Last Updated on December 28, 2021
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” on the road to wealth. Before we begin did you get a chance to read the previous post: How to reduce risk in an investment portfolio
The following assumes that you have
- adequate life insurance
- medical cover
- identified your goals, chalked up a strategy for each
- started investing
The milestones are in no particular order as we cannot say which arrives first.
0 Think rich to be rich.
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. exceed one crore.
No biggie. Should be possible in a decade with some systematic investing,
2 The investment amount required decreases!
We need to re-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!
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 measured 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.
If you want a simpler thumb rule then for zero real return (return from investment = inflation) then if your retirement corpus = 25 times your current annual expenses (25x) then you can life off that amount for 25 years. So 5x will be your first mini-milestone. This is suitable for those who wish to quit salaried jobs to create startups. Then 10x then 15x –> 20x —>30x. Anything about 30x with at least 15 years worth of money in fixed income would be pretty awesome.
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 net worth grow. All it takes is discipline and time.
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation for promoting unbiased, commission-free investment advice.Use our Robo-advisory Excel Template for a start-to-finish financial plan! Now with a new demo video! ⇐ More than 1000 investors and advisors use this!
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 2800 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 675 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
My new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish mutual fund screeners and momentum, low volatility stock screeners .every month.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions, seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)Free android apps
- All calculators from our book, “You can be Rich Too” are now available on Google Play!
- Install the Financial Freedom App! (Google Play Store)
- Install Freefincal Retirement Planner App! (Google Play Store)
- Find out if you have enough to say "goodbye" to your employer (Google Play Store)