The Penny vs. The Pound

There have been two old sayings I've been mussing over for the past couple of weeks:

"Penny wise, pound foolish."

"Take care of the pennies and the dollars take care of themselves."

One is about looking after the big costs in your life such as your mortgage, car payments or the purchase of large items.  The other is about watching those little drips and drabs of money that just seem to disappear.  Funny thing is that they are both right, it all depends on the problem that you're facing.

When you're budget is way out of wack, you need to come up with money for debt repayment, or you you need to boost your savings you may be "Penny wise, pound foolish."  It's for those who buy large expensive items when already in debt.  For those who's housing or transportation budget eats up more than 35 and 15% of their budget respectively.  Taking steps to get their big expenses back in line might be what they need to get back on track.  Downsizing houses to reduce costs, selling a car to come up with debt repayment money, or not buying that big ticket item in the first place may help solve their problems.

When you're fixed expenses look reasonable but for some reason you run out of money before the end of the month or that credit card balance keeps creeping upwards means that you might need to "take care of your pennies so that they'll take care of the dollars."  A couple dollars a day for coffee or not bothering to shop around for your groceries can slowly add up to an appreciable amount.  The problem is that with out meticulous record keeping (read: recording everything) you'll have no idea where it all went.  If your large expenses seem reasonable and you have no idea where the money's going you may be having trouble with your pennies.

Of course you could also have a combination of the two, which means that you really need to do something, and quick!