One Huge Step for Creating The FIRE Future You Desire! Create a Milestone Map P2

Milestone Map - A map of the world with a small business man with a briefcase standing on top of it.

Welcome to part two of creating your why, purpose, and milestones towards the financial future envisioned for you in the years to come!

In part one, we asked – “sacrificing instant gratification with the promise of a prosperous future – you begin to ask, why am I doing this?” From there, we answered the obvious question from a series on milestone map creation; why make a milestone map?

Where shall we go from here?

Prerequisites

Let’s begin with a few activities required to create a financial roadmap for you. We believe in you and know you can do what it takes to figure this out, as it requires a bit of work to begin!

State of the Kingdom

  1. List of all debt accounts with their interest rates
  2. List of all investment accounts
  3. List all other assets (cars, real estate, etc)
  4. Determine your net worth

Commit!

Read more on this important step in Committing to Financial Stability – Are You Brave Enough?

Strategies

  • Arresting Expenses
  • Increasing Income
    • Raises / Promotions
      • We’ve talked about a few skills that can boost your earning potential in step I of the roadmap: Build Consistent Income
    • Field
      • Are you in a great field or doing things you love? Awesome. We don’t mean to offend only to show that there are options for higher salaries based on switching your career field: 2017 25 Highest Paying Jobs
      • Some of the top jobs require years of service and career building, so if you are later in your career or just finishing a degree we don’t recommend going back to school (especially if taking on more debt) unless you truly think it makes sense for your situation
    • Side Hustles
  • The important thing to remember!
    • Whether it is through arresting expenses, increasing income, or maintaining your current state – the important number related to your financial independence is? Net worth!
    • We have two levers to change our net worth each month

Milestone map decision flowchart

To guide our fellow dukes on their positive personal monetary policy, we created a simple flowchart to use throughout the process outlined below. Where does it fit? It prioritizes the milestones to focus on as you continuously build your kingdom.

Milestone flowchart to determine which direction you will take for your financial kingdom.

The flow chart guides you to what we believe the most efficient approach from a pure numbers perspective towards financial independence. We have no quarrel if deviation happens for a compelling reason – comment or contact us for questions!

Create your map!

We are here to help, but only one person can do the work required in this part of the process. That person is you! I’ll be doing my best to guide you on the steps with the hope you will do your part too. By creating this map now, you can easily update it as life changes and with your “why am I doing this” in place, you have the motivations you need to stick to it. Build that kingdom!

Milestone Map Step 1: Walking through the flow chart

Emergency Fund:
  1. No emergency fund? -> Determine the requirements for reaching the recommended level
  2. Contributing to 401(k) match
  1. Your company has a match -> invest into your 401(k) to receive that match!
    1. Deciphering the 401(k)
    2. Do you like free 401(k) contribution money? Contribute to your company match and get yours!
    3. Choose funds for your 401(k)
Pay off high-interest debt

Three approaches:

  1. Snowball method
    • Starting with the lowest of your high-interest rate debt balances, begin paying off the one with the lowest balance. Once that account is paid off, then use the payment from it and begin paying off the next largest, then repeat until the snowball has wiped out all high-interest debt!
  2. Highest interest
    • By paying off accounts with the highest interest, you will save money by paying less interest on the lower balance. Rank your debt accounts highest interest to lowest, begin by paying off the highest!
  3. Loan Pool
    1. We’ve discussed this option here: Average Student Loan Debt in the US = 30K! Find your third alternative solution & pay it off intelligently!

Based on your chosen approach, create a milestone in the order of the approach for each high-interest account. We’ve chosen six percent as the cut-off based on the stock market earning 7% average returns in the past, meaning you can earn more on investing money than paying off the debt if the interest rate isn’t higher than the returns.

Maxing out your retirement accounts

Create a milestone for each retirement account with the clarification of (ANNUAL). These accounts can be different based on your employment type (self-employed, salaried, part-time, etc.). Yes, this means you will need to max them out each year! It is worth it.

Tax-advantaged accounts are quite helpful for pulling the “cash in” lever mentioned above. Whether it is dividend investments in your Roth or index funds in your 401(k). Appreciation or income both increase your net worth while saving you tax from the big man!

Consumer Debt

We are huge fans of removing consumer debt from your life before focusing on brokerage accounts if you have a debt free goal. Why? As you know from The Great War of Debt – it has a lot to with peace of mind.

Look, we know this can be debated and we understand why. I’m in the camp of peace of mind because accelerating my outside brokerage accounts once those required payments disappear looks appetizing, further it will be a much stress-free life when you know that losing your job doesn’t mean late payments on those debts.

Is mortgage included here? An Answer to the Timeless Question, Should you pay off your mortgage?

If in agreeance – your next milestones will be the highest interest consumer debt accounts in order -> with the overarching goal of debt free if you are including your mortgage.

Brokerage Accounts and/or Real Estate

The milestones for you depend on what you believe in and what you want to do from here. It can be $$ invested in specific accounts or a specific dividend income each month. We will rely on you to decide, with the end goal of increasing your net worth through asset building!

Create these milestones and you’re almost there!

Last Milestone:
  • Net worth target
    • Determining your required net worth (assuming it is generating income, for example, stock returns via growth or dividends), then you can do simple math at the early stages of your journey, increasing the evaluation and developing your strategy as you learn more. The simple math is based on a general rule of being able to withdraw 4% of your assets without losing them based on a > return from historical averages. This means a 40K income would require 1 million in investments. The simple math: income * 25 = required net worth or investments.
  • Passive Income target
    • Instead of a net worth to determine your retirement status, using passive income to generate the required inflow of cash into your bank accounts to live off of can be an alternative milestone for you

Milestone Map Step 2: Write down smaller milestones to celebrate

If you have 3 high-interest accounts, then please celebrate the pay off of each one! Reward yourself!  If you have the 1 million-dollar investment goal from the example above, then celebrate reaching 100K, 250K, 500K, and 750K. By the time you get to 1 mill, it will just be another small goal on the list!

Develop these mini goals for each of the milestones created in step two. They are your check-ins, your time to adapt, or time to see how much you’ve accomplished and where you are going. It assists in prioritizing your life and spending habits, and upgrades. These are not just goals on a piece of paper, they are your life – the future you want. Make them count!

Map - Many people letting balloons go on a beautiful blue sky filled day in celebration of life.

Milestone Map Step 3: Determine your timeline

For each of the milestones you created in steps one and two, give yourself deadlines to achieve them by – it is up to you to keep yourself on track and honest. Based on your current situation, will these goals take a long time? It’s OK. Why? You have changed your focus and your path. You can side hustle to beat deadlines, but “doing something” beats doing nothing every time!

We can’t walk you through creating the timeline based on your circumstances, only recommend you take a look at yourself, your position, and realistically determine the time you need to step into the life you want. The best part about having the map determined – being able to adapt and change it.

Personally, I don’t know when I’ll reach the net worth required for me to retire yet. I do know based on my current kingdom state that theres a great change in two-three years my consumer debt will vanish. Maxing out retirement accounts and vanquishing debt takes work and sacrifice – this is my current obsessed focus and when it is completed; my current state will change. The next step for me will then be brokerage account investing, and then I will develop the next part of the plan.

Like Warren Buffet and Bill Gates said from the documentary we recommended – the one word for their success throughout the years? Focus. By writing a map and dictating your next goal (in accordance to the long-term dream), you have the opportunity to focus and complete; then, move on to the next one. Begin by knocking out milestone #1, then #2, and watch your net worth grow before your eyes!

Milestone Map Step 4: Define your next steps!

Based on the milestones created in step one, you now have the order in which your next steps will be executed. We recommend Mint and Personal Capital for tracking your accounts, with the addition of Excel or another spreadsheet option to track your goals.

Print out your milestones and put them somewhere you see often – seeing is believing, and believing results in action! Focus on the next milestone and dog on it – get that thing completed :).

Stay on the path!

The last note we wanted to reiterate – the importance of celebration + reinforcement. We commented on My Sons Fath’s Post to give our humble opinion on why we truly believe it is the process, not the results that make financial independence and investing so much fun (not to mention challenging)!! The screenshot is below for your convenience (click to enlarge).

This is one reason we love being part of the personal finance community. Having others feeling, writing, and sharing with each other gives us all the opportunity to learn and support!

Start traveling today!!

Congrats on completing step VII of our Build Your Kingdom road! In the future, we will have posts on creating an investment plan, analyzing amortization schedules, and sharing spreadsheets to help. These can be utilized to track and adapt your milestones with more accurate timelines, giving you the full picture of when and where you need to be! You have the map for your future financial travels. Start traveling today!!

As always, thank you for reading and we look forward to hearing from you in the comments below! Subscribe to our Pigeon Service to get new posts directly in your inbox!

One Huge Step for Creating The FIRE Future You Desire! Create a Milestone Map P1

Milestone Map - A map of the world with a small business man with a briefcase standing on top of it.

You’ve walked down VI of the XIII steps of the roadmap. Your army of greenbacks continues to grow and budgeting flourishes as a habit. You were brave enough to make a commitment for a better tomorrow and began investing into your 401(k). Emergencies are easily affordable for you – your credit has begun to reach new heights. With your foundation set, walls constructed, and roofing placed, your queen continues asking when will we be able to see through the castle to the world beyond?

“My dear queen, we have reached stepped VII. The workers will begin installing windows at once!”

Answer your why

As an elite of the land – sacrificing instant gratification with the promise of a prosperous future – you begin to ask, why am I doing this?

  • Why am I saving so much now instead of buying the BMW I’ve always wanted?
  • Why am I biking to work when I could be riding in said BMW?
  • Why worry about investing now, retirement isn’t for 50 years!?
  • Why am I reading this blasted blog with a silly metaphor trying to build a financial kingdom?

What’s your why?

We can’t answer this one for you. Being financially smart now in order to be financially stable later requires sacrifice. To continue making decisions that favor your future, one must have a purpose for doing so.

I can tell you why my path has been chosen this way. In the future, I want to do the following:

  1. Provide for my family and children
  2. Be a dictator of my time for projects that impact the world
  3. Mentor and inspire the next generations of America to achieve anything they want in the world
    • One of the most important pieces of being a strong mentor? Time. Time is hard to find when 40+ hours are scheduled for you each week!
  4. Travel to various places around the world, opening my family’s mind to new perspectives
  5. Live a wealthy life. Wealthy in good company, new experiences, and great relationships

Before creating new milestones and a map – you must define this purpose. When your priorities are challenged by the UAWs (Under Accumulators of Wealth), remember your purpose, then answer with a resounding assertion as you bypass their consumerism! Live with patience. You are destined to be a PAW (Prodigious Accumulators of Wealth) Master Duke ranking instead!!

Why make a milestone map?

The road to building one’s financial kingdom takes many years of time. Writing down long-term goals with smaller milestones keep us on the right path; also, it provides evidence of accomplishing them!

Here are four reasons we feel taking the time to create a map uses time wisely:

Direction

We’ve talked about a direction in the past, and still believe in it is one of the biggest personal finance motivating factors. It gives you the why and also the rough timeline, pushing you towards your desired kingdom’s outcomes. It lends itself to providing ACTION, instead of wandering around earth hoping good will happen to you. An excellent article to add to this perspective comes from one of our favorite bloggers: If You Want To Be Miserable, Broke, and Unhappy, The World Won’t Stop You

“There is a saying that, “Until the pain of staying the same becomes greater than the pain of change, you will never improve.”  It is one of the most succinct explanations for what psychologists call “intrinsic motivation”.  Nobody else can do it for you.  The only thing that works in the long-term is changing your heart so that the you make decisions consistent with your goals.” – Joshua Kennon

Do you truly want financial independence or want to make sure you always have food on the table? Prove it. Make your map with deadlines. Keep yourself accountable and take it one small step at a time!

Clarity

Can you answer the following questions?

  • How much money do I need to live the lifestyle I envision?
  • What net worth will allow me to feel financially safe?
  • At what age do I want specific salaries or net worths?
  • What are the 2-3 main reasons I want financial independence?

Easily answer them all? Awesome!! You already have clarity towards the money goals in life.

Unable to answer? Please take some time to this weekend with notebook and pen in hand. Start with the following:

Starting with the 20 years from now mark

What monthly income would give you peace by looking into your bank account, knowing you can easily pay all of your bills and savings goals, then use extra to do anything you dream of in your life. The amount that when you see green text in Mint each month, lets you take a deep breath and say to yourself “I’ve done it!”

Move on to 10 years

Reasonably, what monthly income can you generate per month 10 years from now? Would you be able to double that to achieve #1? Will you still be working? What is the salary you can be paid based on the career you will achieve? Where will the other income come to hit that monthly goal?

You can estimate your salary in 10 years (3% average per year) and side hustle income (or business). Do you need to figure out how to make more? Do you need to arrest more expenses to lower your FIRE number?

5 Years from now

Are you certain that you will be promoted within the next 5 years due to the work you’re doing now? Can you estimate the salary you will have? Estimate investment account contributions such as 401(k), IRA, or outside brokers.  Create loan amortizations on your current debt – can you pay it off before the 5-year mark? Do it!

Five years seems so far, yet the decisions you make today will start showing up in time. Personal finance goals test our muscles that say no to instant gratification often. You can always help accelerate them by doing something awesome like living in a camper to pay off 50K of debt in 11 months!

The point here I’m trying to make – use the decision flowchart (in post 2 of the series) to plot out your next moves now, creating that envisioned future in 5 years! Planning + execution pays more dividends than Hershey over the years!

3 Years from now

This marks a great milestone check up year. Are you on target for the goals you set 2 years from now? What about in 7? We understand these estimates can change due to life – no biggie. Plans are always subject to change – use this 3 year from now mark to take stock of where you are.

Is the promotion prospect still looking good? How are your debt payments or student loan accounts looking?

Make the changes that are required to adjust your budget or side hustles to get where you need to. Turn on BEAST MODE and grind. Do what you have to do! Make your dreams happen!!

1 Year from Now

What can you do starting today that will make you reach your financial goals, build your kingdom, and fortify your personal monetary policy?

Chris’s example:

One year ago, around this same time, I had enough! Enough of the student loan payment and car payments consistently taking down my greenback reserves. It was time for a change!

Talking with Jack and making a plan, it was decided. My Great War of Debt would begin at the beginning of 2017. What did that entail? It meant finding an apartment in the proximity of work and developing my wardrobe to prep for a shopping ban. It meant making a 5+year investment plan to realistically determine (numbers don’t lie) when I could end the war. It meant that for the next two years+ I would be making many sacrifices, so I could enjoy debt-free life later. Here I am, 7 months in, with only 2 new pairs of shoes (wedding attire) and ahead of schedule by 5 months (update to come next week).

Without a plan or a way to track my progress, I wouldn’t be eyeing it each month like a hawk. The motivation to accelerate it would not be knocking on my budget’s door. Each month I see how debt payments cause me to put some of my goals on hold. Still, I must find the balance to enjoy the life I’m working towards. I’m comfortable and confident in the decision all because, in five years, the fruition of my future will begin to be realized. It’s all part of the plan!

Why am I sharing this? Because as even Tony Robbins mentioned in his book – anyone can do it! Anyone includes you! All we must do is define what we want with some type of map, then begin traveling towards the final destination!

In post two of the series, I’ll be posting the spreadsheets talked about in this post along with our flowchart :).

Celebrations + Reinforcement

We beckon you to join us in having both long-term (20 years) mixed in with short-term (1 year) goals for motivation. Celebrations for smaller milestones should definitely happen throughout the process. In part two of the series, we’ll talk through creating number based goals. For example, paying off debt by X year. This should be followed by “take the trip I’ve always wanted to the grand canyon.”

No one can sacrifice their whole life without rewards. Incentive bias in psychology proves over and over the importance of having it. Incentivize yourself with an award; watch your brain continue to make the right decisions to achieve it!

Milestone Map - A picture of the Grand Canyon with a blue sky.

Prioritizing

Last, but certainly not least, prioritizing decisions in your life becomes much easier when you have distinct decision factors. It’s much easier to say no to an expensive bar + gambling night when you know that money will make you miss a goal on the map. Sundays become food prep day with your family instead of Netflix and relax, easing the “no I can’t make it to lunch this week because I prepared all of my food” response to work lunches.

Every single money decision has a direct correlation to the goals on the milestone map; making each decision weighable against the milestones you’ve created. Becoming the executive of your life leads to great confidence; it is a great feeling indeed.

Concluding Thoughts

Thank you for reading. In part one we explained what and why we recommend our fellow dukes to create a milestone map. In part two, we will walk through creating one – resulting in a milestone map for your family! We truly believe in doing this as you travel down the road, and hope to help create this mindset for you!

As always, thank you for reading and we look forward to hearing from you in the comments below! Subscribe to our Pigeon Service to get new posts directly in your inbox!

 

Committing to Financial Stability – Are You Brave Enough?

Stacks of money in a brown open suitcase.

Come hither to our next stop (III) on your road to building a financial kingdom, committing to financial stability! As a young duke, you’ve gathered your resources and created your budget to track your cash flow. These foundational steps have shown you are dedicated. ‘Tis the time to solidify this dedication!

Are you committed to financial stability?

Committing to financial stability means that you are willing to make sacrifices in order to meet your goals. It means you are willing to spend your time regularly to track and improve upon them. You spend brainpower and attention to grow your knowledge. Financial goals are life time goals. It’s like saying I do, promising to keep them for better or worse, in sickness and health, and being faithful as companies try to push you towards more consumption.

Financial Stability - A woman puts on the ring to her husband.

 

Are you ready to change your life? Are you committed? Will you say I do for a better life as you design your empire?

Why should you commit to financial stability?

Typically speaking, would you get in your car and drive randomly without any direction or end destination in mind? What if you were to get in your car, and every 3rd road, you take a left or right turn. If you did this, without stopping to get directions and not deciding on a destination through the day, what would happen? You would end up totally lost.

Now tell us, why do people wander through their WHOLE life with no direction on where they want their finances to be?

They don’t have goals or milestones that help them reach their dreams. They never sit down to create the architecture they want to build in their life. We believe that people inherently want to be the best they can, but find it hard to follow the “Do something” principle. Learning a new skill, sitting down and thinking about where you want to be, or reading financial blogs is something you must do. Finding the right financial moves you should make is challenging. Financial blogging has taken off, leaving those looking to grow their knowledge in a Paradox of Choice. This is why we created this blog, to help people like ourselves with a roadmap. We require only you commit your time and effort as you build your kingdom.

Three reasons to commit

  1. Writing down your goals increases the likelihood you achieve them!
  2. Just like marriage, committing to your finances will help you stay on the right path as life temps you to veer. Both provide the fulfilling life you want and the happiness you desire!
  3. Long-term goals broken down into short-term milestones give us the motivation and inspiration to stay on track

How to commit to financial stability?

During the construction phase (step VII), we will help you create a milestone map. In your foundation, our ask is to commit from the overall objective perspective. It will help remind you WHY you’re making sacrifices and spending the time to achieve your dreams.

Three steps to say I do to your finances

  1. Decide on your objective
    • Examples:
      • Financial Independence
      • Debt free
      • Peace of mind
      • Live a wealthy life
  2. Retrieve your pen + pad
    • Write the following:

I, <insert name here>, fully commit myself to building mine own financial kingdom .

I shall make sacrifices, spend time learning, and use the energy required to build thy kingdom.

My main reason for this commitment is <insert your objective here>.

<insert signature>

  1. Place your written commitment in a place you will see it often as your reminder

You’re committed!

Congrats on completing the third stop! You have fully committed to achieving your future! We sincerely wish you success as you make mistakes and learn from them. We know that you can make a comeback when needed! We are here to help you as you build your kingdom!