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The Secret to Ben Stein's Money

Most know Ben Stein as the monotone history teacher in the 1986 movie Ferris Bueller's Day Off, or from Win Ben Stein's Money, the Emmy-winning game show that ran on Comedy Central.

But Ben Stein's knowledge of history and money extends beyond a few movie and TV scripts. Besides being an entertainer, Stein is a lawyer, economist, former speechwriter for Presidents Nixon and Ford, and author of copious screenplays, articles, and books, many on the subject of money. His father was a former chairman of the Council of Economic Advisors.

So given all this knowledge, experience, and wealth, what one piece of financial wisdom would Ben Stein like to be remembered for? Fool co-founder Tom Gardner asked Stein that question on The Motley Fool Radio Show, and here was his response:

Save consistently and always have a nest egg, and let that nest egg grow. No bit of financial wizardry is more important than just putting another $500 a month in your savings account.

Surely, someone of Stein's education and connections has learned some other, more sophisticated ways to amass millions. (Do you think he learned his "nest egg" nugget while getting his economics degree at Columbia, or while earning his law degree from Yale?) But the truth is, he's right. Scrambling, straining, and stretching for the best return on your money is not as important as setting aside more money on which to earn a return.

What might you have after investing $500 a month for 20 years and earning 8% annually? Almost $300,000. Not shabby.

You might already be making regular investments, through your 401(k) or other account. But whether you do some saving now or not, the question is: Could you do more? That is, if you're not on a regular saving schedule, could you set aside $500 a month? And if you are currently investing, could you increase your savings rate?

I came up with three reasons why some people (including myself) may initially resist putting Mr. Stein's wisdom to work -- and three solutions. Read on if you'd like 300 grand in a couple of decades.

Reason #1: "I don't have that kind of cash lying around."
Reducing your spending money by $6,000 a year might seem difficult, especially if you have kids or expensive addictions, such as cars, travel, or eBay (Nasdaq: EBAY  ) . But don't be too sure before you know the facts.

Ask yourself these questions: How much do you spend each month on utilities? How much on food? Clothes? Books and CDs? If you're like most of us, money might as well be liquid, it seeps out of our wallets and purses so easily. Chances are, there are ways you spend your money that aren't, deep down, very important to you -- impulse purchases and habits, really. You might be surprised to find that you could find another $500 to invest just by forgoing some meaningless purchases and keeping down the costs of necessities, such as groceries and phone service.

But to do that, you have to see where your money has been flowing. In The Motley Fool Personal Finance Workbook, we provide an army of worksheets and tips on how to find out who's been the beneficiary of your spending. But even a review of your credit card and checking account statements from the past few months might prove enlightening. As you look through your spending history, ask yourself these questions: (1) How many of these purchases weren't necessary and don't add anything to the quality of my life, and (2) Are there $500 worth of expenditures that could have been turned into savings (and possibly thousands of dollars down the road)?

Reason #2: "I'm not sure what to do."
While the question of whether someone should save money is a no-brainer, actually deciding how to save can be difficult. Which account? Which discount broker? Which IRA? Which fund? Which stock?

If that's a roadblock on your path to a higher net worth, then here's the simple solution: If your employer matches contributions to your retirement plan at work, then start there. Otherwise, begin with something easy and accessible, such as a money market account. Then, learn more. Doing it the other way around -- delaying investment until you have learned everything -- will surely result in a loss of precious asset-accumulation time. A delay of one year -- i.e., your $500 monthly investments grow for 19 years instead of 20 -- could result in a nest egg worth $28,000 less.

Another option is getting a little professional help, or at least a second opinion. Paying someone to put you on the right path is money well spent, if that's the best way to get you going. Visit our Advisor Center for guidance on picking the best advice.

Reason #3: "I've been meaning to, but haven't gotten around to it."
Buried among the piles of paperwork in my basement are the enrollment forms for three different investment accounts. Why haven't I completed these forms and put them in the mail? Procrastination. Who wants to finish paperwork when there are children to be reared and football games to be watched?

So this morning, I tried to think of another way to conceptualize those future investment accounts, and here's what I came up with. I thought of my three biggest time-wasters, essentially meaningless ways that I fritter away the minutes. Then I asked myself: How much would I pay someone for the privilege of watching ESPN, playing my Sony (NYSE: SNE  ) PlayStation, and surfing the Internet much more than necessary? Of course, I am paying for these privileges to some degree, since I pay for cable TV, cable Internet, and PlayStation games (of which I only have two, and they were gifts from my wife, so I'm not completely irresponsible).

But by doing these things instead of opening the three investment accounts, I'm actually paying much more, in the form of lost compounding, increased taxes (since two are tax-friendly accounts), and reduced savings (since -- let's be honest -- any money that isn't stashed away is more easily spent). Plain and simple, those activities aren't worth the price.

If Robert Brokamp had a game show, it would be Win Robert Brokamp's Coveted Christmas Carol Compilations (suggestions and submissions always accepted). He is the co-author ofThe Motley Fool Personal Finance Workbookand the author ofThe Motley Fool's Guide to Paying for School.


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