How to Use the Right Savings Tool to Reach Your Financial Goals

April 18, 2013
Emilie Papageorgiou
AFC© Candidate   
FINRA Military Spouse Fellow

“Only when you combine sound intellect with emotional discipline do you get rational behavior.” –Warren Buffett

Let’s be honest—saving is hard work! With living costs, daily wants), short- and long-term goals, it can become difficult to figure out how to make it all work.

Perhaps we can’t have it all. That’s right. I said it. We can’t have it all—at least not all at once.

Without a tangible goal, a good plan and a reasonable amount of financial discipline, there’s a good chance we’ll all eventually come up short. In our household, the hubby is dying for a new big screen TV, but also knows that extra “fun” money has to come from somewhere in our budget.  Consider this example: You want to buy a more expensive car now.  What will that purchase do to your plan to save for a down payment on a house, save retirement or, most importantly, build an emergency savings account? No one wants to end up in a tight spot, so why wait to start planning?

Use these tips to help organize your goals:

1.    Take an inventory of your wants and classify each as short- or long-term goal.
2.    Strategize the best method to save up for each.

Short-term goals (1-5 years) might include saving for an emergency fund, paying off debt, saving for a car, and saving for a vacation. These goals most often benefit from tools that enable you to have relatively easy access to your cash (aka “liquidity”) within a certain timeline. Tools can include:

·    Savings accounts
·    Money market accounts
·    Certificates of deposits (CDs)
·    Short-term bonds.

Long-term goals (5+ years) might include saving for a down payment for a home, saving for college, and saving for retirement. These goals greatly benefit from tools that allow compound interest to work its magic.  However, long-term savings tools restrict your access to the funds and many times can incur penalties if you try to access the money too early. Tools can include:

·    Mutual funds, stocks and bonds
·    Employer-sponsored retirement plans, such as Thrift Savings Plan (TSPs) or 401(k)s
·    Traditional or Roth individual retirement accounts (IRAs)
·    Long-term bonds
·    529 college savings plans.

Some may wonder—why not take money from my retirement saving to finance a new car? Or why isn’t a savings account good enough to stash away money for retirement? While some saving is better than none, short-term goals often do not benefit from time and interest like long-term goals. Similarly, some long-term savings tools have penalties for withdrawing money before a certain age or under certain circumstances.

Use these tips and tools and it will help you to Set a Goal, Make a Plan, Save Automatically.  Save on!

Want to see how much your savings can grow? Check out this handy savings calculator!

Tip of the Day

  • Written by Guest Blogger | May 1, 2014

    Check out the FREE "My Military & Money" app for servicemembers from @BBB and McGraw Hill Financial. More info at

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