A Penny Saved is a Penny Earned

A penny may have been worth a lot more when Benjamin Franklin wrote, “a penny saved is a penny earned” in Poor Richard’s Almanack , but the saying’s just as true today as it was back then. The best way to start saving is to take some of your income, no matter how small, and set it aside. If you do this consistently, the amount you can end up saving will surprise you.

How to start saving those pennies

In order to start saving money you obviously need to have money that you can set aside for the future. You could feasibly get money to set aside by increasing your monthly income, but it’s probably easier to start spending less instead. The number one rule of spending less is to make sure you see loans as expenses you will have to pay back and not as temporary increases in income. That may sound easy, but many people treat loans as free money and then are astounded when they find themselves in debt when they have to pay the loan back.

The worst type of loan is based on unsecured debt. Unsecured debt is any debt without collateral, such as credit card debt. Unsecured debts are considered high risk because there is no property that has been promised to the creditor in the event that you cannot pay back the loan. As a result, creditors charge a high interest rate for these loans. A good rule of thumb when it comes to credit and loans is that if it has an interest rate over 10%, you do not want to take it. High interest rates and late fees are some of the easiest expenses to avoid if you plan carefully. Keep yourself out of debt by learning to live comfortably with the money you make.

Getting those pennies to earn

Discretionary capital is the money that you have left after you have accounted for all of your expenses. If you are able to make all of your monthly payments on time and still have discretionary capital, then it is time to start saving. Put some of that extra money into a low-risk account that will pay you interest. This way, you’re earning money every month on your savings instead of losing money every month paying back the bank or credit card company. If you’re just starting to save, the amount you set aside and the interest it earns may not seem like much at first, but the power of steady accumulation should not be underestimated. Confucius once said, “the person who moves a mountain begins by carrying away small stones.” The same is true of your bank account; the person who wants a large savings begins by making small deposits.