There’s an old British saying that goes: “Penny wise, pound foolish.”

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No, the saying doesn’t mean that those who have less money are wiser. If that were true, I’d be a very smart man.

Rather, it refers to someone who goes to great lengths to save some money (a few pennies) now, but ends up losing more money (many British pounds) later on.

Here’s an example that I’m sure hits close to home for most: Buying the least expensive clothes you can find isn’t always the smartest decision. Digging through that pile of cheap underwear may save you a few bucks today. But having toreplace your hole-ridden drawers every other week ends up costing you more money than buying quality undies the first time around. Penny wise, pound foolish.

Now let’s look at this on a way bigger scale: Governments have a knack for being penny wise, pound foolish. For example, politicians don’t always make budget cuts with a long term view. In politics, getting re-elected in the short term often clouds the long term implications. If we all agree that the nation’s youth are our future, then budget cuts on education are penny wise, pound foolish. Yes, you may be saving taxpayers some money in the short term, but education is an investment that will only begin to pay off in the long term.

As you can see, this saying can teach us a lot about how we make decisions with our own money, as well as on the national scale. It’s not to say that you shouldn’t try to cut costs and save money. Just be smart about it and think of the future consequences.

What are some examples of being penny wise, pound foolish that you can think of? Leave them in the comment section below!