Cash in hand

Tips on Budgeting– A dollar saved is 2 dollars earned

Have you ever heard the saying that a dollar saved is two dollars earned? Do you know what it actually means? It all comes down to personal finance basics and understanding tips on budgeting. Part of becoming successful financially is learning how to become efficient with how you earn and spend money. Lets take a closer look as to how a dollar saved is two dollars earned: If you were to earn $75, 000 a year in Ontario, Canada, here’s where your next earned dollar would go.

Marginal tax rate            35.39%
CPP/EI premiums            4.95%
Pension contributions      6.00%
Union dues                       1.28%

Total                                47.62%

So that would mean if you were to earn $1.00, more than 47 cents would go towards expenses. In order to save one full dollar you would need to earn $1.91. That is pretty close to two dollars earned. I understand that not everybody will have pension contributions or union dues but I wanted to give an example that was similar to my personal situation. If you are an American then you will have Social Security and Medicare in lieu of CPP and EI in Canada.

Saving a dollar rather then earning two may make sense for most people out there For many people cutting back on luxuries or unnecessary items is far easier than going out and earning more. The progressive tax system in the western world makes it very difficult to get ahead just by increasing your earned income. A solid savings plan coupled with following tips on budgeting is just simple personal finance basics.
With these tips on budgeting you can see how saving one dollar is almost the equivalent of earning two dollars. You would need to earn $1.91 in order to be able to save one full dollar, which prompts the saying “A dollar saved is two dollars earned.” Consider this scenario when deciding to put in more overtime to pay for your luxuries. It could cost you more than you think; needless to say it is very inefficient.

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Filed under: Budgeting Tips

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