Saving the first $100K is the hardest! However, once you reach the cross-over point, your net worth increases faster from earnings than from your contributions.
“The first $100,000 is a bitch, but you gotta do it" Charlie Munger
Charlie Munger said:
“The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do – if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
Saving Your First $100K
Assumption: You are able to save $10,000 per year and you’re able to earn 7% per year in interest on your investment.
How long will it take to save up your first $100K? It’s takes 7.8 years.
Saving Your First $200K
If you keep saving the same amount ($10,000 per year) and earning the same interest rate (7%). How long will it take to save up your first $200K? It takes 5.1 years.
Saving Your First $500K
If you keep saving the same amount ($10,000 per year) and earning the same interest rate (7%). How long will it take to save up your first $500K? Time decreases as compounding increases each year.
Unfortunately, the magic of compound interest doesn’t tend to reveal itself until you cross the $100k net worth mark. It’s slightly after that ($200K-$300K) point that you have enough savings for interest to have a noticeable impact. Once you reach this cross-over point your net worth increases faster from earnings than from your contributions - that means your money is now working harder than you are for the next $100K!
How to save your first $100K
Saving the first $100K is all about consistency and discipline.
Because it takes a substantial amount of savings before compound interest begins kicking in, we have to do the majority of the heavy lifting upfront. There is no way around it.
As a result, it’s important to establish good financial habits early on that facilitate building wealth. These are the 3 proven principles to building wealth EARN - SAVE - INVEST.
EARN - Your earning potential is your largest asset
SAVE - Your net worth only increases form money earned and not spent (start with automatic savings in your 401(k)
INVEST - keep it simple and invest in index funds
While saving the first $100K is not an easy thing to do, it is fundamentally necessary in order to start building real wealth.
Follow along with Ten Wilsons as we show you details on more multi-millionaire net worth progressions to Fat FIRE.