If you save in small ways, but aren't taking advantage of serious savings, you're penny wise but dollar stupid. Here's how to really start saving.

The idea behind the idiom penny wise but dollar stupid—or penny wise but pound foolish—comes down to this: Don’t bend over backward to save a few dollars here and there when you’re not taking advantage of opportunities to save hundreds or even thousands.

Today I’m going to explain to you what it means to be penny wise but dollar stupid, and show you different ways you can really start saving.

A penny wise but dollar stupid person scrimps and saves in all the wrong places

To help demonstrate what it means to be penny wise but dollar stupid, let me paint a picture for you using a fictitious person we’ll call Sam.

Sam’s going over his monthly bills and expenses and notices that he’s spent a whopping $60 on his morning bagels over the last 30 days. Wanting to save money, he resolves to eat breakfast at home from now on and vows to use the extra money towards debts or savings.

The problem, however, is that Sam is still bleeding thousands of dollars every year by paying too much on his mortgage. In other words, the $720 he’ll save on bagels over the course of the year is negligible in comparison to what he could save on his mortgage.

Sam is focusing on an insignificant source of savings when he should be looking for real ways to save.

Many of the ways people focus on saving don’t add up to much

I often hear people saying things like they’re doing everything they can to save money. But, when I dive more in depth, I find out that everything is more like the bare minimum. When you need to be saving thousands, pinching a few pennies isn’t going to cut it.

Let’s look at a coffee example. According to Acorns Money Matters Report, the average American spends about $21 a week on coffee. If you were to cut out your morning trip to the coffee shop every day, you’d save $1,100 a year.

While this may seem like a lot, it’s insignificant when you compare it to the $2,500 you could save by making your lunch instead of eating out every day.

Another way that people often try to save money is by driving farther to get the best price on gas, or driving to multiple grocery stores to get the best deals on various foods. In the end, they waste more time and more money on gas than you save trying to find discounts.

Instead, spend your energy on serious savings

If saving money is something that you’re really serious about, then it’s time to get dollar smart. The way to do this is to pay less attention to the small sums and to start paying attention to the ways you can save real money. Here are some concrete ideas for saving big on purchases:


A home is one of the biggest purchases you’ll make in your life, so it stands to reason there are many ways you can save on your house and mortgage. Here are a few ideas:

  • Put down at least 20 percent, so you don’t have to pay for mortgage insurance
  • Reduce your budget and look for a smaller home, or consider downsizing if you’re already in a house
  • Make additional payments as often as possible to cut down on how much interest you pay


One of the best ways you can save money on smartphones and other devices is by buying the model only when a newer version is announced. As soon as the announcement comes, the price for the current device will drop.

Also, chances are you don’t really need unlimited plans or even a smartphone to get buy. You could save a lot by switching to a low cost wireless plan.


Vehicles are another great place where you stand to save big because the price tag is so hefty to start with. One of the easiest ways to save here is to avoid buying new because a used car can provide you much more value thanks to the lower price and the smaller depreciation.

Whether you opt for a new or used car, make sure you always do your research in advance so you can spend less time at the dealership.

Saving isn’t just about spending less, it’s also about paying less interest

I find that when people talk about saving money, the discussion is often limited to ways they can spend less on purchases. But what about the other places where you’re spending more than you have to because of interest payments?

In the examples above, two of those large purchases (the mortgage and the car loan) generally come with an interest price tag that’s just as big as the purchase price. But just as you can save on the actual purchases with a little savings-savvy thinking, so too can you save on the payments.

The trick here is going to lenders to renegotiate the terms of your various loans. You can do this with more than just your house and car. You can renegotiate credit card APRs, and even student loans. Here’s a quick overview of what you need to do:

  • Request a free annual copy of your credit score from TransUnion, Experian, and Equifax
  • Go to the competitors of your creditor and request quotes (get two or three at least)
  • Contact your creditor about renegotiating your loan, keeping in mind your desired interest rate
  • Mention that you have better offers being made by competitors to strengthen your case

By negotiating better terms on your loans, you could save hundreds, if not thousands of dollars over the course of the next few years.

You can also save big by cutting costs on smaller, recurring purchases

Big ticket items aren’t the only place you stand to save. Try cutting costs on your phone and cable bills, as well as things like insurance.

When it comes to your phone, Liane Cassavoy at PCWorld suggests saving by cutting out the expensive extras, switching to a data-free or low-data plan, changing carriers to take advantage of introductory rates, or even switching to a prepaid plan, so you only pay for what you use.

Similarly, you can use many of the same tactics to cut your cable bill. To start, call around to the competitors to see what they’re charging, and then call up your cable company’s cancellation department to discuss lowering your bill.

Auto insurance is another place you can make great strides toward savings, and this again starts with shopping around for a better rate than what you’re already paying.

You can save on insurance by requesting a higher deductible, by taking advantage of discounts, by getting home and auto insurance from the same provider, and by reducing your coverage if the car is worth less than ten times the premium.

Another great way to end up with more money is to earn more

Making the checkbook balance isn’t always about finding ways to save. Sometimes, the solution can be as simple as making more money. Especially if you’re scrimping and saving just to get by, consider asking for a raise or renegotiating your salary.

Here are a few articles to get you started:

Be careful not to throw the baby out with the bathwater

You shouldn’t go so far with the savings that you end up shooting yourself in the foot.

A good example of this is car insurance: If you reduce your coverage too much just to get the lowest premium, you might end up paying out of pocket if you get into an accident and have to pay for repairs yourself.

Ignoring car maintenance and not going to the doctor when you should are two other examples of penny-pinching to the point of detriment.


The idea of being penny wise, but dollar stupid is all about learning to save money the smart way. There are lots of things you can do to save a few cents here and there, but your efforts there will pale in comparison to what you’re losing if you don’t take advantage of the big opportunities to save.

Aside from earning more and spending less in the ways I’ve mentioned today, have you discovered any genius hacks for being dollar smarter?

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About the author

Chris Muller picture
Total Articles: 279
Chris has an MBA with a focus in advanced investments and has been writing about all things personal finance since 2015. He’s also built and run a digital marketing agency, focusing on content marketing, copywriting, and SEO, since 2016. You can connect with Chris on Twitter.