What works: Your worst enemy...overspending
How much you spend matters much more than how much you earn. Here's a spending plan that works for William and Michelle Hartmann.
By Penelope Wang, Money Magazine senior writer

NEW YORK (Money Magazine) -- As a senior investment analyst at Vanguard, John Ameriks has a close-up view of how well shareholders save for retirement. And he's come to a conclusion: How much money you make matters a whole lot less than how much you spend.

Looking at the assets of Vanguard 401(k) plan participants, Ameriks found that those who were saving enough to retire comfortably had a median income of $69,000 and median assets of $200,000.

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William and Michelle Hartmann live on 70% of their income.
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The group falling behind, with assets of just $38,000, earned more - a median of $83,000. "Clearly this group is spending relatively more of its income," he says.

That brings us to Ameriks' second point: Everyone needs a budget.

Studies by Ameriks and others suggest that those who fail to pay attention to spending tend to consume more. Using TIAA-CREF plan data, Ameriks looked at the relationship between monitoring a budget and net worth.

His finding? "Budgeting, like planning, is closely linked to greater wealth," he says. "After all, it's the best way to put a rein on spending."

The right kind of budget - or spending plan, to use a friendlier term - depends on you. Some households, particularly those in debt, may need to keep a close watch on expenditures, while for others a more flexible approach is just fine.

What works for William and Michelle Hartmann, both 37, is setting a goal of living on just 70% of their $100,000 combined salaries.

So before spending any of their income, the couple makes sure savings are taken care of. Michelle funnels the maximum 14% into her 401(k), and William invests another 10% or so into his IRAs.

On top of that, the Hartmanns try to get the best deals possible. The $425,000 they spent to build a three-bedroom home was far less than the $650,000 a comparable home in their Dallas neighborhood would have cost. With that careful attitude, they have amassed more than $400,000.

What to do now

For an idea of your spending, add up a couple of months' worth of bills. Chances are, you'll find a lot of trivial expenditures. See our Ideal Budget maker for help.

Another tip: Use online banking, which will do much of the budgeting research for you by showing you where your money goes. At that point, though, it's up to you to create a plan and stick to it.

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How to make your nest egg last a lifetime Some people like the do-it-yourself approach. Others may prefer the lifelong promise of annuities. Money's Walter Updegrave lays out the perfect compromise.

7 stocks for the really long run The best investments are the ones you can hold for decades. You'll lower your tax bill and your trading costs and maximize your chances for great returns. Money's Michael Sivy identifies the most promising. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.