What Financial Advisors Consider Key Wealth Milestones — Have You Reached Them?
Written by
Alan Joseph
Edited by
Rebekah Evans
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We all have fond memories of special financial milestones: perhaps it was that twinkle in your eye when you looked at your first paycheck after landing your first job or when you saved your first $10,000.
But what do the experts think? What key milestones should we aim for? To find out, GOBankingRates spoke with Steve Case, financial and insurance consultant at InsuranceHero.
Contrary to what some believe, a key milestone isn’t necessarily about becoming a millionaire or landing that first six-figure job. Having helped many people over his long career, Case said his most successful clients aren’t the ones who had major goals; rather, they’re the ones who sorted out the basics and are comfortable.
What are the basic key milestones? Read more to find out.
Eliminating High-Interest Debt
Eliminating this kind of debt is the first and foremost important milestone Case advises his clients. “Everything else you build while carrying it (the debt) works against you,” he said.
According to a study conducted by the Money and Mental Health Policy Institute, people who struggle with debt are far more likely to face mental health challenges than those without debt. The same study also outlined that owing debt makes it difficult to remember bills and account details as a way to cope, which further compounds the stress.
Simply put, eliminating high-interest debt frees you to pursue other milestones rather than hold you down. Or as Case put it: “Clearing high-interest debt is where it begins.”
Build a True Emergency Fund
Now that you’re free to save, the next milestone is building an emergency buffer. Life can throw unexpected curveballs and if we’re not prepared, it can sting. This could be anything: illness, getting laid off, divorce or a once-in-a-lifetime pandemic as we saw not too long ago.
While standard benchmarks suggest three to six months, the COVID-19 pandemic lasted much, much longer. People often underestimate how much they need to save, given the sky-high cost of living in today’s economy. The bigger your emergency fund, the better.
Transitioning From Surviving To Building Wealth
We have, at last, reached the best part. You’ve successfully taken the albatross of debt off your shoulders and you’ve built an emergency fund in case something goes wrong. Now it’s time to herald your finances into something bigger and better: wealth.
Case posited building wealth as a shift from day-to-day and month-to-month to “something that stands.” That could be “pension contributions or getting onto the property ladder,” which both point to the same shift.
Alternatively, it could be investing in an ETF that tracks the S&P 500 index in a tax-efficient account and regularly contributing to it through dollar-cost averaging. This framework catapults you from surviving toward long-term financial security.
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