With Fourth of July coming up, I thought it would be a great time for us to learn some frugality lessons from one of our founding fathers, Benjamin Franklin. Pat S of Money Crashers has a great article on personal finance and money lessons from Ben Franklin. Here is an excerpt:
1. “A penny saved is a penny earned.”
Franklin’s most famous personal finance quote isn’t actually quite accurate. Quantitatively, when you consider that most people calculate their earnings prior to taxes, a penny saved is actually worth more than a penny earned. Why? Because taxes reduce your actual take home pay. If you earn $10 an hour, you will likely only see around $7.50 after taxes. Therefore, if you can cut your expenses by $10, it actually results in saving more than 1 hour’s worth of your take home wage.
- The lesson: Saving money is the number one key to building wealth and becoming financially successful.
2. “An investment in knowledge always pays the best interest.”
Investing in yourself is just as important as saving for the future. In fact, although Franklin is also attributed with the saying, “early to bed, early to rise, keeps a man healthy, wealthy, and wise,” Franklin was known to frequently burn the midnight oil studying languages which included French, Italian, Latin, and Spanish. This gained knowledge served him and the colonies well in his travels soliciting support from the French during the American revolution, paying dividends he could have never expected. Franklin’s life teaches that success is not only born from hard work, but also from diligent study.
- The lesson: Never stop learning. If you have a chance to take a class, or further your education, go for it. Better yet, study things that interest you on your own time. A library card is free!
3. “Having been poor is no shame, being ashamed of it is.”
Franklin was a self-made man who believed that success was derived through hard work, diligence, and study. His own beginnings were of a humble nature, but he progressed through entrepreneurship and lifelong learning. He never shied away from being honest about who he was or how he came by his success.
- The lesson: Remembering the crushing weight of debt or poverty might be just the motivation you require to sustain your personal frugality and ensure a better future for yourself and your family.
4. “He that is of the opinion money will do everything may well be suspected of doing everything for money.”
An encyclopedia of personal finance could be written on this quote alone. Frugality, savings, and thrift are one thing, but greed is another matter altogether. The financial crisis which began in 2008 is a prime example. Greed drove billions of dollars into risky and speculative investments such as sub-prime adjustable rate mortgages and mortgage-backed securities which promised impossible returns to investors who were well beyond their depth of understanding but blinded by dollar signs.
- The lesson: You should be in charge of your money; it shouldn’t be in charge of you.
5. “Rather go to bed without dinner than to rise in debt.”
Franklin understood the insidious nature of debt, and firmly believed that it’s better to slash expenses to an extreme level rather than to incur debt in order to afford a lifestyle that is well beyond our means. Certainly, cutting back on essential human needs such as food is a choice that we will ideally not be confronted with any time soon, but this quote reinforces the importance of building an emergency fund.
- The lesson: Don’t live beyond your means, and get out of debt as quickly as possible.
I hope that you learned a little about frugality and money management from one of our founding fathers. Happy Fourth of July!