Thursday, November 18, 2010

A Dollar Saved Is Not A Dollar Earned?

The holiday season is pretty much upon us. Halloween is a memory, and Thanksgiving is quickly approaching. This is a great time of year. I'll be celebrating Thanksgiving twice this year, first this weekend with my extended local family, and then again with my mother at her assisted living home on the traditional date. That's two free meals, I consider that a pretty good haul.
From a budget point of view, food may not seem like all that great an expense, and truthfully if you regularly eat at home, then it probably isn't. But a dollar saved is a dollar earned I was always told. So whenever I get a chance for a freebie I take it. I want to earn that dollar. The funny thing is, that age old adage is actually incorrect; a dollar saved is NOT a dollar earned.
What? That's financial heresy!
Wait, wait, before you go throwing me under the train, you'll see my point is that a dollar saved is actually MORE than a dollar earned.
If I spend a dollar at a store or on some good of some sort, then it would seem that I have used up one dollar that I have earned. Actually, I have used up more. Every time I earn a dollar I must give a portion of that dollar to several different tax authorities; the IRS, the state comptroller, entitlement fees, etc. (Now I'm only talking about income taxes and social security programs here, don't get me started on sales tax and use tax and all those others.) Let's say I pay 30% of my salary in income tax and entitlement fees to the government. That leaves me with only 70% to take home, or only 70 cents on the dollar. In reality, at a 30% tax rate, I would have to earn $1.43 in income in order to bring home $1.00 of spendable income.
So, where does that leave us? The adage is "A dollar saved is a dollar earned." But in today's world, apparently, a dollar saved is $1.43 earned.
When put this way, its easy to see why getting a couple of free holiday meals is a real bargain!

1 comment:

  1. That's nothing. I pay almost 40% in taxes before sales tax. I think I get about 30 cents for every dollar by the time big daddy government is done.