I think it’s important for you to have money milestones, some kind of target that you want to achieve with your money. Maybe it’s getting the first $100 into your emergency fund. Maybe it’s paying off your debt or getting to positive net worth. Perhaps you want to ensure that your portfolio kicks off enough money to pay for your current standard of living. They can be things you want to accomplish in the next six weeks or they can be priorities that will take you years to fulfill. However long it takes you to attain your milestones should not dissuade you from pursuing them. Like they say, from the smallest little seed did the mighty oak grow. Start today.
Whatever your milestones are, it’s a good idea to pat yourself on the back once you’ve achieved them. After all, you worked hard to achieve a goal and attention should be paid. You should thank yourself for the effort and discipline it took for you to achieve your financial goals. If you hadn’t committed, then it’s pretty likely that you wouldn’t have met your money milestones.
Back when I was a kid, I bought myself a reference book about money called Personal Finance For Canadians by Kathleen H. Brown. This 552-page book was one of my very first personal finance books and it led me down the rabbit hole of financial planning. Next up – The Complete Idiot’s Guide to Getting Rich by Larry Waschka. This is one my very favourite money books. The latter had a section about the 5 levels of wealth. You attain Wealth Level Two when your portfolio’s returns matched your contributions. In other words, if you’re contributing $1000 to your portfolio every year, then WL2 starts when your portfolio generates an annual return of $1000.
As I was updating my spreadsheets*** this week, I realized that I’m now at Wealth Level Two. I’ve hit one of my money milestones. My portfolio’s return is more than my contribution. Hooray for me! It took me a blood long time to hit this stage, but I’m very proud of myself right now. To quote one of my favourite little people, “I did it!”
I’ve made money mistakes over the years – see here, here, and here. Due to my many money mistakes over the years, it’s taken me since 2011 to achieve this particular milestone. That’s 12 years! Had I been smarter or more insightful, I don’t think it would’ve taken me this long. I can’t bear to think about how much further along I would be if I’d started investing when I bought the book…last millennium! That said, I’m still pretty proud of myself. I took the initiative to get started and to commit to bi-weekly contributions to my non-registered investment account, no matter what. Whether the market was going up, going down, or going crazy, I stuck to investing a chunk of my paycheque every two weeks. As my salary went up, so did the investment amount. I continued to live below my means. Most importantly of all, I never pulled my money out of the market, even when we experience that gut-churning stock market plunge in 2020 and the more recent volatility of 2022.
Please do not think that I didn’t face temptations to spend my investment contributions on today’s wants instead of my long-term goals. I did, but I know myself. I knew that if I didn’t rely on automatic transfers, then I’d likely spend the money on stupidities. Instead, I put technology to work and lived on whatever was left. Automation is my friend. Once I had an automatic transfer is place, it would take a serious threat to my survival and/or livelihood to persuade me to halt the automatic contributions to my future. Concert tickets, travel, a newer vehicle – all of these could be paid for with whatever was leftover after my long-term goals were funded. The Fear of Missing Out and You Only Live Once philosophies did not guide my investing decisions.
When I first read those two reference books, I was a young adult who didn’t come from money. My parents worked hard, but they were not rich. They taught me how to save money in a savings account and how to buy Canada Savings Bonds. They invested in a few stocks so that I learned a little bit about the stock market and how to earn dividends. The rest of it mutual funds? Exchange-traded funds? Real estate investment trusts? Tax Free Savings Accounts? Canadian Deposit Insurance Corporation? Other investment vehicles? Real estate investing? My parents definitely lit the fuse when it came to investing for my future. However, it was up to me to learn about the other stuff on my own.
It took quite a long time, but so what? The time was going to pass anyway. Today, I’m seeing the results of my discipline. It’s paying off. I’m hitting my money milestones, and that makes me smile with happiness and joy. My life is good. I have everything I need and most of what I want. A few smart choices in my past has allowed me to create a good financial life for myself. I’m attaining my money milestones, and there’s a good chance that I’ll attain the rest of them too.
You can do this. First, identify your money milestones. Secondly, pick an amount of money to direct towards achieving them. Thirdly, set up an automatic transfer so that your money is whisked away before you get a chance to spend it on not-your-money-milestones. Fourth, never stop reading about money. Learn, learn, and learn some more. Fifth, congratulate yourself for starting your financial journal then do so again each time you attain your money milestones.
Will it be easy? Probably not. There’s an entire industry captained by the AdMan and his trusty sidekick, the Creditor, which exists solely to part you from your cash. Even without AdMan and Creditor, inflation is currently kicking everyone in the soft bits so income doesn’t go as far as it used to. Here’s a little tip from me to you. It’s never easy to save and invest. There’s always a reason to put it off.
Don’t let that stop you. If you can only start with $1, then start with $1. Work your way up from there. Get in the habit of saving and investing your money. Once it’s investing, leave it alone to compound. Save – invest – learn – repeat. Time will take care of the rest. Your first money milestone is to start.
*** By the by, I have to admit that I love spreadsheets. They’re rewarding, a visual reminder of how far I’ve come by investing consistently. One of my spreadsheets tracks all the dividend payments that I receive. As you know, I’m a big fan of dividend-paying exchange-traded funds. I’ve invested a good chunk of my portfolio in VDY and XDV. I have other dividend-payers as well, individual stocks mostly, but these two ETFs are the powerhouses of my portfolio.