“The first $100K is a b*tch, but you got to do it”. Charlie Munger said this at a Berkshire Hathaway meeting. It truly is hard to get your first $100k. It takes saving, investing, and staying out of debt. Plus it is all about consistency. It took my wife and I being married together and investing our savings 2 plus years to hit $100k. Now it is time for that money to compound even faster.
“Your first $100K is a b*tch, but you got to do it”
How hard is it really to hit $100K?
The question is how much do you want to hit that number. My wife and I took two years to hit $100,000. At that moment, we knew this saving and investing thing was working. The momentum to get it going was half the battle.
We had to be patient. There are so many things going on in our lives. Traveling is something we truly enjoy, and it costs money. So we just needed to live more frugally.
Being able to live frugally is not as hard or as miserable as it may sound. We out less. Oftentimes, we camp to avoid staying at hotels and paying for places to sleep.
You need to also be able to invest your money. Investments will grow faster than money sitting in a bank.
The highest interest rate I have seen is Ally Bank with 0.50%. You can achieve higher through Yotta Savings, but it can come at a risk. Check to see which one you like better. Yotta Savings vs Ally Bank.
These banks will not give you enough money to hit that coveted $100,000. You have to make investments. There has to be a time when you have to take a risk and let your money work for you.
You have to go and invest.
For the average person, the way Mrs. FE and I save may not be the most suitable.
Firstly, you should do what is comfortable for you. Maybe it is $300 a month, which is like $10 a day. You can add that into savings, and then invest it in order to make your money work for you.
Then make a goal to slightly increase that amount. $500 a month is about $6000 a year. In about 10 years you can have that at close to $100,000.
These are just a few things you may do in order to achieve that $100,000. If you really want to achieve success in life you have to make sacrifices, learn from mistakes, and try to go and reach your goals.
The first $100K is a b*tch.
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The Compounding of $100K
If you think about how compounding interest works. This $100K will easily be able to compound even faster that you would expect. At a conservative 7% rate the $100K will make $7000 in the first year.
After 10 years, the money will have doubled to $200K.
Another 10 years without doing anything to it the money will double to $400K
In about 35 years, the money will be over $1 million dollars and continuing to create more money. At $1 million dollars with a 7% return that is $70,000 a year.
That is with simple compounding of $100,000 in a 35-40 year period. It is vital to start investing sooner rather than later in life. The more time for compounding the faster your money will grow with less capital input.
Our goal is $100K.
It is time to make a goal. Our goal is $100k. Simple and easy.
Now it is time to take steps to achieve this goal.
First of all, you need an emergency fund in order to cover emergencies that may come up. I suggest anything from 3-6 months of a salary in case you lose your job. This will help for any expenses that may come up.
It is better to be covered instead of being derailed on your path to achieve your goals.
Next it is time to invest your money.
You have an emergency fund set aside. It is time to invest the rest of your money.
The best investments would be low cost index funds like Vanguard’s Total Stock Market Index Fund (VTSAX). This gives you a wide variety of stocks to invest in like the whole U.S. market. That is like 3500 companies.
This simple approach gives you the opportunity to make wise decisions on your investments. You do not need to look up anything, just invest, invest, invest.
The third step is to stop spending money.
Your savings rate is quite important. The average American saves like 7-8 % of their salary, which is crazy low. Mrs. FE and myself are saving 60% of our income living in Taiwan. If we can save much more so can everyone else. You just need to cut spendings.
Cutting spendings can help speed up that savings rate. Cutting out $10 a day can be worth $300 a month, which is $3600 a year. If compounded for 40 years will be worth $770,000. Look at how much money you can be earning by simply saving $10 a day.
Some of these cost cutting measures could be as easy as no more eating out. You could cut the cable and read books instead.
You could ride your bike to places instead of spending money on gasoline. Plus also move to a lower cost of living place in order to save more money. These are all ways to cut costs.
Once you hit that $100K keep the money going.
It is time to keep that momentum flowing. Once you hit $100K the hard work is done. Not so fast. It is time to keep that snowball rolling. Continue to spend less, continue to invest more money, and continue to work hard.
Lifestyle creep is the enemy of your savings. Once you let the gas off the pedal then the savings and growth will start to slow down a bit.
Time to Make a Plan and Goals
People have different goals in life. Some will want to work til they are 70 years old. There are others that want to work til 50 and have enough money to stop working. We will all have some different goals.
If you really want to make your savings grow and have your money continue to work for you, then it is time to get that first $100K. It may be hard, difficult, and a pain in the butt, but this work is worth it.
It is time to think differently about money. Time is not going to slow down. You can make motions to do things, but once you take action the snowball will start to roll.
The First $100K is a B*tch
Getting to that first $100k is going to be difficult and hard to do, but if you take little baby steps every day to hit that goal you will be able to achieve it.
It is time to save more, invest more, and get to $100K.
Charlie Munger is a billionaire and if he said “your first $100k is a b*tch” that work really hard to get it. Let the compounding begin afterwards.
” Spend less than you make, stay out of debt, and invest the rest”
I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.