April is Military Saves Month!
Military Saves is a campaign organized by the Consumer Federation of America that encourages the military community to build savings, pay down debt, and increase personal wealth.
Navy Mutual is proud to support Military Saves Month. It is a core part of our mission to “educate members of the uniformed services and their families on matters of financial security.” As always, we remain a resource to help you and your family achieve financial stability, set savings goals, and start saving. Setting financial goals and putting money away also protects you from any unforeseen expenses that may arise, such as needing to perform extensive vehicle maintenance or having to pay for a sick pet’s visit to the vet.
If you are not sure how to get started, consider the savings options listed below:
1. Save Automatically
Saving automatically is the easiest and most effective way to reach your savings goals because once set up, you do not need to remember to pay yourself first every month (before you spend any of the money you have coming into your household). It guarantees that you will contribute to your savings accounts each month, instead of waiting until the end of the month and depositing whatever is left over. You can save automatically by having your employer deposit a percentage of your paycheck into a savings account each month, while the remainder goes to your checking account. You can also set up recurring transfers through your bank or credit union. Any time you get a raise or a bonus, update the amount of money you’re putting into savings – don’t use it as an excuse to unnecessarily upgrade your lifestyle.
Note: If you are a servicemember serving in a designated combat zone, you may be eligible for the DoD Savings Deposit Program. This allows you to deposit up to $10,000 to a savings account at a 10% interest rate. Learn more here.
2. Save for the Unexpected
A new survey by Bankrate shows than only 39% of Americans could afford to pay for an unexpected emergency expense of $1,000 with savings. Having the funds in place for an emergency can prevent undue stress and help your family avoid going into debt. We recommend two different funds: an emergency fund and a rainy-day fund.
A rainy-day fund is used when the refrigerator breaks, for example, and you need $700 for repairs. An emergency fund would come into play if your spouse was laid off and you need enough money to cover the loss of income to your family for the amount of time it takes them to find a new position. Because a rainy-day fund is smaller (between $500 and $1,000), it’s the easier fund to save for. Once you have that amount saved up, you can turn your attention to your emergency fund, which should have at least three to six months of living expenses stored in it, depending on how secure your paycheck is each month. The good news is that once these accounts are fully funded, you can put any extra money into retirement or your regular savings account because you only need to replenish the funds if you have to delve into them during an emergency.
3. Save to Retire
The earlier you start saving for retirement, the better. If you are a servicemember, you likely have a TSP account, which is the federal government’s version of a 401(k). If you’re not a servicemember, but you are employed outside the home, you may have access to an employer-sponsored 401(k). Regardless of your employment status, you are eligible for an Individual Retirement Account (IRA).
Having a retirement plan in place will provide you with more financial freedom later in life and make you less reliant on Social Security benefits once you reach retirement age. Each year, you should review your contributions to your retirement accounts to ensure that – if you have a TSP or 401(k) – you are contributing at least as much as is required to get the full matching amount from your service or organization. If you have an IRA, you can put in up to $6,000 each year, and every bit counts. If you are currently saving less than the federal maximum and can afford to increase your annual contributions, do so.
Tip: Use our Retirement Savings Calculator to estimate how much money you will need to save for retirement.
4. Save by Paying Down Debt
Addressing your outstanding debt is another way to approach saving. Reducing debt now reduces the amount of interest paid in the long run. Consider a $5,000 credit card bill and an 8% interest rate. If you paid $100 per month, it would take 62 months (just over five years) to pay off your debt, and you would pay over $1,100 in interest. If you raised your monthly payments to $150 per month, you would pay off the same debt in just over three years and pay only $673 in interest.
It’s also important to pay your bills on time to avoid late fees and improve your credit score – which may help you access lower interest rates in the future.
5. Save with a Plan (and as a Family)
It is not enough to set a savings goal; you need to create a plan for how you will reach it. Whether you are going to cut your morning coffee or shop around for the cheapest gas and car insurance, you will find it easier to reach your goal if you know that there’s a plan in place to do so. Creating your savings plan involves taking a deep look at your budget and determining where your family has the most wiggle room. Some costs are the same every month – like your internet bill or your renter’s insurance. Others you have some control over, like groceries, date nights, and transportation. Free up cash in your budget by shopping around for better insurance rates (just make sure that coverage and deductibles are equal), eliminating monthly subscription services you do not use, and negotiating your rates with cell phone and cable service providers. Make sure to always ask for discounts having to do with military service. You can also identify the areas where you are spending more than you thought each month (such as that daily coffee run) and change your habits accordingly.
Tip: Creating a visual aide can also help motivate you by allowing you to see your progress. Involve your children by including them in discussions about your savings goal – maybe now is a great time to save for that family trip to Disney World – and putting them in charge of the visual aide (e.g., coloring in stripes that represent progress toward your goal).
Take the Military Saves Pledge to hold yourself accountable in meeting your saving and planning goals. But remember, being wise with your money does not just involve saving, it involves protecting your family in the future. Schedule an appointment to speak with one of our representatives about your family’s life insurance or annuity needs or request a quote online. We’re here to help.