Some of my closest friends and me, watching Matt complete one of his milestones (graduating from UC Berkeley)
Milestones are great. For me, they are a signpost; something to strive for; a measure of my will and efforts. And, of course, there is that feeling of sweet satisfaction when you get to cross a milestone off your list! The following is a list – in no particular order – of milestones that I would like to accomplish in my 20s.
Note: because these are milestones for my 20s – not life goals – they are primarily financially driven. I’ll make a life goals list soon.
1) Graduate from a Tier 1 University – in progress: estimated graduation from Harvard in 2013
The benefits of a college/graduate degree are obvious: further your knowledge base, greater career options, networking opportunities, etc. Several certification programs that I’m interested in, as well, have a degree requirement, so I don’t have much choice. Another personal, yet important, side reason for me is that attending a great university is very important to my family.
2) Get rid of all bad debt – complete: credit cards paid 11/2010, no current loans
My interpretation of bad debt is those assets that depreciate in value. Examples of bad debt include credit cards, car loans, personal loans, etc. Assets that appreciate, like your home, can be considered good debt and are not included in this milestone.
(I did not include my car lease as bad debt because my company pays for it. If that changes, it will be added to my list of bad debt.)
3) Finance a dream vacation… in cash – complete: trip to Greek Isles paid 05/2011
At the time I didn’t know I was saving for a dream vacation so I won’t claim credit for planning this particularly well. I did, however, prior to deciding to go on the trip, estimate the trip costs to ensure that it could be financed in cash!
In general, I would recommend that your dream vacation fund be budgeted in advance. No cheating by borrowing from your Emergency Fund or any other savings account. Pick a place you want to go, estimate the costs, and start setting aside whatever you can every month. Before you know it, you’ll be on your way. I found American Express’ Travel Planner pretty helpful, but for some real travel tips be sure to check out Joanna’s Guide to International Travel Planning (she’ll post it here this week).
4) Make my first investment mistake – complete: investment in a friend’s business venture 01/2010
Sir John Templeton said, “The only way to avoid mistakes is not to invest – which is the biggest mistake of all. So forgive yourself for errors and certainly don’t try to recoup losses by taking bigger risks. Instead, turn each mistake into a learning experience.”
My first financial mistake, for example, cost me $15,000 dollars and was one of the stupidest decisions of my life. Since then I have come up with investment guidelines to prevent the same mistake from happening again. It is my hope that the knowledge I learned will save me from losing far more in the future.
5) Create a budget/manage cash flow – complete: budget 01/2011, cash flow 05/2011
Just like no business should operate without financial statements (cash flow, profit and loss, etc), neither should you. It’s important to make sure that you are spending less money than you’re earning, while still setting aside some cash for retirement, dream vacations, your Emergency Fund, or any other fund you may have. I use American Express’ Money Manager so that I can view my cash flow and ensure that I’m following my budget. There are also free tools like Mint that provide the same functionality if you don’t have an American Express account.
6) Learn to negotiate – in progress: I’ve gotten pretty good at negotiating but still forget to utilize the skill
The art of negotiation can save you hundreds if not thousands of dollars a year, especially when making larger purchases for yourself or your business. Sometimes the result of the negotiation isn’t a monetary discount, but an upgraded room or rental car instead. I’m by no means advocating haggling, just polite bargaining. If produce or meat seems a day or so old at the grocery store, ask for a discounted rate. If you’re comparing rental car companies, choose two and force them into a bidding war. You get the point.
7) Establish multiple revenue streams – in progress: my current side hustles consist of investing in the stock market, financial consulting, and college advising
Establishing multiple revenue streams is the goal I find most important on this list. The last several years have shown that few jobs are as secure as we all thought. If you only have a traditional 9-5 job and get laid off, you just lost 100% of your income; having multiple streams of income mitigates this risk. In addition to security, multiple streams of income are cumulative and often multiplicative. My current side hustles haven’t had a multiplicative effect yet because they cater to different markets but I’m working on fixing that.
8) Break an 800 FICO Score – in progress: current score is 760
Having excellent credit entitles you to the best credit card, insurance, mortgage, and car loan rates. Even if you don’t carry a credit card balance, having a sufficient credit score is often needed to qualify for the best rewards programs. Basically, excellent credit means creditors will offer you the highest loans and most rewards at less cost to you.
9) Build an adequate Emergency Fund
One of my favorite bloggers, J Money from Budgets are Sexy, is always stressing the importance of having an Emergency Fund. Following his advice about having a separate savings account for a rainy day has really helped me out. Last year my roommate moved out and left me with an early move out fee of $2500 (that sucked!). If I didn’t have an Emergency Fund I would have had to charge my credit card, which would then be subject to interest, making my situation even worse. My goal is to have at least 6 months worth of expenses (roughly $10,000) saved up in case of any unforeseen bumps in the road.
10) Max out IRA and contribute up to employer match in 401(k) – in progress: maxing out my IRA
Compound interest can be sweet (depending on which side of it you’re on). Say you get your first job at 22 and start investing $5,000 a year to your IRA. Assuming a 10% return, you would have $2,002,238.89 at age 60.
Now let’s say at 30 you start investing an additional $5,000 a year in your 401(k) and your employer does a fixed 5% match. Assuming the same 10% return, you would have an additional $949,952.98. Add that 401(k) saving to your IRA savings and you have a whopping $2.95 million to retire with. Guess how much you had to invest to get that much? Yeah… only $340,000. Pennies compared to your return.
11) Save for a down payment on a house
When I graduate, or maybe sooner, I want to buy a house. The kind of house will depend on my financial situation but I’d like to make at least a 25% down payment. Why you ask? Because it’ll save me a bunch in interest. Just to set a goal let’s say I’ll be in the market for a $250-$300,000 house, making my down payment $60-$75,000. Really not going to enjoy saving for this one…
12) Start a college fund
I am very thankful that I was able to go to college without having to take out student loans and I would like my children to have the same opportunity. I don’t know how much I’ll invest in a college fund during my 20s because I don’t plan on having children till my late 20s, but I figure the sooner I can start setting aside money the better.
RJ Weiss from Gen Y Wealth suggests using a 529 College Savings Plans for “tax efficient” investing. Your contribution and earnings grow tax deferred and can be withdrawn tax-free if used for qualified expenses. Qualified expenses include tuition, room and board, fees, and supplies (books, software, computers, etc). I’ll probably start investing in a 529 College Savings Plan after I knock out some of my other savings goals.
13) Get my doctorate
While financial success is important to me, I believe my desire for further knowledge will lead me to pursuing a doctorate in economics after my MBA. I’m not sure if I’ll still feel this way in three years, but it’s definitely a goal of mine for now.
14) Start my own company
My ultimate career goal is to start a company that delivers to shareholders while having a higher purpose than revenue. My company will be my contribution to the world and it’s my hope that it lasts and continues to do good far after I’m gone.
15) Invest $1 for every $1 spent – the 50/50 Rule
The 50/50 rule is that for every dollar you spend, you should invest an equal amount. In my opinion this is better than the typical “pay yourself first” rule. Paying yourself first has you focus on increasing your income (x) if you want to spend more money (y). The 50/50 rule, in contrast, suggests that there is another variable to consider: savings (z). Under this rule’s logic – regardless of income – you would need to save more if you want to spend more. Implementing strategies like the 50/50 rule, among many others, will be key in helping me reach milestone #16.
16) Reach a 7 figure net worth
This was actually my first financial goal. As long as I can remember (since before high school), I’ve wanted to make my first million before turning 30. It’d be pretty sweet if I could cross this goal off the list at 25. Gotta work those side hustles :)
So there you go – 16 milestones for my 20s! Regardless of whether I reach some or all of these milestones, I’m sure striving to complete them will keep me in the right direction. In the comments section please share any milestones that you’ve found helpful in gauging your success or keeping you on track.
Filed under: Personal Finance