Ramit Sethi's 9 Money Milestones Before 40: How Many Have You Achieved?

Understanding the Financial Milestones for a Richer Life

Money mastery isn’t always taught in school. Only 11 U.S. states guaranteed students access to a personal finance course in high school before 2021, according to Next Gen Personal Finance. This means that if you're an adult in the U.S., there's a good chance you were never taught how to manage your money. Ramit Sethi’s goal is to bridge this knowledge gap by providing clear, no-nonsense financial advice that anyone can put into practice today.

If you're in your 20s, 30s, 40s, or beyond, his nine money milestones are worth considering.

Milestone #1: Zero High-Interest Debt

Sethi’s first milestone is clearing all high-interest debt, defined as over 6%. Credit card debt is particularly problematic because it creates compound interest in reverse, counteracting any benefits from investing. Clearing this debt should be your top priority.

The fastest path to understanding your debt is by creating a budget that tracks all types of debt—credit card, student loans, mortgage, and personal loans—alongside their APR. Tools like Monarch Money can act as a personal finance concierge, connecting with over 11,200 financial institutions. This provides a top-down view of your bank accounts and investment portfolios, helping you get a handle on your financial situation faster.

Two common debt payment strategies are the avalanche and snowball methods. The avalanche technique focuses on paying off the highest interest debt first, while the snowball method targets smaller debts first to build momentum.

Once your debts are under control, you can use Monarch Money to actively plan and track your financial goals. Whether you want to build an emergency fund, save for a vacation, or make a down payment on a home, Monarch Money can help you set these goals and track your progress.

Another option is to consolidate your credit card debt using a Home Equity Line of Credit (HELOC), which offers a much lower interest rate than credit cards. A HELOC is a secured line of credit that leverages your home as collateral. LendingTree’s marketplace connects you with top lenders offering competitive HELOC rates, making it easier to compare multiple offers in one place.

Milestone #2: Have a Bullet-Proof Emergency Fund

After clearing your debt, the next milestone is creating an emergency fund. Sethi believes six to 12 months of core expenses provide true psychological security. This includes rent or mortgage payments, transportation, groceries, and more.

To grow your savings efficiently, consider a high-yield cash account like the one offered by Wealthfront. It offers a 4.00% APY, which is 10 times the national average. With full access to your money at all times, Wealthfront also offers fast and free transfers to internal and external accounts.

You can start with as little as $1 and begin stacking up your savings. This helps ensure you have a financial cushion during unexpected events.

Milestone #3: Reach Full Financial Automation

Sethi emphasizes the importance of automating your finances. This means setting up automatic contributions with your banking and investing accounts so a percentage of your income is automatically invested every time you receive a paycheck.

“The secret to getting rich is not about stock picks, it's not about crypto, it's definitely not day trading … it's boring, automated, consistent investing,” according to Sethi. He recommends investing at least 10% of your income into your 401k and/or Roth IRA every time you are paid.

Acorns can help you get started in less than three minutes. When you make a purchase, Acorns rounds it up to the nearest dollar, turning that $4.25 coffee into a 75-cent investment in your future. Acorns also offers a $20 bonus when you sign up with a recurring deposit.

Once you’re fully automated, consider diversifying your investments. A 60/40 split between stocks and bonds is a good starting point, but still exposes you to market risks.

Milestone #4: Reach Career Mastery

Your income is your most powerful wealth-building tool. Sethi notes that the majority of millionaires in America made it from having a stable salary and investing their money in low-cost investments. Building the skill of increasing your income is essential.

Milestone #5: Know Your Number — and Your Why

Sethi’s next milestone is about finding and understanding the bank account balance you need to retire and achieve your financial goals. Ask yourself what number will make you feel like you have enough to retire comfortably, retire early, or go on a dream sabbatical.

Knowing how much you need and why is the backbone of any strong financial plan. If you’re unsure, a financial advisor can help you get a better picture of your goals.

Milestone #6: Have a Shared Financial Dashboard

If you are married, or considering marriage, a shared financial dashboard is crucial. Sethi notes that there should never be one person in the relationship who controls all the finances, as that can lead to resentment. A shared dashboard means you actively look at your money together, share financial goals, and make long-term plans together.

Monarch Money offers tools for couples to track combined finances across multiple accounts, helping you create a shared dashboard to manage your full financial picture.

Milestone #7: You’ve Created Your “No” List

What don’t you care about? Cut it out ruthlessly. Sethi suggests writing down three things you don’t care about spending money on, then three things you want to spend money on unapologetically.

This means actively looking at what you spend money on by tracking spending for a few months. Make sure your spending aligns with the things you actually care about.

Milestone #8: A Simplified Credit Card Assortment

Sethi recommends keeping “one to two solid rewards cards.” Cancel those junk cards, including predatory credit cards with high APRs. Monitor your interest rates while paying off debt.

Milestone #9: Have Your Financial Vision in Place

Finally, Sethi recommends using everything you learned from the other milestones to create a financial vision that you revisit yearly. What you think you want out of life in your 30s will not be the same as what you might want in your 40s or 50s.

Update your plan annually to suit your current lifestyle and future goals. Ask yourself questions like, “What do I want more of in this coming year? What doesn't matter to me anymore? What do I want less of? And finally, what's next?”

For some, a big goal might include real estate investing to create generational wealth. Crowdfunding platforms like Arrived allow you to enter the real estate market for as little as $100, meaning even if you never want to own your own home, you can still benefit from investing in the market without the hassle of home ownership.