Are You On Track to Become a Multi-Millionaire? (2025 Edition)

0:00Brian Preston:This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more.

0:42Brian Preston:Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. These are the money milestones you need to hit for financial independence. Brian, I am so excited about this because we love giving folks money milestones to track the progress on their wealth building journey. So what we've done is we've taken what we believe are the crucial checkpoints that you need to hit on your way to financial independence, and we're going to share them all with you today.

1:21These will also help you to know whether you're ahead of the curve, behind the curve, or right where you need to be. But remember, these are not milestones you need to hit by a certain time to be successful. These are goals to hit along the way as you build your great, big, beautiful tomorrow.

1:42Bo, milestone number one is going to surprise some people because it's just reaching the simple goal of being at zero.

1:49Brian Preston:Yeah, this may seem counterintuitive. You may be thinking, okay, well, we're talking about financial milestones on my path to financial independence, but you're talking about being dead broke. But what we're actually saying here is reaching zero is kind of exciting because what it means is you are not negative. You are not on the other side of the net worth equation. So just getting to a solid starting point is an amazing milestone for folks to hit. And to make the point, Credit Karma actually did some research and they found out that 31 % of Americans have a net worth of zero or below. And by the way, if you're younger, it's even worse.

2:25Brian Preston:Yeah, Gen Zs, 41 % of Gen Zs have a negative net worth and 38 % of millennials. So there are a lot of folks that are following into this camp of not actually being at zero that need to work towards this first net worth milestone. Now, there's good reasons here. I don't want to, because I don't think we're throwing shade because I get it, especially for younger people. There is a why to this. If you think about for younger generations, they just don't have a lot of assets. That's right. If anything, they've got things working against them with not having a lot of time as well. Yeah. The average first-time home buyer now is 38 years old.

3:01Brian Preston:So a lot of folks who are early in Gen Z or even millennials have not had time to buy the assets that a lot of people use for building wealth. So they don't have those assets. They don't have the time that they've had those assets or their money working for them so far. And if you want to know how valuable time is to this whole wealth building process. We thought a good case study where we could take young Yolanda, who's 25 years of age, and then we did Wise Wanda, who's 45 years of age. But here's the good news. They both started saving and investing at a very young age,$100 a month since age 25.

3:36I'd be curious to see what happens.

3:38Brian Preston:Yeah. So let's assume that young Yolanda is now age 30. So she started saving at 25 and she saved until age 30. And then you have Wise Wanda, who started saving at 25 and is now age 45. Let's assume that they both earn the exact same rate of return. They both earn an 8 % rate of return on their investments. Well, once you recognize that each of their ages, young Yolanda has been doing it for five years. She's saved about$6 ,000. Well, wise Wanda, as you would expect, has saved$24 ,000. She's been saving for longer, but that's only part of the story. The real amazing thing is when you actually look at what their money has done, young Yolanda's portfolio has turned into about$7 ,300.

4:22Brian Preston:But wise Wanda, hers has turned into almost$59 ,000. Even though Wanda had four times the savings, she actually had eight times the portfolio value because of time. Guys, that's why if you're young watching this, don't give up in those first five to 10 years because there's going to be a lot. You'll notice that for Yolanda, the contribution and the market value are almost combined. You're like, why am I even doing this? Do not give up because as wise Wanda shows you, time is your friend. While you're a billionaire of time, put that money to work and you're going to see that spread of what compounding growth can do for you is really going to build some amazing things.

5:03Brian Preston:Yeah, so not only are people not able to build assets at early ages and not only have they not had a lot of time, but they're also another headwind. There is a lot of debt, especially for younger people, millennial generation and Gen Zs, they're coming out with more debt than their older counterparts. Well, this makes sense because education has gotten expensive. So you got student loan debt. And then for a lot of people, I even fell into this, is that when you're building your first wealth building thing, which is your job, you're going to need transportation. And a lot of you don't have cash to go buy a car with cash.

5:37So you end up using, even if you're being responsible, like using 23.8 in our guidelines, you're going to probably run up some car loan debt as well.

5:44Brian Preston:So the math equation is pretty simple. If you have a small amount of assets and you have a lot of liabilities, you're going to have a negative net worth. So if this describes you and you're someone who's in this situation, how do you stay motivated? How do you get excited about actually being negative and working towards zero? Well, the very first thing is give it time. It's okay if your network is negative. What we care about is progression. What we care about is process towards a goal. So even though you might not be where you want to be right now, if you begin making the necessary decisions that you should be making over time, you'll begin to watch your financial situation.

6:24Also, and this is a heavy one for young people is focus on what you can control. Look, I get it. There's so much social pressure to go out there and live your best life by the nicest car you can do because they want you to essentially fake it until you make it. But as I've shared many times on the show, it's so much better to be rich than to look rich. So actually make good decisions. Be very selective on how much debt you're going to take on. If you're not scared when you take on debt, you're using this tool wrong. And then I want you to also optimize. The decisions you make, if you choose a moderate car, if you make sure when you're in college that you're choosing a degree or major so that you don't run up student loan debt that exceeds your first year salary.

7:09Optimizing these decisions can lead you to not only pay off the debt that much sooner, but hopefully start building wealth that much sooner as well.

7:18Brian Preston:And then another thing that you can do that will really help you stay motivated is actually track your net worth. And I know it may, again, it may seem counterintuitive. Guys, I have a negative net worth. Why would I ever want to see that? Well, if you don't know where you are today, how will you be able to assess next year or two years or five years from now, if you've made appropriate progress. So if you're not tracking it, start doing it. And what's amazing is this magical thing will happen in your mind where you will awaken the invisible hand of sound financial decision-making and you'll be slowly starting to watch, okay, I'm negative now.

7:50Brian Preston:Okay, but because of the decision I made, now I'm a little bit less negative, a little bit less negative, a little bit less negative to where then I finally hit zero and I can start working towards the second milestone. And that leads to milestone number two. And this one, not to steal Bo's thunder in his line. I get so excited about the first$100 ,000. Now, it's not going to be easy. This is actually, because like I said, there's a lot of quit along the road. You see a lot of people who will start saving and investing, they'll get motivated, but then they stop. This first$100 ,000 is hard. And I want to be clear, we're talking about$100 ,000 of liquid investments.

8:25Brian Preston:So this would be like IRAs, 401ks, taxable brokerage account, HSAs, those types of things. We want this first hundred, this milestone to be where you've actually got a hundred thousand dollars working for you. And so the question may be, okay, well guys, why is this significant? Why is this important? Well, behaviorally it shows that you've actually begun to master behavior. No one gets to a hundred thousand dollars of investable assets by accident. It's not just something that you trip and fall into. It likely took some work to get there. Yeah, it is. And Like I said, you're not hitting mastery of your money at this point, but you're definitely showing some signs that your behavior and your good things are starting to reach not a critical mass, but a point of where you're getting traction.

9:12And we actually have a case study or an illustration to make our point on this on why$100 ,000 is so important.

9:18Brian Preston:Yeah, it's wild. if you think about, okay, if you're someone who's going to save$10 ,000 a year and you're going to save$833 each month, and again, let's assume that you can make 8%, it will take you about 7.6 years, right at seven and a half years to build that first$100 ,000. But if you can stay consistent, you can continue doing that, it'll actually take you about 28 years to build to a million dollars. So again, this is just$833 a month. That first$100 ,000 took seven and a half years, 28 years to get to a million. Do you realize that path from$500 to a million took the exact same amount of time that it took you to go from zero to$100 ,000?

10:02That's the part. And this is something from a behavioral as well as getting affirmations that this is all worth it along the way. That 7.6 years is going to feel like a long time. But look at the good news. The second 100 ,000, meaning going from 100 to 200, was 4.7 years. We almost cut it in half. Then it was three. Then it was a little under three. Then it was two. And that's the part that just shows the power of compounding growth. And when you do hit some form of critical mass where your money is working harder than you do, more to come on that. The fact that it can grow from 500 ,000 to a million in less time than it took to get that first 100 ,000, that's the stuff that gets you excited.

10:41Just don't fall off the road to success because you get distracted by consumption decisions and all the other things when you're young. It seems like you have so many Americans that fall off.

10:52Brian Preston:Now, wealth building can be a slow process, but there are things that you can actually do to speed it up. And one of the biggest things you can do is your behavior, how you save, how you build. I mean, we already said that if you save$10 ,000 a year,$833 a month, it'd take you about seven and a half years to get to$100 ,000. dollars. But do you realize if you can save a thousand dollars a month, you can drop that time to 6.4 years to get to a hundred thousand. If you can save fifteen hundred dollars a month, now you can get to a hundred thousand in four and a half years. And if you can save two thousand dollars a month starting right now, it would only take you three and a half years to build up to a hundred thousand dollars.

11:33Brian Preston:So if you can put in the hard work, you actually have the ability to influence how fast your money grows. Now, remember, there's a theme here. Sticking with it and being consistent is going to be a big part, but then also remembering that your savings rate is more important than even what your rate of return is in the beginning. So if you can focus on, once again, what you can control, which is your savings rate and your behavior of sticking with it, you'll be that much better for it. And one of the things that will let you stick with it, again, is tracking. Are you doing an annual net worth statement?

12:05Brian Preston:And we have a tool that you can use at learn.moneyguide.com that you can literally fill out for last year, for this year, and for all the years moving forward so that you can track your progress. So you can see, okay, how far am I from that$100 ,000? How quickly can I get there? What things can I change to move there even faster so that once I hit$100 ,000, then I can move on to milestone number three. This is one of those, I call it a healthy habit. I'll even say for some of us, it turns into a healthy addiction, is if you actually do these positive behaviors, you're going to see these small wins start to stack, stack, stack.

12:40And then one day you're going to look back and go, how the heck did I get here? Trust me, this works. We have a whole client base of people who can give you. And when we do our wealth surveys, it shows this stuff works. You just have to stick with it.

12:54Brian Preston:All right. So milestone number one was getting to zero. Milestone number two was getting to $100 ,000. Now let's talk about milestone three. And this isn't a specific dollar figure, but it's more what your money can do. Because at milestone number three, your money is actually saving harder than you do. For example, if you save$5 ,000 this year, but your portfolio makes$6 ,000, your portfolio has added more to the pot in a given year than you did. Yeah, this is, I'll just tell you from a behavioral standpoint, like I said, we know that in the beginning it feels hard because you're just not getting a lot of feedback that what you're doing is actually going to pay off.

13:34But there will. You do this long enough. It is amazing. You'll get that quarterly statement and you'll say, wait a minute. I just noticed the change in value and the income combined is more than what I saved. It's going to feel really good. And I'm going to even say, and more to come on this, when you start comparing that then to what you make and you're like, oh my gosh. I see how money as a tool can be so valuable. So we want to just kind of give you some feedback on what are the numbers that's going to allow you to kind of have as a goal so that you can replace even what your savings rate is.

14:06Yeah.

14:06Brian Preston:If you think about this, if you have a portfolio worth $87 ,500 and you make 8 % on that portfolio, you will have made$7 ,000 a year. That's enough to max out your Roth IRA. So an$87 ,500 portfolio could max out your Roth IRA every year. If you have a portfolio that has$294 ,000 in it and it makes 8%, well, that's enough to max out your 401k at$23 ,500. So what's really fun is as you're tracking that net worth statement every year, you know exactly what you're saving. You know what your 25 % is. But then when you see that your portfolio starts knocking off some of those big milestones as well, it gets super, super exciting.

14:49Also, I think it's important. This doesn't mean you stop. I mean, because that's the thing. I don't want you getting excited in your 20s when you're starting to reach some traction and it's exceeding your Roth. And I don't want you to quit when your money is making more than you put in your 401k. This is supposed to be almost like a virtual high five where you look at your army of dollars and be like, we're in this together. It's not just me and my discipline anymore. It's now the traction point where the money is starting to work. And if you want to actually do this for yourself, because it's fun to see these illustrations, but you're like, well, where's that point actually that happened for me?

15:21We've got something pretty exciting. We've actually been working really hard behind the scenes. The content team's been working. We have a compound interest calculator. You got to go play with this thing. And what I like about it is it's going to motivate you because if you go to moneyguy.com slash resources, you're going to put in the variables. But then what's cool is when it gives you the feedback and calculates, it's going say, hey, but you know, if you do a little bit more, look at what this does for you. Just gives you some, some little nudges to keep you motivated, to keep you on point.

15:48So you reach your great, big, beautiful tomorrow that much sooner.

15:51Brian Preston:That's exactly right. Remember, this is a path. This is a journey that you're on and we're talking about milestones. And so the time between when your money starts saving harder than you do and milestone number four might be a decent chunk of time. So you want to make sure you're doing things to keep yourself motivated, like using the tools at moneyguy.com slash resources, because milestone number four, I think, is the one that gets the most press. This is the one that everyone talks about. This is the one that books have been written about. And it's when your net worth hits two common land, when it crosses over$1 million.

16:27Now, net worth is a big thing because net worth includes your investments, which we get super excited about, but it also includes use assets like your home equity. If you think about what your home is worth, subtract out what you have in a mortgage, you probably have some equity there. So it includes that. It includes your use assets like your vehicles, all those type of things. And it is something definitely to be celebrated that you cross into seven-figure status because this is what's interesting to me when I saw this stat. Only 9 % of Americans are millionaires. So if you stack up you with 100 people, there's only going to be nine people out of that 100 that are likely going to cross into millionaire status.

17:05Brian Preston:Yeah, it is pretty elite and pretty prestigious company. But there is something we want to make you aware of because there is something that has happened over these past couple of years. There was some great data that came out from the Federal Reserve that showed, okay, how has net worth increased across from 1989 all the way till 2022? And then what did financial assets, so basically net worth excluding home values, how much did that increase? And what you can see is a lot of the increase that we've seen in the late 20 teens and early 2020s is from housing prices increasing. It's not so much because people are saving more and building more.

17:46Brian Preston:A lot of people are now hitting net worth millionaire status simply because the value of their homes have gone up so substantially. Well, I felt like this needed a reminder. I remember when this data point came to me and And the headline was the tip net worth for Americans is up like 35%. I was like, hot diggity dog. All this hard work is paying off. People are doing what they're supposed to. And then I saw this stat. And if you look at the financial assets, that line is actually flat. Fairly flat. And I was like, oh, my gosh. So people aren't actually saving and investing more. It's just because we went through this inflationary period, their houses went up in value.

18:23That's a problem, guys. So we said, hey, we need to kind of educate you on the pros and the cons of your home equity. It's a good thing. Look, I'm proud of you for having that net worth increase because of home equity. But you should go into it with your eyes open so you don't get a false sense of security.

18:41Brian Preston:Yeah, so what are the benefits or the pros? Well, one, if your home equity has caused you to be a millionaire, congratulations, you are a millionaire. It is something worth celebrating. And in reality, you could access that equity. Maybe you could take out a home equity line or you could do some sort of cash out refinance. So it is there. And it very well could be a great planning tool if at some point in your financial journey, you plan on downsizing. So there are opportunities where you can realize the value of an appreciated primary residence. Those are the benefits, but it's not all benefits.

19:16Brian Preston:There is a downside to being a net worth millionaire with a majority of that being in your home. Yeah. I mean, here's the cons. You get to retirement and you're a seven-figure net worth, but you'd have to sell the house to use the equity in the house. So it turns out that you're now captured by this being a use asset because it doesn't feed you unless you take on debt or all these other bad decisions. And that's why I say, and I've already kind of alluded to this, it's the second con, is that it can give you a false sense of financial security. How many people do I hear in their 30s and 40s, they're like, I'm a millionaire.