Budgeting With Military Precision

The Fergusons Have Armed Themselves With A Long-Term Strategy For Running Their Finances

Aaron And Melanie Ferguson have taken solid steps toward building the $1 million retirement cache they are determined to create in 20 years. Since they married 11 years ago, Aaron, 39, has faithfully put away at least 10% of his gross pay in an employer-sponsored retirement account, and Melanie, 34, has managed to save 11% of her gross salary when working part time.

The Fergusons are savings fanatics. They are saving not only for retirement but also to strengthen their emergency fund and begin college funds for their children, Malcolm, 5, and Micah, 2.

Aaron and Melanie are both engineers. He is a systems engineer for the Department of Defense but is currently on loan to the United States Military Academy at West Point, teaching electrical engineering and computer science. The family relocated from Maryland to West Point, New York, last year so Aaron could take the three-year assignment. Melanie is on a leave of absence from her part-time job in Maryland, which she plans to return to when their stint is up in West Point. In the meantime, she is concentrating on raising the children. Despite the fact that they will temporarily be a one-income family, Aaron vows to maintain his commitment to max out on his retirement plan. He currently saves 14% of his $100,000-plus salary. The government matches 3% of his salary as well. The Fergusons’ retirement investments, including an IRA, total more than $200,000. This is a direct result of their decision to honor DOFE principle No. 2: to save and invest 10% to 15% of after-tax income.

Early in their marriage, the couple couldn’t figure out where all their money was going. Melanie decided to collect the receipts for all their purchases. They soon realized they were blowing money on eating out, going to movies, and buying cassette tapes. Melanie set up a budgeting system on the computer and since then they have abided by DOFE principal No. 4: to engage in sound budget, credit, and tax management practices.

The Fergusons now have a detailed budget, with money allotted for each goal, no matter how small. “Even if it’s only $10, we’ll designate that money for the furniture account,” Melanie says. Everyone in the family has a “fun” allowance of $50 a month, much lower than the $100 a month the couple allotted when they were both working.

The Fergusons are big fans of coupons and make sure they buy most items when they are on sale. They don’t let their children bust the budget by caving in to their every demand. A great deal of the toys their children own were bought on sale or by relatives. The Fergusons also trade children’s clothes with friends. “We live within our means,” Aaron stresses. “When we bought homes in the past, we could have bought a bigger house, but we chose not to.” The couple sold their home in Maryland before moving to West Point. They are renting for now and plan to buy a new home when they move

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