The Money Milestones No One Tells Young Adults About
For many young adults, financial success feels tied to major purchases: the first house, the first new car or the vacation that proves you've "made it." But experts say the earliest signs of lasting wealth might not make as big of a splash. More often than not, they come from the financial decisions you don't make and the money you choose not to spend.
Here are some money milestones young adults may not know about but should prioritize.
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Forget the Flashy Milestones — Focus On This
Ryan Maynard, a certified financial analyst (CFA), certified financial planner (CFP) and managing partner at Vaquero Private Wealth, pushed back on the idea of milestones saying, “Building wealth is not something that happens to you at certain checkpoints. It comes from setting goals and staying accountable to them, year after year.”
That said, if he had to point to one, he said “savings rate” is more important than income.
“I've met people earning $150,000 who will never get ahead, and people earning half that who will be fine."
Building a Financial Cushion Before Chasing Bigger Goals
Jacob Bayer, a CFP and founder of Jacob Bayer Wealth Management, agreed with the savings rate as a key indicator and added another milestone is “the cash-flow cushion that's not being spent by the end of the month,” which can build an emergency fund.
This fund keeps people out of the cycle of living paycheck to paycheck and prevents small problems from becoming bigger problems — like debt.
“It changes a flat tire from a crisis to simply an annoyance,” Bayer said.
Start small, like $1,000, and work up from there, he said.
“Saving this amount will allow your debt to not increase with each surprise and will enable you to save for other things."
After that, Bayer said young adults should focus on “unglamorous milestones,” including “going a month where no credit card was used to help pay the bills, going a month living off last month's income ... and finally being free from consumer debt.”
Not Doing Something With Your Money
Some milestones are simply establishing the financial habits that separate people who steadily build wealth from those who earn more. Maynard pointed to a milestone “almost nobody celebrates,” — the one where “you get a raise and your spending stays where it was.”
Many people also fall sway to lifestyle creep by default.
“Choosing to bank the difference instead is one of the most powerful moves a young earner can make,” he said.
Similarly, another milestone that nobody celebrates, but should, is “The first time the market falls hard, and you don't sell,” Maynard said. “That tells me more about someone's long-term outcome than any account balance will. Everybody's plan works in a good year."
Consistently Paying Down a Credit Card Bill
Another milestone that doesn’t get much play is paying your credit card bill in full for three months in a row, according to Robbie Hyman, author of the recently published “The Money Savvy Teen.”
"This simple habit … indicates you've found a way to ignore the nonstop barrage of advertisers' messages. It indicates you view yourself as more than a 'consumer,' a derogatory term we should all reject, and that you've found more productive ways to spend your time than mindlessly spending your money,” Hyman said.
Given that the average Gen Z credit card holder today has more than $3,000 in credit card debt, Hyman said, managing to pay off their entire card balance month after month, is “one of the best predictors that they're on track to financial well-being."
Protecting Your Future
As young adults move into later life stages, the milestones evolve beyond saving and investing. Maynard pointed to two: buying a home and estate planning.
Before buying a home, Maynard said it’s important to know your regular monthly spending.
“Most people have never looked. You can't judge whether a mortgage payment fits until you know what it's competing with."
Young people tend to defer estate planning documents “because it feels like something you handle when you're older,” Maynard said. “But if you have kids, naming a guardian is the most important document you will ever sign, and it has nothing to do with money."
Being Consistent
Wealth isn't built by checking off a predetermined list, as Maynard pointed out. The milestones that matter most, and often fly under the radar, are the ones that reflect consistent behavior and lead to lasting financial security.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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