Measure Your Success Using These Milestones in Personal Finance

When it comes to money management, success can be measured in many ways. If it is personal finance, then it makes sense that the milestones be personal. Here are a few personal finance milestones that can help you gauge “where you stand today”.

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Before we begin, my book with PV Subramanyam, You Can Be Rich Too is available at a 50% discount (Rs. 198) for short periods of time this month as it was among the top 25 bestsellers in the last 3 months. Grab it now! Thank you for your support.  The book reached the top of three sub-categories and the top 156th  across all categories (see image below). May not sound like much, but not all authors are lucky to enjoy the trust and support from readers.

The following assumes that you have

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  1. adequate life insurance
  2. medical cover
  3. identified your goals, chalked up a strategy for each
  4. started investing

The milestones are in no particular order as we cannot say which arrives first.

1 Your Liquid Networth exceeds Your Life Insurance Sum

For example, if you are insured for er … one crore and your net worth that can be immediately liquidated – stocks, bonds, gold, funds etc. exceeds one crore.

No biggie. Should be possible in a decade with some systematic investing,

2 The investment amount required decreases!

We need to red-do the goal planning calculations each year with updated portfolio values and goal estimates. As your portfolio grows, at some point, you will notice that the investment amount needed from this point forward is lower than what you calculated last year and/or lower than the amount you are actually investing.

For example, if you are investing 10,000 per month for a goal, increasing say at the rate of 10% a year and if the revised calculation says, you only need to invest 8,000 a year (increasing at 10%), then that is a huge relief!

milestone - Measure Your Success Using These Milestones in Personal Finance
Photo by: T Hino

3 Your Equity holdings exceed your term insurance sum

With luck – the residue of discipline, your equity holdings will have a value greater than your life cover. Sure, it may not last, but it is a great feeling while it does. Give it time. It is possible.

4 Your Retirement Planning can be set on auto-pilot

This is related to (2). As your portfolio grows and the investment amount decreases, there would come a time when all you need to do is – nothing. Your current equity holdings and your EPF monthly deduction should be enough for your to retire normally. Give it a little more time, and even that EPF deduction will not be necessary (although it cannot be stopped).

5 You can live off Your Net Worth for a certain number of years

As mentioned here, Review Your Financial Freedom Portfolio in Seven Easy Steps, look out for two numbers measure in years.

The no of years you can generate an inflation-protected income if you were to retire today. This will soon be 5Y, then 10Y, then 15Y etc.

The no of years you can generate an inflation-protected income if you were to retire as planned (say 55 or 60). This will soon be 5Y, then 10Y, then 15Y etc.

These are the first steps towards financial independence. Read more: E-book: How to retire early in India.

6 The current cost of an undergraduate education matches the current value of your child education portfolio

If your kid is years from 12th standard, then you can pat yourself on the back.

You can make up milestones like these and watch your networth grow. All it takes is discipline and time.

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Amazon rank 30 Mar 2016 8 am 650x308 - Measure Your Success Using These Milestones in Personal Finance

 

Reader Quotes:

Gift it to your Friends and Relatives whom you care more. Already follower of Pattu and Subra’s forum. Ordered 4 more copies to give gift to my friends and eagerly waiting to read

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You can be rich too - Measure Your Success Using These Milestones in Personal Finance

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  • Ask the right questions about money
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More information is available here: A Beginner’s Guide To Make Your Money Dreams Come True!

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6 thoughts on “Measure Your Success Using These Milestones in Personal Finance

  1. I think of it this way:
    Step 1. Out of debt
    Step 2. Liquid funds worth 6-9 months of expenses
    Step 3. All insurances in place for everyone (this will not be required once you are financially free at step 9)
    Step 4. Careful assessment of exact amounts of assets and their distribution. This also includes inheritance which you may get (have the conversation with parents and make their will etc to get clarity). This includes, Real Estate, Gold, Shares, etc. It’s amazing how many people can’t say with any certainty something like: “I have 60% in real estate 20% in gold and 15% in equity, rest is cash”
    Step 5. Concrete steps to balance the allocation obtained above such that it suits your current and future goals. E.g. If you have/will have a lot of gold and less equity start moving from gold to equity.
    Step 6. Continued plan to adjust the asset allocation wisely with clear goals in mind. e.g. start a SIP
    Step 7. Clear plans/timelines to enjoy the wealth. Rich dead men/women are still dead, better enjoy before you die. Systematically rewarding yourself the fruits of your own wealth is bliss.
    Step 8. Financial freedom. Pursue your innermost goals and live your life with your own rules, not contingent upon your job or other external circumstances.

  2. Excellent post pattuji….
    Alternate to Milestone No:2 :-You can substantially advance your retirement age with same investment.

  3. Dear Mr Pattabhiraman,
    Thank you for your insightful articles. I wish i had known about all these factors before i quit my job.(I did make a rough calculation about how much money i needed to live on-without considering inflation etc, and just did it).

    However, better late than never. I am trying to salvage whatever i can now. (sort of like closing the barn door after the horse has bolted)

    Anyway, because of good samaritans like you, at least i am a bit more savvy when it comes to financial affairs, and atleast i am in position to inform the next generation, if not about investments, at least about sites like yours.

    Please keep up the good work.

    Regards

    M

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