The Sates of Money Series: Earnings

In part 1 of this series I talked about how, just like any element on the periodic table, money takes on three distinct states: earnings, savings, and spending. Now let's focus on one particular state, earnings.

My Question

What do you do with your paycheck?
   A. Don't open it and toss it in the shredder.
   B. Open it and see if the pay line is close to "normal".
   C. Open it and review that the pay and deduction figures are correct.

If you chose option A (Don't open it, and toss it in the shredder) then we have a good bit of work ahead of us. Keep reading and remember hope is not lost, because frugality is a learned trait. Now for those who chose B or C, and open your check. Please know that you are atypical, and you have developed some frugal tendencies.

My Challenge 

Everyone go find an old paycheck - really go grab one - now open it and look past the pay line. It is likely you will be presented with several lines of purposefully confusing deductions. Many relate to benefits from your employer, and the rest are for good Ol' Uncle Sam.

For your employer’s deductions you need to ensure two things. First, make sure the amounts leaving your paycheck match the amounts you expect...HR is not infallible. Annual elections get missed, and payroll entries get "fat fingered" all the time. In the past I have found several small issues that were caught by a simple 2 minute review. If the issues would have gone unnoticed; however, it could have been a headache at tax time.

Second, you need to know what you are paying for. HR is required to keep documentation on all of your benefits. Get a hand full of pamphlets and start reading. You may find something valuable, or you may also find you are wasting money.

Through this same research process I found many hidden gems. For example, one of my current benefits is an identity protection service. This service is free to employees, and  has the same level of coverage I was paying Zander $10 a month for (I still recommend and admire Zander). I also found I was eligible for PerkSpot.com, an employer sponsored shopping portal that saves me a good deal of money through coupon codes.

Next up in this series we will continue our discussion on earnings by focusing on Uncle Sam's share.

Disclaimer: Let me be clear, I am not a tax adviser and I do not, in any way, profess to offer tax, legal, or investment advice in this blog.  Visit the IRS website and see if you are overpaying. 

The Sates of Money Series: The Concept

Take a second and remember back to those elementary school chemistry classes. In the first week or so you probably learned that every element has 3 states: solid, liquid, and gas. This is a very simple and foundational concept in chemistry, and similarly a foundational concept to this blog series.

Money, just like any element you find on the Periodic Table, takes on three distinct states. You can earn it through hard work and ingenuity, you can save it in a bank or investment account, or you can spend it on the things you want or need. Each of these states offers the frugal minded an opportunity to maximize the value of every dollar.

Let's dig deeper...

In the earnings state you must be diligent. The key here is to know your deductions, your company benefits, and most importantly you need to know how much you owe in taxes so you don't overpay in withholdings each pay period (big tax returns are not cool folks).

The savings state is driven by two mottos, "Cash is king" and "He who has the gold makes the rules". Simply put, when you have money available for savings there is an opportunity cost to you holding the money. This is why banks pay interest, because you would have no incentive to take the money out from under your mattress if you did not receive some form of reward.


The spending state is my favorite. Not only is it fun buying new things and going interesting places, but this is often the most challenging state, because the opportunities come and go so quickly. In the spending state you are looking for two things: a discount on your purchases, and a method of payment that will provide you with a return through cash back or loyalty points. 

In the coming parts of this series, and as a more global theme behind this blog, I will walk you through the ways to benefit in each state. I also hope we can learn from each other in the comments section below.

A Vision of Frugality

Isn't frugal just a fancy word for cheap?

If I were cheap I would refrain from spending money all together. By saying I am frugal, I have committed to spending the money, but I will take a few extra minutes to plan out my spending.

Generally when making a big purchase I will look for online coupons, check my favorite shopping portal (TopCashBack) for cash back offers, and then use either a cash back or points earning credit card to make the purchase. Just by using these steps I can save 10% with an online coupon, get 5% back from TopCashBack, and another 3% back from credit card spend. Being frugal is like giving yourself a pay raise without the added expectations from your boss.

In my opinion the difference between frugal and normal is the incremental effort and time spent. More simply, frugal is about developing a lifestyle where you become aware of your money, and the patterns behind how you earn, save, and spend it. Frugal does not mean going without…frugal means being strategic with what you have in order to make it go further.

Enjoy your family and give them more by taking the extra time!