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We all have memories of special financial milestones: maybe it was the sparkle in your eyes when you saw your first paycheck after getting your first job or when you saved your first $10,000.
But what do the experts think? What are the main goals we should achieve? To find out, GOBankingRates spoke to Steve Case, financial and insurance advisor at InsuranceHero.
Contrary to what some people believe, an important milestone is not necessarily becoming a millionaire or getting that first six-figure job. Having helped many people over his long career, Case said that his most successful clients are not those who had big goals; Rather, they are the ones who have figured out the basics and are comfortable.
What are the basic key milestones? Read more to find out.
eliminating high-interest debt
Eliminating this type of debt is the first and most important milestone, Case advises his clients. “Whatever you build while you bear it (debt) works against you,” he said.
According to a study conducted by Wealth and Mental Health Policy InstitutePeople who struggle with debt are more likely to face mental health challenges than those without debt. The same study also states that debt makes it difficult to remember bills and account details, which further increases stress.
Simply put, eliminating high-interest debt frees you up to pursue other goals instead of keeping you tied down. Or as Case put it: “Paying off high-interest debt starts here.”
Build a true emergency fund
Now that you’re free to save, the next milestone is to build an emergency buffer. Life can take unexpected turns and if we are not prepared, it can sting. It could be anything: illness, being fired from a job, divorce or a once-in-a-lifetime pandemic like we haven’t seen in a long time.
While standard benchmarks suggest three to six months, the COVID-19 pandemic lasted much longer. Given the high cost of living in today’s economy, people often underestimate how much they need to save. The bigger your emergency fund, the better.
Transition from survival to wealth creation
At last we have reached the best level. You have successfully taken the burden of debt off your shoulders and have also built an emergency fund in case something goes wrong. Now is the time to turn your finances into something bigger and better: money.
The case presented the creation of assets as a transformation from day to day and month to month into “something that stands”. That could be “pension contributions or getting on the property ladder”, both of which point to the same change.
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 helps you move toward long-term financial security.