Watch your pennies, and your dollars will watch themselves. Watch your dollars, and your hundreds of dollars will watch themselves. Watch your hundreds of dollars, and your thousands of dollars will watch themselves. You get the idea.
The Penny Rule Makes Business Sense
I remember when I first heard the “Penny Rule” as a small boy, I thought it would be a good practice with my personal finances. After all, I was just starting to earn money as a paper boy. A short time later, I realized the greatly expanded application of the Penny Rule during a conversation with my dad.
Driving home from a farm auction we attended, I asked, “Why did that farmer need five hacksaws?” My dad explained that the farmer didn’t need that many hacksaws, but that he didn’t keep track or take care of his tools. So when he needed to use a tool – a hacksaw, for instance – he would just run to town to buy another. In other words, he didn’t watch his business, and because of squandering and wasting money over the years, it ended with him having to sell out in a farm auction due to too much debt.
I don’t remember what my dad bought at the auction that day. What I do remember is realizing that the Penny Rule had applications to the business world, as well.
Good Examples of The Penny Rule
It has been many years since I first heard the Penny Rule, but it still holds true. As a long-term commercial lender I have had the privilege of observing numerous great managers and owners watch their pennies when leading their businesses. For example, I have an existing customer that needs several expensive specialty tools (much more expensive and complicated than hacksaws) on job sites scattered throughout the Midwest. Every tool has its assigned place on peg boards at the main office and must be signed out. As a result, tool costs are controlled, and time and money aren’t wasted searching for existing tools or buying duplicates.
Another way to watch pennies add up is energy costs throughout the year. Money and energy saving considerations can include:
- Occupancy sensors that shut off lights in rooms that are not being used
- Timers that turn the heat down during the night and back up again early in the morning
- Fuel-efficient vehicles
- Door closers
- Heat tape
- Solar panels
- and more!
Can frugality be carried too far? Absolutely. Like most everything in life, balance is essential! If taken too far, penny pinching can be considered extreme (even bizarre) with no real buy in except for ridicule from observers and participants.
Two examples from my days as a bank examiner come readily to mind. A former co-worker would stop his car along the road to pick up one aluminum can because there was a 5-cent rebate. Another example happened when reviewing the official minutes of a bank’s board of director meetings. Only every other page made sense because the minutes were kept on the back side of “used” paper. This was also the type of paper they loaded into the copy machine.