The 7 Golden Milestones to Financial Freedom
We ended the last article ready to start on the 7 Golden Milestones to Financial Freedom. At its core, this is a checklist, and during my airline pilot days, checklists have often saved the day. My thinking is, why isn’t there a checklist like this for dealing with money? I’ve spent 5500+ hours flying, and over 17 years of learning the markets since I bought my first stock, but if I had to compare the two, money is so much easier than dealing with an airplane because you plug yourself in the system and after the initial setup, it takes care of itself. The adjustments are infrequent and relatively easy.
I have a lasting reminder of the importance of not missing a step in a checklist. At the regional airline, we used to have “ferry flights” where we’d usually fly an empty jet somewhere for scheduled maintenance. These were always a blast because the jet took off like a rocket ship without all those people and bags aboard. One day, we took off, rocketed upward at a steep angle, and heard a huge smash, crashing backward in the cabin.
Glancing back to make sure the plane wasn’t damaged, I saw a rogue drinks cart had somehow escaped from the galley sideways, turned, rolled halfway down the plane toward the back, smashed into a seat, and toppled over, sending drinks and snacks everywhere. The soda and beer cans had tumbled out, punctured, and were continuing their roll down the aisle like little garden sprinklers, hissing while they spewed liquid and foam everywhere. We called ahead for a cleanup crew.
Why did this happen? We didn’t have “secure the galley carts” on our checklist because it was on the flight attendant’s checklist. And we had no flight attendant, since they weren’t required for an empty flight. Usually they always left the carts locked away, but you can bet that after that, I always checked them.
Most of us have had our financial equivalent of a rogue drinks cart accident. As a First Officer (you might have called me a co-pilot) with the regional airline, I didn’t make much. That didn’t stop me from buying a shiny new Mazda RX-8 sports car with the racing modifications and an extended warranty. Altogether, it cost more than double my annual income when you included loan interest. I must have fallen for the pilot driving the sports car cliché.
The monthly payment alone was half of my paycheck. Then there was sales tax, sports car insurance, and racing tires that lasted 6 months, and I found myself flat broke, paying mostly for something that sat in the airport parking lot for 20 days per month.
Now I drive a Toyota Tacoma that is nearly 20 years old and love it more than the sports car, even though I could now buy one with cash, but I could only do that because I’ve been driving the old truck for a while now and it’s been giving me an advantage in the Money Games. It’s a paradox.
The issue was, back then, I had no checklist or concept of how to apply my earnings. Not anymore – below is the money checklist version of a lifetime of these kinds of lessons. Each one will be featured in future articles in more detail.
1. First Golden Milestone – Start Your Journey
The very first part of the path is the easiest one, because it’s right under your nose, but you have to be the revolutionary of your own life by taking the first click.
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2. Second Golden Milestone – Gather Your Capital
Like any good traveler, we will need to be light, adaptable, and complete while preparing for your journey. I will discuss how to take a jumble of accounts, passwords, paychecks, bills, student loans, obligations, insurance, taxes, and possessions and restructure them to be faster, transparent, painless, and automatic, so you realistically know where you stand at any given time.
The best way to stay the course is to begin tracking your scores over time in the Money Games, which I’ll demonstrate. Think of it like checking the scores for your favorite team, except your favorite team is your own family (and you hopefully won’t be booing other teams).
After seeing your score, you will find that you’d like to skip straight ahead to the Sixth Milestone and become debt free. I’ll offer the best ways to skip ahead, but depending on your situation, it may require some patience while the rest of the milestones take effect. Please don’t be discouraged in this milestone because change starts happening in the very next one!
3. Third Golden Milestone – Reduce Your Costs
These articles will feature discussions on how to reduce the expense of each of the most expensive recurring items discovered in the Second Golden Milestone: housing, transportation, food, healthcare, etc. Or, in my case, the sports car that I ended up selling. This is like unloading the weights from the backpack you’ve been carrying around.
4. Fourth Golden Milestone – Maximize Your Income
These articles will cover tactics and strategies for most importantly, doing the work you love, but also achieving an income that represents the best of your talents and skills, long-term decisions on education, and cost of living considerations. We will find the true value of your time and see how it can be used as a lever to move your income.
Time is worth more than money, because it gives you the ability to create things, or learn enough to offer something extremely valuable to the world. If a genie ever gives you 3 wishes, don’t wish for money, fame, and power. Those are short-term and way overrated. My recommendations:
1. End Suffering
2. World Peace
3. Manipulate Time
Before you ask, no, you can’t wish for more wishes. Haven’t you seen Aladdin?
Investing at its core is a simple concept. You’re simply taking what you’ve saved and putting it to work in businesses that generates a profit while you kick back and track their progress just like you’ll track yours in Milestone 4. After reducing your costs, you should start seeing a surplus that goes directly into your savings and is reinvested when it pays you.
This is a cause for celebration, as you’re now creating ownership where there was nothing. You can also invest in yourself through education or skills to unlock the next door of opportunity.
5. Fifth Golden Milestone – Guard Your Value
Most people might think that only the wealthy need protect themselves with hedges. However, this is a key lesson for anyone from a college student to a billionaire. The lesson is: It doesn’t matter how much value you create today, if it’s taken away in chunks or bit by bit for the rest of your life. That could be governmental organizations, shady money managers, a financial “aid counselor” at college, or the person who is suing you after a car crash. In our wise friend Warren Buffet’s terms, “Build your castle with a moat around it.”
6. Sixth Golden Milestone – Repay Your Debts
This milestone happens when you successfully drive all of your debt back to the fiery depths from whence it came. This is a huge relief and that stress evaporates after making it this far. I know, because I finally reached this milestone after paying off my student loans last year.
You’ll find that you can always train for any of these to increase your speed, but becoming debt free in Golden Milestone Seven is like the tipping point in the marathon. Without that backpack full of weights, you’ll accelerate toward the finish line.
7. Win Financial Freedom
When your investments pay you enough to cover your cost of living, you are financially free. You’ve then reached the break-even point, are no longer dependent on a paycheck, can provide for yourself by owning things that pay you, and anything that pays you more than your cost of living adds to the accelerating snowball. You are completely self-sufficient. Anything you’re doing at this point is better because you have complete flexibility and occupational stress is not even on the map. Financial Freedom is the finish line in the marathon. This is how you win the gold.
You’ll be able to navigate to any of these Golden Milestones through my categories:
1. Start Your Journey – Start
2. Gather Your Capital – Capital
3. Reduce Your Costs – Save
4. Maximize Your Income – Income
5. Guard Your Value – Value
6. Repay Your Debts – Debt
7. Win Financial Freedom – Freedom
You can work on any of the milestones at once. Drawing from my flight background, I’ve prioritized them as a logically ordered checklist to first put out any fires and stabilize the situation.
Remember when Clark Griswold planned on using his Christmas bonus to build an in-ground swimming pool? Now, it’s possible for some pool owners that money is no object, but in Clark’s case he committed the down payment on the pool’s construction without actually having the money before his bonus even arrived!
If he applied the principles we’ll discuss in Golden Milestones 2, 5, and 6, Clark might have considered that he lived in the cold northern climate of Chicago with a limited summer season. He probably already had a community pool membership available, supported by his own property taxes, with less liability, and with lifeguards and maintenance included.
Clark’s pool drama is a perfect example of taking a Golden Goose (his bonus) and stressing out after turning it into expenses and debt that he himself says that he can’t afford.
But why can’t we have the one step we talked about? This one sounds glorious:
1. The One Quick Cheat for Lazy Slackers
I’ve given this some thought and will prove to you in the next article that it is actually possible to use one quick cheat in certain circumstances. It falls under the 4th Golden Milestone – Maximize Your Income.
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