The Major MONEY Milestones To Hit By EVERY Decade!

22:42And so this is when your capital starts to begin doing real work and you're becoming an investor in addition to a good earner and saver. The second milestone is going to be to build a fortress balance sheet. Your 30s should feel financially stable, not fragile. And so by the end of this decade, we should definitely be ticking off that six plus month of living expenses, that six plus month emergency reserve. We should have no bad debt, no high interest consumer debt. We should have a positive and growing net worth. And we should have our insurance boxes checked, right? We should have health insurance set up.

23:13We should have disability insurance set up. We should have renters and homeowners insurance set up, umbrella insurance, car insurance. We should have a philosophy behind those. And I recommend for people on the journey to financial independence to carry that cash balance, that six plus month of emergency reserve, and use that to feel more comfortable with high deductible insurance policies that have lower premiums. I almost never file a claim for my insurance policy. Because of that, I feel very comfortable with higher deductible plans, and I can use my cash position to keep those premiums low.

23:43And I think also by the end of your 30s, you should have the boxes all checked with regards to estate planning. That means your beneficiaries, basic estate planning, and a will are in place, all those documents that govern those types of things. So this is not just about building wealth at this point. We're also beginning to think about protecting it. The next piece is we need to start actually putting up points on the board that are meaningful. So some big milestone numbers, I think, on the journey to financial independence are going to be your first$100 ,000 in net worth,$250 ,000 in net worth,$500 ,000 in net worth, and a million dollars in net worth.

24:16And I think some people watching this podcast will cross that$1 million mark. That's an exceptional achievement to do by the end of your 30s. But reaching some of those, at least the first two,$100 ,000 to$250 ,000, I think are really good aspirational targets for students of personal finance in the financial independence world to achieve by the end of their 30s. And those are real, tangible numbers that feel big to a lot of folks. And I think that's a really important milestone to begin targeting. Okay, milestone number four is to turn your income into a weapon. So your 30s are your prime earning years.

24:49You should have a clear, intentional career strategy, right? So maybe that's the pivot Mindy talked about earlier. Maybe you're coming out of your 20s with that. But I think there should be a strategy here. We know what the upside is in our career. And we know that we are chasing something real that has potential. Be known for something valuable at your company or with your skill set. Put out work that builds your resume that you can point to for years to come and say, I did that. I built that. I made that contribution. This went from X to Y, put that resume, those resume items out there into the world and make sure that you're are, you're, you're really intentionally building up that resume so that it gives you optionality for better jobs as, as time passes and stack rare or high demand skills, um, whatever that means in your, in your career field, right?

25:35For me, I think I told you this earlier in the show, that's that CEO toolkit, all of the processes and frameworks that I use to run a business. Have negotiated multiple times, whether that's as a manager or with your manager about raises, opportunities, promotions, flexibility, but practice that skill. Don't be afraid to negotiate. Be willing and able to leave your current job for better alternatives, right? We talked with Paula Pant about the concept of best alternative to a negotiated agreement or BATNA. Know your BATNA in life, in your career, and have that ready to go. And then potentially look for opportunities to get serious upside.

26:12Serious upside looks like commissions, large bonus potential, or equity in a company, or business ownership in other areas. And I think if you don't have any cards played by the end of your 30s that could have some chance at potential upside, that's a missed opportunity, I think. I think you should be really looking for those and saying, where can I, in addition to earning, saving, and investing, actually have some irons in the fire that could, if things go well, pay off for me? A good chunk of the time that might look like equity in a business eventually after 10, 15, 20 years working there. Okay.

26:43Milestone five is make one or two high conviction plays. So this is the same concept we talked about in our twenties, but you should be continuously making, again, putting irons in the fire that can move your financial position forward. So what are high conviction plays? Buying or scaling a business, aggressively growing a real estate portfolio, making that intentional part of your strategy, making that player that next, you know, taking that next opportunity at work to move into that director, maybe executive level branch at your company, building your personal brand, maybe starting a blog or a social media account, doubling down on a niche, something that is interesting to you that has the potential to be at least a hobby, if not a business opportunity.

27:23You should feel like you're on a path, not exploring random one-off bets with this approach. By your 30s, I think you should have a reasonably synthesized skillset and strategy that can point you in a direction to be strong in a field of your choosing. Okay, next up is going to be to optimize your three big expenses. I don't know if you're going to have to house hack for all of your 30s. I'm certainly not going to do that since I house hacked for most of my 20s. But I think you have to make a conscious decision about where you live and how you're going to live. Are you going to rent? Are you going to buy and have run the numbers?

27:54I think you have to make a conscious decision about how you're going to get around. I think your car needs to be a reliable choice that is cost effective, not an ego driven choice. And I think you're going to have to start thinking about if this is in the cards for you, what childcare is going to look like and what family planning considerations you need to map into your financial trajectory if that's something, again, that you're planning on doing in starting a family. And I think those three categories, housing, transportation, and childcare, food is the other big one, but housing, transportation, and childcare will be the really big ones to plan on in your 30s if you are starting a family.

28:28Number seven is going to be automate and systematize your finances. So your financial life by this point should not be a conscious decision every day. You should be making a conscious decision upfront and letting that roll for years. That means that your investments should be automated. Your bills should be paid automatically. You should have simple, repeatable systems to track and measure your spending on a regular basis. You should have a lifestyle that defaults to the serious accumulation of wealth and money. And you should be reviewing that and making decisions on an annual or quarterly basis that you can then implement into your automated systems.

29:04Our favorite tool to automate your finances is Monarch. Mindy and I both use Monarch. It maps all of our credit cards, all of our bank accounts, all of our investment accounts. It maps the real estate that we own and it builds one picture of our net worth that allows me and my wife, Virginia, to have a meeting every week to go over our finances and just look at what's happening. We see where every expense goes. It is generally speaking categorized correctly by the pretty intelligent AI and we can make adjustments and fine tune in real time. We also know what our net worth looks like based on how investments have been performing.

29:37All of that's a little bit less actionable than the budgeting information there. So it's a super powerful tool. It's available for 50 bucks, 50 % off$99 if you use the code POCKETS, P-O-C-K-E-T-S and wanna set that up. You can also do a lot of this automation with other apps out there, but that's our favorite one for a lot of reasons. And it's one that I've used for many, many years with Virginia. I love Monarch just because it's a look at your entire financials picture. It's not just investing. It's not just banking. It's banking and credit cards and investing in everything that you connect to this account all in one snapshot.

30:14I am a very busy person and I don't have time to comb through every single account. I just want to look at it really quick. Oh, doing good today. Or ooh, market's down. Shucks. That stinks. I'll check in next week. So it's It's so easy once you set it up. Okay. Milestone number eight for your 30s is deepen your financial sophistication. So in your 30s, you should go from basically literate financially to strategic with your thinking financially. So this means that you understand concepts like tax optimization, like how to plan when to realize capital gains, retirement account arbitrage. You should understand asset location.

30:50if we're going to invest in portfolios that are other than very simple accumulation portfolios, we should understand where to put the aggressive portion and where to put the conservative portion. We should understand risk management. We should understand the concepts of leverage and when to apply it, when it's good, when it's bad, and when it's time to begin paying off the debt on that rental property, even though it's only six and a quarter. We should understand opportunity cost as a basic framework, both of their time and our money. So this is no longer just doing the basics. This is optimization, and this is a continuation of the reading and self-education that we started in our 20s.

31:21It's a lifetime pursuit. Milestone nine is we should clarify what enough means. I think it's really hard for a 23-year-old to discuss, here's my financial independence number. I think it's a little different to declare that at 35 once you have a family and a house and are sat there and your spending has been fairly consistent for a couple of years and you're getting into your routine, what that number looks like. And I think by your late 30s, you should have a clear FI number, a rough FI timeline, a sense of the trade-offs involved in realizing financial independence and a vision for exactly what freedom actually looks like.

31:52And that should translate to this concept of enough. This number is enough adjusted for inflation. That should be a good milestone by the end of your thirties. And then last, the milestone is to exit your thirties with optionality. If we exited our twenties with momentum by the end of our thirties, we should, if not be already fully financially independent, we should have the options to survive for a year. If we get laid off unexpectedly to change careers if needed and take that job at a startup that has really promising opportunity and not run out of cash. To downshift if we want, or maybe consider some version of CoastFi where we don't have to save quite as aggressively for traditional retirement because we've already funded our traditional retirement.

32:32And now we can take a foot off the gas a little bit and enjoy life. We're not trapped by lifestyle inflation and we have real choices. So we're not retired yet, but we are powerful by the end of our 30s. And what that translates to in terms of net worth targets. I think your baseline net worth target, if you're on the journey to financial independence, should be around$250 ,000 for someone exiting the 30s, someone turning 40. I think that a strong financial position looks like something in the$400 ,000 to$600 ,000 personal net worth range. An exceptional net worth is going to look like$750 ,000 to a million dollars or more by the time you exit your 30s.

33:04And again, many BiggerPocketsMoney listeners will find those numbers achievable or have already surpassed them. Okay, Scott, thank you for handling the 20s and the 30s, I do think you're still closer to your 40s than I am, but I'm going to cover the 40s anyway, because I'm going to give your voice a break. So your 40s are where you really start to shine. Your financial independence stops being hypothetical and it starts to feel real. You've set up your foundation and then you have continued to grow. So now your first milestone in your 40s is to become financially unshakable. I'm talking about 12 months of reserves.

33:42So you truly have a strong foundation and you can take some risks if they pop up. We're done with credit card debt. We're done with student loan debt. The only debt that you have is a low interest mortgage payment and you have real financial resilience. Milestone number two is high level investing. We're not guessing, we're executing. You have created an investment philosophy. You have crafted a strategy and you're following it. You're not taking stock tips or investment advice from your best friend's sister's boyfriend's brother's girlfriend. You're doing it based on your information and your research and your feelings about investing.

34:21And you're doing it consistently. Milestone number three, compounding takes over. This is a huge shift. Your money grows faster than your efforts, than your contributions. So start tracking your net worth in addition to your spending. Watching it grow can be fascinating, especially when the compounding kicks in. I clearly remember the year that our net worth grew more than our income for that year, working 40 hours a week. That was really powerful. That was really, really fun. Miles step number four, build real optionality. You don't have to quit. You just have to be able to quit. And being able to means thinking about what you're doing after you no longer work at the current job.

35:10Milestone number five, harvest what you planted. This is the decade where your career or business should matter. Your 40s are not the time to figure it out. Your 40s are the time to get paid for figuring it out earlier. Milestone number six, now we're starting to optimize for taxes. We're putting the right assets in the right accounts. We are choosing investments with tax efficiency in mind and future tax obligations in mind. My also number seven, we are aligning our money with our lifestyle design. What are you actually building towards and working towards? What is it that you want? In your early 40s, you're starting to think about life after FI so that as you reach financial independence, you can make better choices about, do I quit or do I keep working for a little bit longer?

36:02Do I want a totally different job? Do I want to travel the world? You start setting yourself up for your life after you have retired. Milestone number eight is knowing your fine number, your true fine number based on your spending, based on your projections for what you want your life to look like after you have reached financial independence. Milestone number nine, you're designing your exit. Even if you don't take it, you're starting to think about how you are going to exit the workforce. And milestone number 10, you're feeling inevitable. Financial independence is inevitable and your relationship with financial independence is very comfortable and you are looking forward to it.

36:41And in your 40s, your net worth milestones baseline is between$500 ,000 and$750 ,000. dollars. Strong is between one and 1.5 million and exceptional is 2 million plus. I think the theme for your forties here is, is again, this, this, this concept of, you know, if your twenties are planning a foundation and your thirties are about accelerating that journey, the forties are really about mastering money. It's not necessarily about being super rich. It's about really having the mental models and playbooks all in place. So you feel super comfortable with exactly what you're doing, why you're doing it, what you want.

37:17and you have a clear finish line. So your 50s can just be about finishing the play. And I think that's what the theme for your 50s is gonna be here. It's gonna be about control and choice. And the theme is finishing the play. Mindy, you wanna take this one too? Yes, this is where money stops being about accumulation and now it's more about protection. Milestone number one is you've reached FI or you are so close you can taste it. Work becomes truly optional. I don't think that everybody has the goal of quitting, but having the ability to quit, the option to quit is so powerful. My also number two, you are shifting from growth to protection.

37:57You're shifting into bonds. You are truly assessing the risk level of your portfolio and your comfortability with that risk. I am currently totally fine with risk. I'm in some high risk options. I also have some lower risk bonds now, thanks to Frank Vasquez. And you're stress testing. You're playing around with it, seeing if your plan works. When we think about this concept of shifting from growth to protection, I just want to call out that there's kind of two themes that we're observing in end state portfolios. One is a good number of the FIA community are what Frank Vasquez calls hoarders, which he has a real problem with in there.

38:38He's a good friend of ours. He really calls this out. is a real problem with somebody who amasses, for example,$5 or$7 or$10 million and spends$100 grand a year. Because none of the rules that we're talking about with financial independence really apply in that situation. I don't think Mindy and I have any problem with that, the people who choose to pursue that. Great. You've accumulated more wealth. And if you're happy with the other spend, you can. But if you're going to go that route, then you can keep investing aggressively, right? Because you spend so little as a fraction of your net worth base that it doesn't really matter.

39:08We don't need all these rules of thumb and protection rules in our financial portfolios. And you can just grow for maximum legacy value or whatever it is that you want to grow for. If you are, however, closer to your FI number, let's say that you have two and a half million dollars and you want to spend a hundred grand a year, you want to retire in your fifties or sixties. Now we really got to be smart about building a diversified portfolio that can actually survive sequence of returns risk, right? Sequence of returns risk is the risk that the market goes down or inflation rises. or some combination of that happens right after you retire.

39:40And that really erodes the purchasing power of your retirement nest egg. And so you need to know where you're at in your 50s, I think, and understanding that and how you're going to mitigate that risk. Are you going to mitigate it by just becoming so wealthy that it doesn't evolve and spending so little relative to that wealth that it obviates the need for all of these traditional retirement rules of thumb? Or are you going to actually do the hard work of rewiring your brain from accumulation to decumulation and build a portfolio that is capable or that is supported historically in being spent to last a retirement.

40:12Well, thank you for expounding, Scott. We're gonna take our final ad break and we'll be right back with more after this. When's the last time you enjoyed checking your finances? Well, Monarch is trying to change that. Open it up and in a couple of minutes, you know exactly where you stand with your spending, your goals, your net worth, your investments, everything all in one place. And it goes wherever you go. Quick check in on your phone between meetings, or check the bigger picture on your laptop on Sunday night. Everything syncs, everything refreshes whenever you want. Use the code POCKETS at Monarch.com to get your first year of Monarch Core half off at just$50.

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41:24The thing that makes that practical now is Ethos, a platform that helps you find life insurance all 100 % online. Same day coverage, no medical exam. you just answer a few health questions online, up to$3 million in coverage, some policies as low as$30 a month. So building a two or three layer ladder that used to take a month of appointments is something you can knock out before your coffee gets cold. Get your free quote at ethos.com slash bpmoney. That is E-T-H-O-S dot com slash bpmoney. Application times may vary and rates may vary.

42:00Thanks for sticking with us. Milestone number three is having a real retirement plan. And I'm not talking about what you're going to say to your boss. I'm talking about how are you going to start accessing the funds that are in your portfolio? Cashflow models, healthcare. What are you doing for healthcare? How is social security going to come into play? And how are you going to take it? What is your plan for taxes and tax optimization? This is what you're starting to think of in your 50s, maybe even into your late 40s if you're closer to retirement in that decade. These are things that are going to have real consequences to your portfolio and your cash flow, especially if you're not thinking about them in advance.

42:40Milestone number four, be financially bulletproof. And to me, this means you are no longer investing in super risky things, or at least not a large portion of your net worth. If you want to invest in that latest TikTok stock tip, test it out with just a tiny little bit, but don't put the bulk of your net worth in something that could ultimately go to zero. My also number five is decide what work means to you. Some people get to financial independence, retire, and never work again. And other people decide, now is the time to start my small business. Now is the time to go and be a park ranger, which doesn't pay very much or doesn't pay what you were making before.

43:24What does work mean to you? Not everybody wants to quit working and then never work again. Some people want to continue, but in a different capacity. They want to work part-time. They want to do things that pay little or nothing. They want to experience different ideas. So decide what work means to you. My also number six, design your life, not your portfolio, but your life. What are you going to spend your days doing? And this honestly is again, more early fifties and late forties than the end of the road. You want to be figuring out what you're going to do well in advance. My also number seven, have a purpose plan.

44:01Most people fail retirement because of their emotions, not because of their finances. They weren't adequately prepared. And And if this feels like I keep harping on this same subject, it's because I do. You need to know what life after FI looks like for you. My also number eight, understand what enough looks like to you. If your goal is to amass a portfolio of$2.5 million, that's your goal. And oh, I'll just wait till I'm 3.5. I'll wait till I'm 5 million. I'll wait till I'm 10 million. Have a realistic goal and understand where enough stops. And milestone number nine, exit your 50s with full agency.

44:42You've got everything under control, your finances, your time, your intentions. Everything is yours to do with as you please. That's what you've been spending the last 30 years creating or 20 years or 10 years. That's what you've been doing this whole time is to create the life that you want. The last milestone here, milestone 10, is I think at this point, if we're going to actually retire and we're going to actually live off our financial portfolio, I think it's time to construct a full, real, high quality professional financial plan. You can DIY this, you can use AI agents, or we recommend talking with a financial planner, not just any financial planner.

45:21We bias the search towards financial planners who do not charge AUM fees and who do not receive commissions for selling investment or insurance products. So I think that we would recommend at this point that You either build this plan yourself or get a flat fee financial planner or an advice-only financial planner. A flat fee financial planner may have the advantage of also being able to manage your money for you, which is maybe not something you want to do in your 50s, but you may want them to do that in your 60s, 70s, or 80s. That may be a really smart choice. And so you may want to begin thinking about that in terms of what is your professional financial planning going to look like at this point in time when the stakes are highest because we don't have income generation to fall back on to fund our lifestyle.

46:04So that's the last milestone here. And if you're interested, you can go to biggerpocketsmoney.com slash CFP. We have a partnership with Domain Money and one of the CFPs there, David Jackson, who is doing my personal financial plan as well. They have to offer a flat fee model with tiers based on the complexity of your situation. biggerpocketsmoney.com slash CFP if you're interested. We believe that some good baseline targets for folks looking for financial independence would be$750 ,000 to a million dollars if you're looking for lean financial independence, $1.25 to$2 million if you're looking for a traditional financial independence, and$2.5 million or more if you're looking for financial independence that's beginning to bump into that chubby fire range, allowing for more middle or upper middle class annual spending.

46:49All right, Scott, the big takeaway here, your 20s are all about momentum. Your 30s are about acceleration. Your 40s are about inevitability. And your 50s are about choice. Money isn't the point. The point is freedom. And money is the tool that you use to buy your freedom. And I'll also call it that freedom is a feeling as much as it is numbers on a page and the optionality that that money buys you. And so what you need to feel free may differ dramatically from the numbers that we've put out in today's episode. We use them as placeholders because it's helpful, we think, to have benchmarks and hard numbers to compare something against.

47:22But they're by no means what may work for you. You may want or need much less or much more than the numbers here. and you can adjust your timeline accordingly. We can and have and will find many examples of people who start late and crush targets on this list, people who start early and get their way ahead of time, and people who are doing just fine and haven't hit all of these numbers because they don't command a huge income and are loving life and thriving. So there's room for everybody and everything in between all the items that we discussed here. This is just one or two people's idea of what good could look like across the decades for people working to achieve financial independence.

47:58Absolutely, Scott. And this was a lot of fun to do this episode with you. Thank you for bringing your point of view to the 20s, 30s, 40s, and 50s. And to our dear listeners, do you want more personal financial information? Follow us on Instagram, Facebook, and YouTube at BiggerPocketsMoney, or head on over to our website, BiggerPocketsMoney.com, to sign up for our weekly newsletter. And you can also find free resources, calculators, and templates to accelerate your personal finance journey. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the BiggerPocketsMoney podcast.

48:32He is Scott Trench. I am Mindy Jensen saying be sweet, Parakeet. I'm skeptical of a lot of financial products, but life insurance isn't one of them, at least not term life. For the vast majority of you listening, term life is simply the right answer. And the smartest way to buy it isn't one big policy, it's a ladder. Your need for coverage isn't flat. It declines over time. You've got a 30-year mortgage, a couple of young kids, maybe a spouse mid-career. In 15 years, the mortgage is going to be smaller and the kids are almost launched. So instead of buying one giant 30-year policy you'll overpay for, you stack a few, say a 10-year, a 20-year, and a 30-year layer.

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49:40Questions about what comes next, how to think about the life you're building around your wealth, not just the wealth itself. Most people find that they don't have anyone to talk to about that part. James Keefe spent 20 years in pharmaceuticals building toward that stage. When he found Long Angle's community, something specific resonated. Here's what he said. It's a community of primarily first-generation wealth builders. We all feel like we've gone through some sort of rite of passage. You lend trust a little sooner with that. It's clearly a group of people that also care about you as a person.

50:08Long Angle is a vetted community of 8 ,000 plus entrepreneurs, executives, and investors, mostly self-made, all navigating the same complexity on both sides of the financial equation. Membership is free for those who qualify. Apply at longangle.com slash money. That's longangle.com slash money.