse after that, we also must pay FICA taxes, for social security and Medicare.  As an employee, you must pay 7.65% (Double that if you are self-employed/1099).

This means, if you are in the 22% federal tax bracket, for each extra dollar you earn, only about .65 cents makes it to your bank account. (Less than .60 for self-employed)

Lifestyle Inflation

It happens to all of us.  As our incomes rise, our expenses also tend to rise.  We get that promotion, bonus or new job and feel like we have more money to burn.  We then go out and get that new gadget, big toy, wardrobe upgrade, car, boat, house or whatever else we want.  But it usually cost more than sticker price.

Once we get that new house, it needs to be filled with furniture, needs to be heated/cooled, needs more insurance, taxes and upkeep. Once we get that new top of the line car, it’s very hard to downgrade on our next car purchase.

Of course, it’s ok to buy something nice for yourself.  And it is important to keep in mind the other costs, both in terms of dollars, time and attention invested.


When you spend less than you make and save and invest the difference it starts to compound.  A simple rule of thumb is the “rule of 72”.  This means if we divide 72 by the rate of return we expect, we get the number of years it takes for our investment to double.  Let’s say for the sake of simplicity, we assume an 8% rate of return, 72  / 8% = 9 years.  This means our funds would double every 9 years.  This means investments we make when we are 20, will have the chance to double 5 times before we turn 65.  An investment of $1,000 would turn into $32,000.


Earning and saving are both crucial parts of your financial plan. Saving can’t happen without earning, but each dollar saved has a disproportionate impact over each dollar earned.  

At Wisdom Wealth Care, we help our clients maximize their after-tax income, help talk through which purchases will have the most impact on their lives and pick the investment strategies that will give their plan the best chance of success.

If this is something you are interested in learning more about, please give us a call at 336-218-9244, or send us an email at