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Saving solution: Spend less than you earn

January 2, 2010

Many people make a New Year's resolution to save extra money. The task can be difficult, but one local certified financial planner said the key to building that nest egg is "spending less than you earn."

"It really comes down to discipline and planning," Certified Financial Planner and co-owner of Innovative Investments Cliff Marstiller said. "While I have clients who have obtained wealth through a windfall, most of the clients that I have who have accumulated significant savings over time have followed one simple rule - spend less than you earn."

Marstiller said to save money people have to practice self discipline to deny themselves some of the things society tells them they have to own.

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(CU and The Inter-Mountain/Grant Jones)
PINCHING PENNIES — Certified Financial Planner and co-owner of Innovative Investments Cliff Marstiller said the easiest way to save more money is to spend less than what is earned. Marstiller also said creating a spending plan and figuring out exactly what you need to live on will also help save money.

"You need to take the time to consider what you need to live a comfortable, but frugal, lifestyle and plan your expenses and purchases accordingly," Marstiller said. "Then, stick to the plan."

Marstiller said the most common way to start saving is a savings account. He said with the current interest rate environment the account will not likely provide a lot of interest earnings, but by separating the funds it reduces temptation to spend from your checking account.

"Money market accounts may be another viable alternative," he said. "Just be sure to know what limitations may be placed on the account with regard to accessibility. If you have long-term goals with the money you are saving, you may want to consider other investments once you have $500 or $1,000 accumulated."

Marstiller advised the first step in saving money is to start a savings account and examine what is necessary to live.

"Start thinking in terms of making saving a habit. Each of us can write down the bills that need paid every month: mortgage, utilities, car loan, insurance and groceries," Marstiller said. "After you make that list, look at each entry and ask yourself, 'Is that company I'm paying more important than me?' Shouldn't you be at the top of that list? Shouldn't you pay yourself first? That's what savings is."

Marstiller said one thing to do to help save money is to take your lunch to work. He said it takes less time to make lunch at home than it takes to go through a drive-through and it is about half the cost of the restaurant.

"It often times is more healthy. Even if it saves you only $3 a day, that's $15 per week or over $750 in a year," Marstiller said. "Another example would be to wait a month or two for a movie to come out on DVD and rent it rather than going to a theater to see it."

He also advised for people to by a vehicle that they need and not what they want. He said many times a certified pre-owned car can serve just as well and lower the amount of monthly payments.

"What about that new Smart phone? Can't I really get by just as well with the one I have? Believe it or not, there are people out there living perfectly happy, well-adjusted lives that don't even own a cell phone. They also don't have a cell phone bill," he said.

Marstiller said Warren Buffet is reported to be one of the richest men in the country and said he lives in a relatively modest brick home in Nebraska and drives a four door American sedan.

"He grew his wealth by spending less than he made and understands the difference between what he wants and what he needs," he said. "I have read studies over the years which reveal that the average millionaire in this country became wealthy by spending less than they earn and lives what most people would consider a very frugal lifestyle.

"Contrary to what Hollywood would have us believe, they usually live more like Warren Buffet than Jimmy Buffet."



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