Ben Le Fort
Dec 18, 2018 · 6 min read
A person in a yellow rain jacket overlooks a fork in the road from on top of a hill.
A person in a yellow rain jacket overlooks a fork in the road from on top of a hill.
Photo by Justin Luebke on Unsplash

Once I discovered the concept of Financial Independence, I completely changed my entire outlook on money. I began looking at the “cost” of buying stuff I don’t need, not in dollars and sense but as a unit of time.

If I am looking at a $3,000 TV I don’t look at the cost of that TV as $3,000 I look at it as an extra few months added onto my working life. The opportunity cost of buying a $3,000 TV (that I don’t need) rather than investing that money over the next 25 years is nearly $20,000.

It’s not just the big-ticket purchases. Most people know that buying a big-ticket item will set you back financially. The small, “everyday purchases” can do just as much damage over a lifetime. Making two latte runs a day at the fancy coffee shop, could be costing you more than a quarter-million dollars and push your retirement back years.

I would argue that these small purchases that you don’t even notice are more damaging than the big-ticket items like a new TV. The fact that you don’t notice them means they provide no value to your life.

But the downside of looking at the cost of everything as a unit of time is that you can find yourself in a constant state of looking ahead. If the goal is the day you finally hit financial independence, your life can begin to feel like a sprint as opposed to a relaxed, leisurely walk.

Your financial life is not a binary. You should not view it as “I’ve achieved financial independence” or “my finances are a mess”. Most of us are somewhere in between these two realities (and if we are being truthful, probably closer to the former).

There are some very important “milestone” days on your way to financial independence that you should take the time to really celebrate.

1. The day you get your Sh*t Together

This is a day that will be different for everyone. This will be the day you decide to take your financial fate into your own hands. Here are some hallmark signs you’ve got your financial sh*t together.

  1. You know exactly how much debt you have, what interest you are paying and what day’s of the month your payments are due
  2. You are saving something (anything, even $1) each month.
  3. You know what an emergency fund is, why you need one, and you either have one OR are in the process of creating one.
  4. You’ve begun tracking your spending. I mean, you know where every penny you earn goes. You should be able to know exactly how much you spent at Starbucks last month.
  5. You’ve written out a list of your financial goals.
  6. You’ve created a budget that is reflective of those goals. HINT: If one of your goals is “get out of debt” and you are only making the minimum payments on your debt, throw out your budget and start again.

2. The day you pay off your “Bad Debt”

Debt is one of the more divisive topics of personal finance bloggers. The Dave Ramsey’s of the world are a bit militant about debt. They view the elimination of all debt (Including your mortgage) as the number one (and sometimes, seemingly only) financial goal.

My opinion is that for certain people who have mastered their money some debt is good and some debt is bad.

Good Debt: Debt that is attached to an asset that does not depreciate in value and ideally produces income.

Bad Debt: All other forms of debt

Here is my power ranking of debt ranked from the best to worst.

  1. A mortgage attached to a rental property that produces at least enough rent to cover that mortgage and all carrying costs associated with the property.
  2. Your mortgage on your home.
  3. A loan with a low-interest rate used as leverage to invest in stocks and bonds. With the caveat that the loan payment is not so high that you would not be able to easily pay it off if you had to.
  4. Student loans
  5. Car loans
  6. Credit card/other consumer debt
  7. Payday loans

Once you have paid off all forms of debt from 4–7 you should do a little happy dance. You are no longer “making payments” to make other people rich. If the only debt you have is from 1–3 on the list, you are officially on your way to milestone day number three…

3. The day you have a positive net worth

Add up the value of all your assets, subtract the value of all your debt. If that number is larger than zero do another happy dance, you have a positive net worth!

4. The day your Networth (Minus your Home Equity) is Higher than your Annual Salary

The final milestone day before full-blown financial independence is the day total value of your income producing assets are worth more than a year’s salary. No, I am not counting the equity in your home.

A lot of homeowners might be throwing up their hands and yelling into their computer screens right now. I understand why. You’ve worked damn hard to become a homeowner and to build the equity that you have.

I don’t want to diminish your achievements, but the fact of that matter is your home equity is about the most useless form of wealth there is. Why? Because it produces no income for you. Nobody is living off the equity in their home. To access the equity you have two options.

  1. Refinance your home (get another mortgage) or;
  2. Sell your house.

Both of these present problems. Refinancing your home by definition means taking on more debt, which reduces your equity (equity=assets-debt). If you sell your house, you still need somewhere to live. That means renting which will add a new, permanent monthly expense or buying another house, which also reduces your equity.

So while homeownership is an important aspect of your finances, I exclude it from the math behind financial independence.

So what do I include?

  • Cash
  • Real estate (that you don’t personally live in)
  • Stocks
  • Bonds
  • Bitcoin + other “non-traditional assets”

So if you make $80,000 per year and you have $85,000 in a combination of cash, stocks, and bonds do your biggest happy dance yet. That is a hell of an accomplishment.

Having a year plus worth of salary stashed away provides an incredible level of financial security. Assuming you spend considerably less than you make, which you would need to in order to reach this milestone, that will provide you would be able to get by for more than a year in the event of a job loss.

Equally important, once you hit that level of savings into income-producing assets, your wealth will begin growing at an accelerated rate. Which will put you on your way to the final milestone…

5. The day you Reach Financial Independence

In a previous post I defined FI as follows:

You have achieved financial independence when you’re passive income is able to cover all of your expenses in life. It is the point where you no longer need to work to get by.

If you require $40,000 per year in order to fund your current lifestyle and the income you receive from your investments is $40,000 or more you have achieved Financial Independence. It is the ultimate form of financial security. Some people also call it “FU” money because it allows you to live life on your terms, not based on what your finances will allow.

So what do you guys think of these five milestone days along the journey to financial independence? Are there any milestones I missed?

This article is for informational purposes only, it should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.

Making of a Millionaire

Stories about money, personal finance and the path to financial indepndence.

Ben Le Fort

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Sharing my journey to financial independence. For freelance inquiries reach me at

Making of a Millionaire

Stories about money, personal finance and the path to financial indepndence.

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