Your extended family is going to go on a long cruise vacation next year. You and your spouse are planning on buying your first house together. Your doctor has recommended you get laser eye surgery to help improve your sight. What do all these have in common? They require medium-term savings!
Be sure to have your emergency fund set up first. Once you’ve amassed enough short-term savings, you’re ready to start saving up for bigger, planned purchases! We all have some kind of big-ticket item we’ve been thinking about that will take a while to get to because of the large amount of money it requires.
These purchases add value to your life. Sure, you could survive in your small apartment as you start your family, but why not save up for a nice house in a good neighborhood that has an extra room or two for the kids? You might be fine taking the bus to work every day, but wouldn’t your own car save you time you could spend on something more fun or productive? Not waiting in the heat, rain, or cold winds would be an added bonus!
So, once you’ve built up your short-term savings to a comfortable level, start on your medium-term savings. Preparing to cover your tuition so you don’t have to work as much during college, getting ready for that surgery so you don’t have to take out another loan at the time of the procedure, or wanting to be able to pay your own way through your adventure in another country are all solid reasons to begin planning now.
Start out by determining the total cost, then split it up to see if you can save that amount in the time you have. If your vacation will cost $6,000, and you wanted to go in a year, you would need to save at least $500 a month. If that isn’t doable for you right now, you might want to put off your vacation until you’re sure you can pay for it. The same applies to any other large planned purchase. There are other ways to save as well, such as starting with $10 from your first paycheck and doubling the amount you save at each paycheck ($20, $40, $80, $160, etc.). Find the savings plan that fits your goals and way of thinking best so you will feel motivated to keep it up and not be overwhelmed by the sheer amount of money you are building toward.
Setting aside a little money at a time will help you navigate through life with more confidence and less stress! Watch our Ask SunWest episode on Medium-Term Savings, then check out the rest of our series. Have more questions on savings or other financial topics? Send us a message or leave a comment so we can answer it in a future video!