Financial Freedom Quick Tip #32: Pennies vs Pounds
If you really want to confuse someone, find yourself a victim, make a sage-like look with your face and tell them in a serious voice:
Quote 1: Don’t be penny-wise and pound-foolish.
Quote 2: Look after the pennies and the pounds will look after themselves.
Confused yet?
So what’s more important? Pennies or Pounds?
Together those two quotes are confusing, because each one holds an element of the truth, but they only tell half a story each!
The truth?
Pennies and pounds are equally important. It’s the way you manage and think about them that differs.
Twelve Pennies in a Shilling, twenty Shillings in a Pound
Becoming financially free is like building a house. You start with a blueprint – your plan for what the house should look like – but you build with bricks.
Each brick is a Penny in your financial plan. Together groups of bricks form walls. Each wall is a Shilling. Together the walls form rooms. Each room is a Pound. All the rooms together make a house.
In the same way that you cannot neglect either the bricks or the position of the walls and rooms when you’re building a house, you cannot neglect either the Pennies or the Pounds when you’re working to become financially free.
Pennies prepare you for the Pounds
If you are a good steward of the Pennies in your finances – the little amounts you can save or spend each day – it will prepare you to be a good steward of the Pounds in your finances – your investments and big financial decisions.
You need to be faithful in the little things. If you habitually spend money on unnecessary small things, with the excuse that it it only cost a couple of bucks, remember:
- those things are still unnecessary,
- the small amounts really do add up, and
- it delays you from being faithful with Pounds.
You have been faithful over this small amount, so now I will give you much more.
Remember Pounds when spending Pennies
Remember your destination. Dream big. The Pounds in your financial plan should always be in the back of your mind.
Then remember that Pounds are made of Pennies. Take care of the everyday incomes and expenses in your life – they are the Pennies in your financial plan.
Live in Pennies, dream in Pounds. Twelve Pennies in a Shilling, twenty Shillings in a Pound.
This tip is part of the Financial Freedom Quick Tips series. If you want to receive a notice every time a new quick tip is published, you can subscribe to Liberta.
October 8th, 2008 at 12:41 am
Love this! Makes all the sense in the world to me….save your pennies, so you can have your pounds (or dollars).
Nice post, Francois!
October 8th, 2008 at 07:51 am
Agreed. I think a lot of people though are put off of any kind of savings because they want the ‘big money’ instant gratification.
Instead of focusing on getting started with small amounts, people tend to say “Its too hard to start small and only get a small return”… But they never consider the power of compounded earnings and how this can quickly add up.
October 8th, 2008 at 12:51 pm
@Sharon
Thanks Sharon. I’m still smiling at the death to AMEX card. You’re like the grim reaper of credit card companies.
@Liquid
Yes, you are right. It is difficult for many people to grasp why they should try to cut or save little amounts here and there – it seems like nothing.
The thing is – it is only for a while. In my case it was about 2 years of watching every cent.
In the beginning it is really small amounts, but they grow bigger and bigger over time. Your “frugality boundaries” shift outwards, the more financially independent you become.
October 18th, 2008 at 08:10 pm
Internet marketer Derek Vitalio has an exact opposite mindset, his mindset is, instead of spending time worrying over the small amounts, rather spend that time on projects that will make those small amounts obsolete, but after studying his work for a while, I realised that he too had to live in a scarcity mindset before he was able to squander small and large amounts of money left and right.
November 5th, 2008 at 06:34 am
Yeah I think it is a case of finding a balance… Its great to set your goals on ‘the next big deal’ that is going to make your small ‘cash flow issues’ go away, but if you are not keeping an eye on those smaller amounts, you might get a nasty surprise when those small amounts start adding up