Content provided courtesy of USAA.
By Ingrid Bruns
What are you saving for? A wedding, a new baby, college, a down payment on a house? How will you pay for an emergency when “Murphy” shows up at the door? Have you been thinking about saving but just haven’t taken the plunge?
Many of us know the feeling. We want to buy a big-ticket item, take a trip, or handle a financial emergency, but we don’t have the cash.
A dedicated savings plan can help, and there’s no better time to start one than this week. Military Saves Week offers service members and their families a chance to assess their preparedness for the future. We’ve heard the mantra: “Financial readiness is critical to mission readiness” — but it all starts with a plan.
Strive to save 10-15% of your gross pay. If that figure feels unrealistic, start with whatever amount you can, and increase your contribution with every promotion and bonus. To keep you from depending on a high-interest-rate credit card, stock an emergency fund with at least $1,000 for unexpected expenses. Ultimately, strive to keep 3 to 6 months’ worth of basic living expenses in your emergency fund.
For military families, two critical times require additional money:
Our family has two kids in college, a mortgage, car loan and the typical household expenses. Finding extra cash to sock away can be a real challenge — but is critical as my husband approaches military retirement this year. We used the USAA Goals Planning Tool to figure out how much we need to save each month. We then opened a separate savings account and linked it to the goals tool so we can track our progress. To secure our success, we set up an automatic allotment from every paycheck to ensure paying ourselves always comes first.
We also take advantage of some of the silver linings of our military life. During this current deployment, we saved money in the Savings Deposit Program (SDP) and are realizing a 10% APR — no other savings vehicle can currently guarantee a return that high. We are also maximizing the temporary increase in pay due to special deployment allowances and tax-free combat pay to plump up our savings plan.
Saving for a specific short-term goal is an excellent way to work toward saving for the major expenses in life, like buying a house, putting kids through college and eventually being able to retire in comfort.
As you watch your balance grow, you’ll forget those times you passed up short-term gratification to fund your savings. Instead, you’ll focus on how much wealth you built and how much closer you are to your goals.