When Ben Franklin said "a penny saved is a penny earned", he didn't quite get it right. Actually, a penny saved is worth more than a penny earned. Do you find this statement shocking? I am about to prove to you that what I'm saying is true.

Most people erroneously believe the best way to strengthen their financial health is to increase their income. On the contrary, saving money by cutting costs will get you there quicker. You see, it's very simple. When your income increases (with some exceptions like the part of it you put into your 401k), that extra money is taxed. On the other hand, any amount you save by cutting costs is not taxed. Therefore, $20 saved by cutting costs is worth more than a $20 increase in income.

The following (although over-simplified) example will illustrate this principle. Let's suppose that Jack and Cindy have identical jobs and incomes. Let's also suppose they shop at the same grocery store and pay about the same amount for groceries each week. Now, Jack gets a $20 per week pay increase and Cindy does not. However, at about that same time, Cindy finds a new grocery store where she is able to save $20 per week on her grocery bill. Assuming nothing else has changed, Cindy is now better off financially than Jack, even though she did not get a raise and he did.

How can this be? It's because Jack has to pay taxes on his $20 raise but Cindy does not have to pay taxes on her $20 grocery discount. Assuming Jack is in the 25% federal tax bracket (and disregarding any possible increase in his state or local taxes), he will be able to put only $15 into his piggy bank each week whereas Cindy will be able to put the whole $20 a week into hers!

Bottom Line: It is more blessed to receive a discount than to receive an equal amount in a pay increase!

Terry Mitchell is a software engineer, freelance writer, and trivia buff from Hopewell, VA. He also serves as a political columnist for American Daily and operates his own website - http://www.commenterry.com - on which he posts commentaries on various subjects such as politics, technology, religion, health and well-being, personal finance, and sports. His commentaries offer a unique point of view that is not often found in mainstream media.

RELATED ARTICLES The Financial Equation that Will Set You Free! I have a good friend who works in an area of the US that has more than itsshare of poverty. He called me the other day with a very broken heart. Lesson 2 - The Commodity Of Kings! What is "The Commodity of Kings""Power is simply "the ability to act." Since ancient times, power has been the commodity of kings. 5 Simple Steps for Serious Saving and Financial Growth 1) Pay off your loan, credit and store card debt and resist the temptation to keep on spending money you don't yet have.Credit cards and store cards attract the highest rates of interest and are the most inefficient way to work your finances. How to Have MORE Fun With YOUR Tax Refund in 2005 I counsel a LOT of people about money. I see the same mistakes being made over and over again. How to Save Money and Take the Vacation You Always Wanted Many people don't realize how much money they spend on convenience and boy does it add up. I am going to share some of my frugal and practical tips of how to save money for the vacation you always wanted. Get Rich Doing What Others Dont "The quickest way to wealthThat I've found to be true;Is to stick out your chestGive your bestAnd do what others don't like to do!" - PrimmIt's been said the difference between the "haves" and the "have-nots" - can be traced back to the people who did .. Create Tax Savings And Transfer Wealth To Your Child With A Roth IRA Parents must give serious thought to protecting their family through estate tax planning. While life insurance and trusts should be a part of every plan, Roth IRAs can be a simple tool for passing money to your child on a tax-free basis. Q and A: Financial Independence Tips For Women From Coni Cecil As a woman Netpreneur, I sat down via e-mail with article-announce regular contributor, Internet marketer and women's financial consultant Coni Cecil of www.cecilfreedom. Methods Of Raising Instant Cash The inability to come up with the necessary cash when suddenly presented with a "can't miss" opportunity, is one of the most frustrating experiences anyone ever live through. Yet, there are literally hundreds of ways to raise unlimited amounts of cash in an hour or less! You may not be aware of many of these cash-raising methods we're about to describe for you, but they are all legal and any one of them could be the answer to your money needs the next time you have an opportunity to get in on the ground floor of a sure-fire winner. Wealth And Your Net Worth Most people know it's important to keep and organize all of your vital financial information. But knowing you should and knowing how are two different things!Once you know the reasons for being very organized with your financial data (and keeping it all in a very safe place) I hope you will put organization on your net worth building to-do list (at or near the top). Prosperity An ellipsis to your success is hidden in the word prosperity. Take a letter; make a word; assign a meaning, discover a pathway to your prosperity. My Entrepreneurial Fire-I Grabbed My First Million Before I Got Too Old My First Million took me exactly 27 months to achieve. I remember the day I made the resolution with self respect. 7 Wonders of the Offshore World Many people assume that the offshore world is accessible only to the super rich looking to increase their wealth, or to large multi national corporations looking to escape taxation.But the truth of the matter is that the offshore world is accessible to everyone!Placing money or assets offshore is a legal and often worthwhile undertaking and it is something that anyone living in, for example, the UK, Europe, Canada, Australia or America can do easily and with potentially great effect. Top 7 Ways To Get Rich Want to be one of the lucky ones on the road to riches, want to be on the freeway to financial freedom, on your way to wealth?Here are the top 7 roads to riches, the top 7 easiest and fastest ways to acquire wealth .. Residual Income - Part Three Finding Leaders In my last article on Creating Residual Income I mentioned that employees are a pain.That wasn't completely accurate. Money Myths Of The Poor From tender age, we were exposed to myths about money and myths of being rich. Be it from our parents, brothers, sisters, relatives, or friends. Ben Franklin Didnt Quite Get it Right When Ben Franklin said "a penny saved is a penny earned", he didn't quite get it right. Actually, a penny saved is worth more than a penny earned. The Making Money Obsession - Discover The Real Truth In most societies, we are raised to believe in the myth that "it's spiritual to be poor". Or we use such phrases as "filthy rich", or "Money is the root of all evil". Profit from Your Own Information Empire! Would you like to profit from your own informationempire? Here are a few ways of doing so.1. A College Degree or an MBA is NOT NEEDED to be Financially Free Look at Forbes' top 10 United States wealthiest people. Notice the top five "self made" billionaires (excludes the Waltons who's net worth is due to inheritance) are college dropouts.