A penny saved is a penny earned.April 13 2007
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While we're on the topic of money, I thought it would be good to discuss this old axiom.
What strikes me is that it is more true today than it was 100 years ago. Why? ... because of income tax.
Today, at the current marginal tax rate for a middle class Canadians, we need to earn at least $2.00 to put/keep an extra $1.00 in our wallets. But even that is an optimistic estimate because when we spend a $1 in Ontario Canada we pay another $0.14 in sales taxes. Also, in order to make that dollar we had employment costs related to travel, clothing and the cost of purchasing things like fast food at a premium because we lacked the time to make it ourselves.
Spending more money also mean that we need to buy more things for the people around us, who now expect to benefit from our personal wealth. I call this, "the friend tax." ... Oh yes and before I forget I should mention that all that stress created by working so hard, means we now need to take some time off in a warmer climate to unwind, I call this the stress tax.
So lets see. I estimate that to get/keep $1 I need to earn at least $3.
| Earned: | $3.00 |
| Income Tax: | $1.50 |
| Sales Tax: | $0.21 |
| Employment Costs: | $0.13 |
| Friend Tax: | $0.08 |
| Stress Tax: | $0.08 |
| ==================================== |
| Residual: | $1.00 |
So there you have it! By detailed calculation I've shown that: "A penny saved is three pennies earned."
Admittedly the employment costs, stress tax and friend tax, are fudges, but I am certain that there are life style costs that go with the spending of money. Pressures come from family, friends and self and in the end I believe that the fudge factors used here are, if anything, significantly under estimated.
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