What Are Financial Milestones and Why Is It Important To Reach Them?
What Are Financial Milestones and Why Is It Important To Reach Them?
Andrew Lisa Mon, August 23, 2021
No matter your age, you might feel like you’re falling behind financially and missing the mark of where you’re supposed to be at your particular stage of life — but “supposed to be” is different for everyone. The good news is, there are a few universal financial milestones that just about anyone should aim for if they care about funding a full life and an independent retirement. Here are a few of the big ones.
Have an Active Brokerage Account in Your 20s
If you’re young today, congratulations. You’re holding every investor’s greatest weapon — time. The high costs of brokerage accounts used to price regular people out of investing, even when they were in their prime earning years. But today, there aren’t a lot of good excuses not to have money in the stock market — even for 20-somethings.
Free brokerage accounts with no fees, no minimums and no commissions are now the rule, not the exception. If you’re new to the workforce, you probably don’t have much money to spare, but by throwing whatever you can whenever you can at a simple investment like an index-tracking ETF, you can turn a pittance into a plethora. You don’t need a lot of money or investing experience. You have time, the greatest tool of all. Just kick in your spare change and let the years and the power of compounding do the rest.
Be One of Those ‘Well-Qualified Buyers’ You Keep Hearing About in Your 30s
When they rattle off the 0% financing/$0 down offers on the car commercials you see on TV, the small print says that they’re talking only to the most highly qualified buyers. Those are the people with excellent credit, which, according to Experian, means their credit scores all start with the number 8.
The FICO credit scoring system goes up to 850, and those with scores of 800 and above get the lowest rates and the best deals when they take out loans and finance purchases. If you’ve paid your bills on time every time, kept your debt low in relation to your credit, applied for credit sparingly, and avoided legal judgments and bankruptcies for your recent adult life, 800 is within reach by your 30s. If not, now is the time to get started with good financial habits.
Have Three Times Your Salary Saved for Retirement in Your 40s
There is no hard-and-fast rule for how much to save for retirement by each decade of life, but Fidelity’s readiness ladder of progression is one of the most widely cited models in the industry. By age 30, Fidelity suggests having the equivalent of your annual salary saved for retirement. By 40, it becomes three times your annual salary — if you earn $50,000 a year, that’s $150,000 in retirement savings. If you do that, difficult as it may seem, the next step is within reach — six times your annual salary by 50, followed by eight times by 60 and 10 times by 67.
Have Your End-of-Life Affairs in Order in Your 50s
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