6 Financial Independence Milestones You Need To Know

When you are on a journey to becoming financially independent it is fun to have milestones to look forward to. There are a lot of milestones that you could derive on your journey, but I see only 6 real financial independence milestones that are the most important. I have done a lot of research on these milestones and many others to see what is really important on the journey and what isn’t. The biggest thing that I have come to realize is that you can’t really state a specific number as a milestone for financial independence.

The 6 financial independence milestones you must know are:

  1. Achieving a positive net worth
  2. Achieving a net worth as large as your income
  3. Reaching “Barista FIRE”
  4. Seeing your investments earn more than you
  5. Hitting your FI number
  6. Gaining abundance.

We all have our unique journeys and we all have different paths that we are going to take to get there. It is because of this we will also have different numbers that we intend to reach. I believe the 6 milestones below should be able to apply to nearly everyone trying to reach financial independence no matter what path they are taking.

1. A positive net worth (Finally)

There is an ever growing population of people with negative net worths, it is quite scary, to say the least. You get a negative net worth for being in more debt than you can pay off. Today everyone has debt for everything. Debt for their home, their car, their college education, credit cards, etc. If you are in debt right now more than what you can pay off in this immediate moment, then you have a negative net worth. A lot of other people do too so you would not be alone. However, this is your first milestone on the way to financial independence. Getting out of debt and getting into positive net worth.

I would much rather have a $1 net worth then be in the hole $30,000 and I’m sure you would too. Treating debt as if it is an emergency is what you need to be doing if you have it. If you are on the path to financial independence then milestone number one is to eliminate debt, this will allow you to then focus on investing and getting to the end goal. If you already have a positive net worth then congratulations, you can move onto the next milestone as your goal. If you want to know the best and most efficient way to pay off debt, I wrote about it in this article.

2. Achieving a net worth as large as your annual income

The next big milestone is having your net worth equal your annual income. This is a big deal because it is almost like you saved an entire year’s worth of work. This number will be different for all of us. We all have our unique situations and different income levels. Still, it is something to be proud of when we have a year’s salary in the bank. If you earn $50,000 a year and are worth $50,000 then you have reached this milestone.

It’s not too important to get hung up on gross pay or net pay, but I would lean more towards favoring net pay. Net pay is how much you earn after taxes and deductions. Someone could earn $50,000 gross pay per year but after everything is taken out of their paycheck like federal income tax, state income tax, social security tax, medicare tax, health insurance, dental insurance, vision insurance, etc. It could be closer to $40,000 it just depends on what kind of deductions are taking place. That is why it is preferred to use net pay to determine when you meet this milestone. It’s a great milestone, but the next one takes the cake.

3. Reaching “Barista FIRE” Status

Reaching this status is a huge milestone. It doesn’t mean you have to follow the Barista FIRE path, but the option is there for you. This status means that you have enough investments to quit your full-time job and work part-time. The part-time work combined with your investment withdrawals is enough to allow you to live your preferred lifestyle. I talk a lot more about Barista FIRE in this article where I break it down completely.

Just knowing that you could quit your full-time job is a huge motivation. You certainly don’t have to but the option is there. A huge component of achieving financial independence is having options, and they are nearly unlimited when you can fully support yourself with your investments. When you are in Barista FIRE status you gain a plethora of options because you could get an easy job or one you enjoy if you wanted to keep working.

With this milestone, you still utilize the 4% withdrawal rule. If you were to Barista FIRE then you withdrawal 4% of your assets per year plus whatever you make from your part-time work to meet your desired level of spending. For example, if you reached $500,000 in investments then you could withdraw $20,000 per year and if you make another $20,000 per year from your part-time job then you can spend $40,000 per year in total. As I said, this milestone is huge and it will vary for each of us because our FI numbers are different. As a side note, you don’t necessarily have to work as a barista in order to barista FIRE.

4. Seeing your investments earn more than you in one year

Wow, how great of a milestone this one is. At this point in your journey, you get to see the real power of investing and compound interest. If you bring home $50,000 per year and your investments did the same then you will be amazed. The money we invest works for us this way. If you had $500,000 in investments at that time that earned 10% that year then it would have earned $50,000 just like you.

Just like with the other milestones, this one will happen at a different time for all of us because of our unique situations and goals. Most of the time if this is happening then you are very close to becoming financially independent. Your investment return will vary by year so this could happen by accident one year. What I mean by that is that sometimes the stock market can generate super high returns one year like 30%. We don’t expect that to happen every year of course because we know that there are market fluctuations.

Over the long term, we would like to see our investments yield 8%-10% and if there is a year where your investments yield just that then you have hit this milestone correctly. On the random year where the stock market returns 30% don’t get too excited because the next year it might be in the negative double digits. We need to understand ahead of time that volatility is a natural part of the stock market.

5. You hit your FI number (You made it!)

You would think that hitting financial independence would be the last milestone, but it isn’t. It is the one that we are all after however. We all know what hitting financial independence would look like right? 25x your annual expenses in investments and you have made it. If you spend $40,000 per year then you need $1,000,000 to get to financial independence. This is probably going to be your favorite milestone.

At this point along your journey, you have the option to do nearly anything. You can retire from your normal job and go part-time, you can pursue something entrepreneurial, you can volunteer, or you could travel the world. Whatever it may be, hitting your FI number means that you have the financial means to support yourself without the need for work income for the rest of your life. You might still want to work even when you are financially independent and that is fine too, in fact, I wrote about 7 reasons to keep working after financial independence in this article.

6. You think less about money than ever before (Abundance)

This is a bonus milestone beyond reaching financial independence. Your investments may give you returns beyond what you expected, you might continue to work and instead support yourself financially with that income instead. Whatever the case may be, once your investments grow well beyond what you technically require for annual spending then you reach abundance.

There is nothing inherently wrong with acquiring abundance, it can always be put to good use. You could increase your spending in retirement, you could donate money to charity, you could acquire extra wealth to pass on to your children, the options are endless. Usually, abundance won’t make you any happier than simply being financially independent. In fact, reaching FI is no guarantee of happiness in the first place. I wrote in detail about happiness and financial independence in this article. Essentially, money is not a good solution to make you happy no matter how much or how little you have. We must seek happiness in other ways.


Having milestones in financial independence gives you something to look forward to along the way. These 6 milestones are what I believe to be major stepping stones in your journey to financial independence. These particular milestones can apply to nearly everyone on their journey because there is no dollar amount attached to them so no matter what your FI number is, you can see your progress towards each milestone. It is important to have specific goals along the journey to keep you motivated and ready to reach the next one. You could go even further and create your own mini milestones to keep you motivated along the way, but I believe that these 6 major milestones are a good starting point for anyone on the path to financial independence.

Zachary Smith

Zach is passionate about personal finance, especially when it comes to financial independence. He is a heavy index fund investor and budget connoisseur that also loves traveling, exercise, and the great outdoors. See his full bio here

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