3 Wealth Milestones YOU Can Use To Stay On Track!

When it comes to building wealth, it can feel like a long road ahead a lot of the time. Every dollar you save makes you the richest you’ve ever been, and it’s the furthest you’ve ever been on your journey to reach financial independence. Even still, we know how hard it can be to stay the course and even stay motivated. But there’s no need to fear—the Money Guy is here!

Today, we’re going to cover some wealth milestones that you can use to keep yourself going in the right direction. No matter your income, no matter your expenses, or even your savings rate, these milestones can be adapted to work for you. We’re going to use a few assumptions that stay the same as we move through these milestones.

We’re going to assume first, though, that you’ve already smashed that like button. Make sure you do it if you haven’t already!

Let’s jump in. For the milestones, let’s assume our test subject, Manny the Mutant of course, has a gross annual income of $50,000 and he never gets a pay raise. Let’s also assume his annual expenses are $30,000 and he saves 25% of his gross annual income—that’s what we suggest you aspire to when it comes to savings. For Manny, that comes out to $12,500 a year. Throughout this journey, let’s say his investments have an annualized rate of return of 8%.

After 9 years of saving and investing, Manny has crossed a portfolio value of $112,500, and he has hit our first milestone: Manny’s money is saving more than he is. From this point on, at an 8% return, his investments will be generating more than $12,500 annually, which is what he’s saving from his income.

You can do this math for yourself as well. If you’re saving $20,000 a year and predicting a 7% return, that’s $20,000 divided by 0.07 to give you a wealth milestone of $285,714 on your money. But we do not want you to stop there. We want you to keep going, strike while the iron’s hot, and use this milestone to keep that fire inside you burning and accelerating your wealth-building journey.

So let’s say Manny keeps saving. He keeps that investing train rocking and rolling forward. If I were you, I would think about climbing on board.

After 15 years, his investment portfolio has now passed $375,000. You might be thinking, what’s so special about that? Well, remember Manny’s annual expenses: $30,000 a year. At 8%, that $375,000 portfolio earns more than $30,000, and we have reached our second milestone—his money is earning enough to exceed the cost of his everyday expenses.

When you think about how hard your money works, this is like having a side hustle that takes no work and still replaces your expenses. And the way you find this milestone for yourself is exactly the same way. That $30,000 figure for expenses divided by 0.08 gives us the milestone of $375,000.

And notice what else just happened: Manny’s first milestone took him 9 years to pass, and it only took him six additional years to get to the next one. That’s the power of years of discipline and the magic of compounding interest working together.

But Manny’s investing journey is not done. He’s still full steam ahead and barreling toward financial independence. And after 20 years of hard work and discipline, Manny’s portfolio crossed $625,000. You probably know where this is going. At 8%, a $625,000 portfolio will earn $50,000 a year—that’s Manny’s income. His money is now literally working harder than him. That’s like there are two of you working toward your future.

Remember how we’ve often said we want your money to work harder than you can with your hands, your back, and your brain? Congratulations to Manny for reaching that key milestone.

Now, don’t mishear me—this is not the end of the journey. Manny still needs to reach financial independence by having his money reach the level where he can safely withdraw from his investments without running out of money. We use the 8% figure to figure out these milestones, but when it comes to the end of the journey, you probably want to be able to replace your income or expenses on something much closer to 4% of your portfolio’s value. An 8% withdrawal rate is risky at best.

I know that when you’re starting out on your investing journey, it seems like 20 years of saving and investing is an eternity. But the earlier you start, the more you save today, the faster and faster it will go as you work toward financial independence.

And if you want to get there faster, there are things within your control that you can use to speed up this journey. The first, of course, is increasing your savings rate. The more you put away, the more it can grow and grow upon itself. The second thing you can do is have a plan for yourself.

And if you don’t know where to start for a plan, let me introduce you to the old reliable Financial Order of Operations. We designed the Financial Order of Operations—or the FOO—to guide you on this journey to financial independence, so you know what to do with your next dollar. It can be your navigation system to help you stay motivated as you work toward these milestones.

If you don’t have your copy yet, you can get one for free at moneyguy.com/resources. And if you do have yours already, comment down below what step of the FOO you’re on and where you’re at with these key milestones.

So follow the FOO, keep that wealth train rolling, and keep building toward your great big beautiful tomorrow.