The contemporary saver navigates a landscape filled with challenges, setbacks, and occasional victories. Concerns over tariffs that increase consumer costs, inflation reducing purchasing power, and other financial pressures can leave many Americans in a tight spot. However, alongside these challenges, there are significant achievements in the financial journey of salary earners and savers. From opening a new 401(k) and benefiting from employer match programs (missing out on which can be a financial misstep) to purchasing a home, these milestones mark progress.
These major financial milestones can be life-altering, even if they seem minor at first or their financial impact is overshadowed by the emotional thrill of achievement. In reality, aiming for these milestones will help your financial journey progress from one success to another. These milestones serve as checkpoints, much like in a video game, marking important stages in your life’s journey. Unlike in gaming, these milestones have lasting and significant consequences, either beneficial or detrimental if missed.
Landing Your First Full-Time Job
The first significant milestone for many is a change in their employment status. Part-time jobs are often a rite of passage for younger workers, primarily those in their teens and early 20s in the U.S. By age 25, most Americans transition to full-time employment. Part-time work provides a steady income stream to support other pursuits. High school and college students, as well as other young individuals, often engage in part-time work while exploring other interests.
Eventually, the financial demands of adulthood require more than part-time work can support. To move out, buy a car, or enjoy more than basic vacations, transitioning to full-time employment is often necessary. While full-time roles may lack the flexibility of other job markets, they provide essential stability and financial growth.
Crafting Your First Budget (and Sticking to It)
Whether you’re 15 or 50, the importance of a budget is immeasurable. Some individuals go years without a budget, while others engage with budgeting immediately and regularly update it to ensure financial responsibility. The first time you analyze your expenses, it might be stressful, and you might overlook minor expenses. However, completing your budget is a crucial and transformative milestone. A budget provides insight into where you may lack financial management skills. For instance, the average American spends approximately $219 monthly on subscription services, many of which go unnoticed.
You may find limited room for discretionary spending in your budget, which can be disappointing but provides a clear financial picture. Budgeting allows you to prioritize your wants and needs intelligently. Sticking to your budget is the key to this milestone. Exploring your finances without following through is insufficient.
Opening Your First Retirement Account
Starting to save for retirement may initially seem inconsequential. Opening an account and making a first deposit may only slightly increase your balance. However, this first step is more impactful than it appears. Time is your greatest ally when saving for the future, and retirement accounts benefit from compound interest more than other investments. Generally, money in a retirement account is inaccessible until age 59½. Opening a 401(k) or Roth IRA at 18 means your money grows exponentially over decades. With a reasonable return rate in growth assets like index funds, your money can double roughly every seven years, resulting in nearly six doublings on initial deposits. For example, $1,000 deposited at 18 could grow to $64,000 after six doublings.
Saving for retirement is essential for every American. Starting in your 20s, around the transition from part-time to full-time employment, means modest monthly contributions suffice. The earlier you start, the more significant this decision becomes, ultimately the most crucial financial choice you’ll make.
Launching and Growing Your Emergency Fund
An emergency fund is a savings tool every American should prioritize. It doesn’t need to be overwhelming; a healthy start is $1,000, and a fully-stocked reserve should cover at least three months of essential expenses (groceries, mortgage or rent, and utilities). Having this financial safety net is crucial for daily life. Emergencies can strike suddenly—illness, injury, or job loss. Having funds available can be the difference between weathering the storm or succumbing to pressure.
Establishing this buffer is one of the most important tasks early in your career. Its importance grows as you age without it. Your emergency fund shouldn’t be invested in volatile assets like the stock market. Instead, a high-interest savings account offers growth through interest payments, helping combat inflation and providing a small income stream.
Getting a Credit Card
Opening your first credit line is a major milestone. However, it can be a slippery slope. Increased spending power can be a blessing if managed wisely but can lead to wasteful spending and poor budget management. Getting a credit card is a step toward future borrowing opportunities, setting the stage for larger needs like a home or car loan.
While some advise avoiding debt products, reality often requires their use, with responsibility being key. Your first credit card may be secured or a basic offering with no rewards and a low credit limit. Regardless, it launches new financial opportunities if managed well.
Paying Off Your Credit Card Debt Entirely (or Finding Balance with Your Credit Accounts)
Various life circumstances can hinder good credit management. Whether due to recklessness or not, many carry debt and pay interest. 60% of Americans carry a credit card balance, making it a widespread issue. Despite its prevalence, most Americans aspire to a debt-free lifestyle. Some loans, like mortgages and student loans, require long-term repayment, but credit card debt can be eliminated quickly. Living within your means and reducing expenses to prioritize credit card repayment saves money long-term.
Everyone’s circumstances differ. Some eliminate credit card debt and stop using cards, while others find balance by using cards routinely and paying them off monthly. This can accrue rewards points for vacations, large expenses, and more. Responsibility is crucial when managing this task.
Landing a Raise at Work
Many employees receive routine cost-of-living adjustments. These small increases differ from a significant raise resulting from hard work or role changes, which can be a financial boon. A salary increase opens new financial opportunities for the present and future. The first substantial salary jump is a major life moment and a responsibility that can shape the coming months and years.
A raise can enhance funding for crucial budget items, such as home upgrades, increased savings, and more. However, more income can lead to increased discretionary spending. Living below your means remains vital, especially when financial circumstances improve. Lifestyle inflation is a real threat, especially for those experiencing a cash flow increase, potentially leading to painful readjustments or opportunities for savings and lifestyle improvements.
Buying Your First Home
Many Americans aspire to homeownership. Buying a home provides an asset with dual benefits: a customizable living space and a tool for long-term financial growth. Building wealth isn’t easy, but owning a home offers a stable asset with historically increasing value.
The transition from renting to owning is significant, often overshadowed by the emotional excitement of owning a home. Homeownership is a responsibility with substantial financial value. While it limits mobility, a temporary market downturn can make selling a bad decision if relocation is desired. However, the long-term financial benefits and average annual property value increase of nearly 5% (since 1992) outweigh mobility concerns.
Reaching Your First $100,000 Savings Hurdle
Retirement savers aim for milestones, with the $100,000 mark being crucial. Achieving it requires long-term dedication and commitment. Crossing from five-figure to six-figure savings is impactful psychologically and financially.
Compound interest makes reaching the first $100,000 challenging. Subsequent $100,000 milestones are easier and quicker to achieve. A moderate investment pace may take eight years to reach this goal, with continuous contributions and a focus on wealth-building tasks. The $200,000 target takes about five years due to the principal value’s contribution alongside deposits. Each milestone becomes progressively quicker to achieve.
Rebalancing Your Portfolio for Competent Diversification
Many early investors focus on familiar assets to start their stock market journey, using personal knowledge for smarter decisions. However, concentrating all capital in familiar areas lacks depth and longevity, as one market correction can reveal. After experiencing a market downturn, investors often diversify their portfolios. Some sell certain positions to buy new assets, while others shift focus on new contributions. Both strategies have roles in well-managed portfolios.
Diversification and spreading investments across sectors and assets are key to good investment management. For newer investors experiencing a downturn, this shift signifies growth as a trader. It’s crucial for improved financial independence and a well-funded retirement.
Setting Up College Plans or Saving for Other Needs Your Children May Have
Those struggling to manage their finances can overlook additional tasks, but those with healthy debt management, adequate retirement investments, and a well-funded emergency account often pursue financial opportunities benefiting loved ones.
Many parents aim to help their children succeed, often by creating financial support for their transition into adulthood. Some children plan to attend college, and investing in a 529 plan can ease educational expenses. Starting young offers the longest saving timeline and 18 years of compound interest for easier expense management. Other children may pursue different paths, like starting businesses or investing in personal growth. Setting aside money for trade school, a first home, or other significant expenses can make a big difference for parents supporting their children’s futures.
