Back to Basics: Saving

If you’ve been following the Back to Basics series, you might have noticed that I didn’t write one thing on the subject last week.  Bad Kate.  I was at a fascinating but utterly exhausting conference and was scrambling to write anything, much less anything smart.  And this week, well, writing has been hard for me.  I don’t know what’s going on, but the brain is lacking fun ideas.

As we move along the series, we’ve made it to a very important topic:  saving.   Like it or not, financial security depends on your ability to save at all levels.  The most basic level of saving is to have a little left over each month so that one surprise doesn’t put you under.  Moving up the savings chain, an emergency fund and savings for specific things like car repairs, new eye glasses, and insurance payments.  These short-term goals are usually things that you will need to pay for within a year.  Next comes mid-term savings.  This includes a vacation, house down payment, new car, braces.  Mid-term savings most likely encompasses things that will come between 2 and 5 years in the future.  Long-term savings includes things like retirement and children’s educations.  Long-term savings is designed for things that you will need in more than five years.

Once again, here is where we refer back to the thinking exercises that we did earlier in the Back to Basics series.  Identify one or two short-term, medium-term and long-term goals.  For the short-term and medium-term goals, identify how much money you will need and when you will need the money.  Divide the amount needed by the number of months to come up with the amount you will need to save each month to achieve your goals.

Here’s where it starts getting scary.  I don’t think that we have unrealistic goals.  We want to go on a trip in August, and we’re going back to the US in October.  We also want to buy a car and a house after our next PCS.  That doesn’t sound like it should be too hard, right until I total the amount that we’ll need to save every month to make those four goals happen.  Oh, dear, that is a lot of money.  Here’s the important thing, though:  You need to know.  If you don’t know, you can’t possibly prepare.  There are two ways to prepare, either to find a way to make those savings happen, or to adjust your goals.  I’ve already done some goal adjustment in the chart above, deciding that we’ll have to buy a used car instead of a new car.  And still, it is a lot of money.

I encourage you to try this exercise, just to see what happens.  Don’t fret about long-term savings right now; we’ll get to it.  Just pick four goals and figure out how much they will cost.  I can almost promise that you will discover something new and useful.


About the Author

Kate Horrell
Kate Horrell is a military financial coach, mom of four teens, and Navy spouse. She has a background in taxes and mortgage banking, and a trove of experience helping other military families with their money. Follow her on twitter @realKateHorrell.