Saving in a low-yield world
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savings
Does penny-pinching pay off?

Penny-pinching alone is "cut from the same cloth as fad diets" and does not fundamentally change a spender's habit of living beyond his or her means, Yeager says.

“Small savings ... are largely false economizing and have led many Americans into their current financial crisis.”

Instead of penny-pinching, Yeager recommends scaling down in more dramatic ways. He recommends never trading up from your house and instead paying off your current home as fast as you can. In addition, he suggests living on roughly the same amount of money year after year despite any increases in income.

"Unlike our peers who have gone to bigger and more expensive houses, we're still in our starter home," says Yeager, 51, who is married with no children.

He and his wife, Denise, have finished paying the mortgage and carry zero consumer debt. Lacking a mortgage payment, the couple was able to quit their jobs and work at what he calls "selfishly employed" ventures they love.

While Yeager says he is not opposed to pinching pennies -- he will rarely buy food that is over $1 a pound -- he says that his philosophy is to pinch the dollars " ... and the pennies will pinch themselves."

"There are endless discussions about coupon clipping and saving 10 percent off this and that ... but the question is really this: Do we really need all this stuff? What happens if we don't buy it?" says Yeager, who adds that the key to saving is simply to spend less than what you earn.

A third way

Of course, if you want to supercharge your savings, it may pay to both penny pinch and downsize.

"Everyone should pinch pennies no matter what your situation to ensure you live well below your means," says Harrine Freeman, a personal finance expert, speaker and author of the book "How to Get Out of Debt."

Living a frugal lifestyle no matter what your financial situation will prepare you for any money crisis that may hit without having to make drastic lifestyle adjustments, she says.

Start with small steps, Freeman says. That includes everything from saving coins in a jar, using coupons, shopping the sales, eating at home -- and, yes, even forgoing the $4 latte.

Eventually, savers can graduate to bigger steps, such as downsizing a house or car, or eliminating luxury expenditures such as expensive vacations.

Rocha agrees that ultimately, a healthy dose of frugality both in the little and big stuff really makes savings pile up.

"For most people, it is not how much you make, but rather how well you plan and spend your money that leads to financial success," Rocha says. "This philosophy has enabled us to save and live a very wealthy life on a moderate income."

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