Milestones Matter On The Path To Financial Independence

“Do you want cookies, or bananas and Nutella?”, she asked me.  “Yes”, I replied.  “Which one?”, she replied quizzically.

“All of the above!”

We were in a nondescript parking lot off the side of a major thoroughfare in Maryland.  Two box trucks gave us shade and spilled their contents onto the fold-able tables manned by friendly volunteers. 

We just reached the 50 mile mark of the ride.  Only 150 more miles to go…..

Many aspiring cyclists consider a “century ride”, meaning a 100-mile ride, to be a major achievement.  It is.  But in my usual “go big or go home” way, I decided about 5 years ago to try my hand at a double century ride.

That’s right, a one day 200-mile ride. 

For my Canadian in European friends, that’s 322 km in one day, riding a bike.  The longest stage in this year’s Tour de France is 230 km.  Those guys are soft.

When I signed up for the event I remember thinking “WTF did I just do?”.  200 miles, one day.  While training in the lead up to the event I would think about it sometimes and it just seemed impossible.  

Kind of like achieving financial independence.

Don’t Be Overwhelmed

If you’re striving to get to financial independence, you may be feeling very similar to how I felt after signing up for that ride.  Let’s say your target net worth is $1.5 million, and your current net worth is $40,000.  That difference might keep you lying awake at night thinking “How am I going to do that?”. 

I’ll tell you how – milestones and rewards.

In my 200-mile ride, the organizers did a tremendous job and had rest stops every 25 to 35 miles.  Each stop had tons of food, sports nutrition, and sometimes even the option for a leg massage to ward off cramps. 

I routinely ride 25 to 35 miles as part of my regular training, it’s a typical weeknight ride for me.  So the event essentially became a series of about seven or eight normal rides, each with a great break full of friends, cookies, and Nutella.  More often than not the cookies were actually dipped in the Nutella. 

To be honest, because of the reasonable increments between breaks, what seemed an insurmountable ride really wasn’t so bad in the end.  I mean, it still hurt, but it wasn’t quite as bad as I feared. 

Chop Up The Path To FI 

So it’s clear that milestones matter.  But how can you mimic this incremental strategy on your path to FI?  First of all and most importantly, you must track your net worth. 

I’ve used the same spreadsheet for over 22 years.  Apps work too, whatever floats your boat.  But just do it, it’s not an option. 

Then pick realistic and achievable increments.  This is key. 

In my example, the 25 to 35 mile rest stops made an epic ride seem very accomplishable in the end.  To get to FI, you should celebrate milestone numbers, since it’s a numbers game in the end. 

Maybe $50,000 increases in your net worth might be a good way to break things up.  But it’s important to pick increments that are achievable in a reasonable amount of time.  You don’t want to be going 5 or 6 years between milestones.

Even numbers are great, like celebrating the $100,000 mark.  But if your target is $1.5 million, you could try a different approach and divide that amount into 40 increments.  That comes out to 40 increments of $37,500.  Having that many milestones gives you more occasions to celebrate, and makes the distance between them more doable.  There’s always a light coming at the end of a tunnel to another celebration.

Next, reward yourself when you hit a target milestone.  Cookies dipped in Nutella might not be a good idea in this case, unless you’re somehow burning nine or ten thousand calories like I did on that bike ride. 

But reward yourself with something meaningful.  Like a date night with your spouse at your favorite restaurant, or a new video game.  Rewards allow you to celebrate and reflect, and more importantly keep momentum. 

Another thing I did at my milestones was to graph my net worth.  Seeing that line going up over time mattered to me and made an impact. 

Lastly, don’t just use incremental numbers in your net worth as milestones, there are plenty of other things to celebrate along the way that can make the journey seem that much more achievable. 

Here are some things to mark as milestones on your journey to FI:

• Spending less than you make 
• Maxing out your 401k 
• Maxing out all available tax-advantaged accounts
• Paying off all debts
• First year your investment returns exceed your expenses
• First year your investment returns exceed your savings  
• First year your investment returns exceed your income
• First year you ride your bike more than you drive your car (ok, this one is mostly for me to brag about again….)

When a seemingly insurmountable goal like financial independence becomes a series of milestone achievements you can focus on, it’s easier to get dialed in.  You’ll be less stressed and overwhelmed, and more focused on progress.  Each achievement and the rewards that come with it will give you the momentum to reach your goal. 

Then you can have the cookies and Nutella.