25 financial milestones you should reach by age 25

Millennials are often stereotyped as being unable to save for retirement, house ownership and other long-term goals because we’re glued to our phones and so obsessed with having fun. While those points may be true, millennials are also more aware of their financial situation than any previous generation.Let’s face it, the cost of living has increased drastically in recent years.

The average cost of rent in the U.S is above $1,200 per month (not including utilities), and the average student loan debt hovers around $25,000-$30,000. But that doesn’t mean achieving your financial goals is impossible; it just means you need to start saving and investing early on if you want to achieve those milestones before turning 30 or 40.

Checking off your financial to-do list by 25

If you’re 25 years old and have just $5,000 in your savings account, you will have to be extremely frugal in order to save up enough money to purchase a house. Houses are expensive, and the average home price in the U.S. is $355,000.

If you’re 30 years old and have just $5,000 in your savings account, you’ll have to work even harder to save up enough money for a down payment. At 30 years old, the average millennial has $8,000 saved in their savings account.

If you’re 35 years old and have just $5,000 in your savings account, you’ll be forced to put off purchasing a house even longer. Again, houses are expensive, and the average millennial has $16,000 saved in their savings account.

A 6-month financial independence buffer

For many, being financially independent means not having to rely on others for help. That could mean relying on yourself, or it could mean relying on friends and family to help you out in times of need.

If you’re 25 years old, you probably don’t want to rely on your parents for help when you need it. While that’s totally fine, it may cause some tension in your relationship.

The best way to avoid financial dependence on your parents is to have a 6-month financial independence buffer in your savings account. This means you have enough money saved up to support yourself for 6 months without having to find a part-time or full-time job.

You may not need to use your 6-month financial independence buffer, but having it there is a good way to avoid feeling like you’re a burden to others.

Mutual fund investments

When you’re 25 years old, you’re in your prime earning years. You may be making more money than you did when you were 20 years old, and you may have more expenses.

If you’re making more money, you may feel the urge to spend more on restaurants, shopping sprees, and vacations. However, if you want to achieve financial success, you need to direct that extra cash flow toward your mutual fund investments.

There are a few types of mutual funds:

• Balanced fund: This fund combines stocks and bonds to give you a mix of both risk and reward.
• Bond fund: This fund invests in government and corporate bonds. This is a relatively low-risk fund because it’s mainly cash-based.
• Growth fund: This fund focuses on growth stocks and is riskier than the balanced fund due to higher volatility in the stock market.
• International fund: This fund invests in stocks of foreign companies and is riskier than other types of funds due to differences in culture, regulation, etc.

Debt repayment

If you’re 25 years old, you may still be paying off your student loans. If that’s the case, you’re not alone—the average millennial has $25,000-$30,000 in student loans.

• That’s a lot of money to be working off when you’re 25 years old! However, the best thing you can do is to start paying off your debt as soon as possible.
• If you have $10,000 in debt and make monthly payments of $200, it will take you 5 years to pay off that debt.
• If you have $10,000 in debt and make monthly payments of $800, it will take you 3 years to pay off that debt.

A fully funded retirement plan

When you’re 25 years old, you may feel like you’re too young to start thinking about retirement. However, your early 20s is actually the perfect time to start saving for your retirement. If you start saving for retirement when you’re 25 years old, you’ll have plenty of time to make up for lost time and save more.

You may be tempted to start making extra payments on your student loans, or you may be tempted to start investing in mutual funds. However, you should make extra payments on your student loans and start investing in mutual funds as well.

While it’s important to make extra payments on your student loans, it’s even more important to start investing in a retirement plan.

If you start investing $500 per month in a retirement plan when you’re 25 years old, you’ll have $72,000 saved up at age 65. If you start investing $500 per month in a retirement plan when you’re 30 years old, you’ll have $48,000 saved up at age 65.

There are plenty of milestones to celebrate on your journey to adulthood, and each one helps you to build your financial future. If you’re in your early 20s, there’s no better time to start building your financial future than now. If you start saving and investing now, you’ll be ahead of the game when you’re 30 or even 40.