11 Financial Milestones in Life to Celebrate

When the alarm clock sounds in the morning, you begin a series of tasks: getting up and dressed, making coffee, heading to work. And it's likely your tasks don't end until you drop into bed that night. In all that busyness, you can easily forget to celebrate the bigger tasks you complete -- milestones like buying a home or paying off debt.

Here are 11 financial milestones to get excited about now -- either because you've already checked them off the list or because you anticipate achieving them in the future.

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Your first paycheck -- whether from a babysitting gig or a full-time job -- marks the beginning of your journey toward financial independence. You have created value by applying your knowledge and skills. That's a formula you can repeat, and on a progressively larger scale.

Earning money teaches you a lot about spending money, too. You had to do something to earn that paycheck, and the effort involved might make you more conscious of your spending choices. You could spend your paycheck on a new outfit and a fancy dinner, for example. But you might think twice about it, knowing you must work 40 hours to replace that cash.

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Whether you're saving for retirement in a 401(k), IRA, investment account, or all the above, your first retirement contribution is a big deal. That initial deposit has the largest growth potential of any contribution you make going forward -- because it will be invested longer than any later contributions.

Your first contribution also defines the timeline for your retirement savings plan. Start saving at a young age and you'll have a long timeline. That means more growth potential and more flexibility to invest more aggressively. Start saving later and you'll have to contribute larger amounts to reach the same end goal. You may also have to invest more conservatively to minimize volatility as you approach retirement.

There are several reasons to celebrate buying your first home. You probably had to save a bit to make it happen, for one. And that roof you're putting over your head should appreciate. Also, if you choose a conventional mortgage to fund the purchase, the principal and interest part of your payment shouldn't change for 30 years. That spares you from rent inflation.

As you pay down the mortgage and the property appreciates, the value of your asset increases. You can tap into that value by downsizing, refinancing, or taking out a reverse mortgage. Or you could simply enjoy your senior years with no home payment.

Experts recommend an emergency fund balance sufficient to fund three to six months of your living expenses. Reaching that goal can take 10 years or more of regular contributions to a cash savings account.

Once you fill up your emergency fund, you have a good layer of protection against financial disasters like job loss, health scares, car accidents, and lawsuits. Rather than reach for a credit card or 401(k) loan to cover these disasters, you can take the money from your cash account. You'll have to restart your cash deposits after the withdrawal, but that's an easier outcome than years of credit card interest or having to rebuild your retirement account.

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Generally, you can maintain your lifestyle in retirement by saving and investing 15% of your income for most of your career. But the reality is that a 15% contribution rate is something most of us work up to. If you can't swing 15% today, plan on increasing your percentage annually until you reach that milestone.

Once you get to a 15% contribution rate, use a compound interest calculator like this one to project your savings growth until retirement. That will tell you if you're on track to meet your savings goal with the 15% contribution rate going forward, or if you need to continue increasing your contribution rate for now.

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Credit cards can help you earn a good credit score. They can also help you out of a jam when you don't have available cash. But credit cards can also be destructive to your finances.

The problem is the ongoing accrual of interest charges at a high APR, combined with low repayment requirements. The balance you roll over from month to month keeps generating interest expenses until it's fully repaid. That increases the cost of goods you paid for with the credit card. The ongoing interest accrual also consumes a chunk of your monthly expense budget.

If you've ever repaid a sizable debt, you already know that debt repayment is something to celebrate. Bringing that balance down to zero turns off the interest expense machine and frees up cash flow for other things.

Reaching a target retirement savings balance is one of life's more challenging financial milestones. It can take decades of disciplined financial choices to get there. The first hurdle is to save consistently, no matter what. The second is to invest those savings and stay invested over time.

Staying invested is one of the more powerful actions you can take to build wealth. Moving in and out of the stock market tends to drive your returns much lower. This happens because investors naturally want to follow the tide -- which means selling when share prices are low and buying when share prices are high.

If you stay invested, on the other hand, you take advantage of the market's long-term growth trends. Those trends, averaging about 7% annual growth after inflation, can go a long way to helping you retire comfortably.

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Collecting Social Security, like saving for retirement, has a long lead time. To qualify for Social Security, you must be 62 and have worked at least 10 years or be married to someone who has. (If you are divorced, you may qualify for Social Security on your ex's work record if the marriage lasted 10 years or more.)

A 10-year work history won't get you a big benefit, though. Social Security calculates your benefit amount by averaging your highest-paid 35 years of working. If you worked less than 35 years, the missing years are included in the calculation with zero income. That pulls your income average and your benefit amount lower.

Claiming Social Security early at age 62 also limits your benefit amount. You don't qualify for your full benefit until you reach FRA, which is somewhere between 66 and 67. Prior to FRA, your benefit can be reduced by up to 30%. If it makes sense for you to wait until FRA to claim, you'll be rewarded with higher income for the rest of your life.

Mortgages today are historically cheap, so you may not be in a hurry to pay down that balance. Still, there's a lot of comfort that goes with owning a home, free and clear. Having no home payment can be a game changer for your retirement budget, too.

One mistake that can put a mortgage payoff out of reach is habitual refinancing. Refinancing for a lower interest rate can make sense. But refinancing for a lower payment at the same interest rate may not. Often, the payment can be lower only because the refinance extends the life of the loan. If you have 25 years of repayments left and you refinance into a 30-year mortgage, you add five years to your payoff schedule. That's five more years of interest expenses, too.

Turning in your final resignation at the office is both exciting and scary. You've worked and saved for decades, and now you have the freedom to decide how you spend your time. On the other hand, you may not be sure on day one what your finances will look like going forward.

Three financial wild cards for retirees are income taxes, healthcare expenses, and inflation. If you're still working, you can take steps to prepare for these unknowns. You can give yourself tax flexibility by saving to a Roth IRA or doing a Roth IRA conversion. For healthcare, save to a health savings account (HSA) if you are eligible. The HSA offers tax-deductible contributions plus tax-free withdrawals for medical expenses. And you can hedge against future inflation with reliable dividend stocks and TIPS, which are Treasury securities that are indexed to the Consumer Price Index.

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Most savers view required minimum distributions (RMDs) as a negative. These are IRS-mandated, taxable withdrawals you must take from your 401(k) and traditional IRA starting at age 72.

But you can take a positive view of RMDs. Think of it this way: RMDs only affect your normal withdrawal practices when you don't already need those distributions to pay your bills. That means you have extra wealth on your hands -- and that is something to celebrate.

Also, it's not the end of the world if the IRS requires you to take RMDs you don't need. You can reinvest the money in a taxable account, create college funds for your grandkids, or donate it to a cause that's important to you.

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Don't let your major financial accomplishments go uncelebrated! Your first paycheck, your first RMD, and everything in between are all markers on the journey to financial independence.

No doubt you deserve a few pats on the back already and there are more to come. Keep on that path of earning and creating wealth, and you'll be ready to realize all these financial milestones and then some.

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