How to Save Your First $100K

 in Blog / Budget / Invest  tagged investing
Save your first 100k

I saved 100k before I turned 25. 

It was the most difficult financial milestone I have ever tried to accomplish. Nothing has yet to compare. 

Charlie Munger, who is Warren Buffett’s right-hand man famously said this at one of Berkshire Hathaway’s annual shareholder meetings. 

The first $100,000 is a b*#%h, but you gotta do it. 

Chuck talked about how necessary it is to get to that point. 

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.”

Why the First $100K is the Hardest 

When you are trying to get to your first 100 stacks, it is hard. The reason behind this is most of your money will have to come from savings. You won’t have enough money yet to begin to reap the heavy rewards that your investments will gain. 

If you are in your early 20’s, and your salary is, well, less than you would like. Then you have to find other ways to make additional income so you can hit this milestone. Let me tell you, it is truly a pain. If you are in debt, it is an even bigger hurdle to climb. 

But in the end it is all worth it. 

Charlie is completely right because you can take your foot off the gas after you hit this milestone. I don’t mean you can start poppin’ bottles full of bub at the club (shout out 50 cent) but you can safely begin to spend more frivolously on things you enjoy. 

How I Saved My First $100,000

How I Saved my First 100K

Right out of college, I got a job making 30K a year. I quickly realized this wasn’t enough to live comfortably in my area, so I decided to start a few side businesses as well. 

My goal was simple, increase my income at both my job and side businesses so I could save more money. 

I did just that. The key was to take massive action. I started negotiating my salary at my full-time job. How did I build this leverage? I realized early on that I must go all-in on learning new skills. So I set out to become better than all my peers that were a level above me.

Next, I began to take on as many side hustles as I could. One of those side hustles was this website. Craigslist flipping, opening a Christmas tree stand, amazon affiliate sites, and selling products on Amazon FBA all rounded out my crazy side-hustle action plan.

I saved every extra dollar I had. Then shoved those dollars into investments that would go to work for me. Not because it is what you should do (every situation is different), but because building wealth was important to me. I wanted to have a choice.

It took me 3 years out of college to hit that goal in my brokerage account. I invested in index funds and dividend growth stocks. I still invest in both of these assets today along with a number of other investment classes such as real estate, businesses, etc. 

How Much Would I have to Save to Get to $100,000 in 5 Years?

How much would I need to save

Five years is a safe goal for someone who makes a moderate salary and is willing to do some extra hustle to accelerate their savings rate. With an extremely modest return of 5%, you can hit that goal in 5 years if you save $1,500 a month. 

$1,500 a month may seem lofty to you, now. But remember, you may not be used to tracking your spending, or seen the power in increasing your income. 

At this rate, your savings will be roughly 85% and your interest income closer to 15%. 

How Much would I Need to Save to get to $100,000 in 3 years? 

This is the timeframe it took me to save the first 100K.

If you have a higher income and want to get there in 3 years at 5%, or you are willing to build additional income streams (what I did), then you would have to save $2,600 per month. 

How long would it take to Save $100,000 with a 7% Return? 

With a 7% return, you would have to save $1,400 a month. That would amount to $16,800 per year. 

How long would it take to Save 100,000 with a 12% Return? 

If you could get a 12% interest rate, saving $1,250 a month, you can save $103,007.96 in 5 years flat. You would still have to save $15,000 a year, even at 12%. You just can not get passed having to save a significant portion of your income to get to your first $100,000.

Your Income and Savings Rate Matters 

Your Income and Savings Rate Matter

Your income is never is never as high as you want it to be early on. 

Guess why? 

You have not proven anything yet. The only way to increase that income is to negotiate your salary at your current job. How do you do this? By stepping up and learning new skills. This could be excel mastery, getting new certifications, or obtaining another degree in your field. 

In the meantime, building a small business around your passion can be so powerful. Not only do you get to work around something you enjoy, but it could become what you do full time. 

This could be a number of things from, websites, Amazon FBA, Real Estate Investing, affiliate marketing, or flipping items on craigslist. 

Why put all this effort into increasing your income early if you can just save a modest amount without all this effort? 

Early on your savings rate is everything. 

Your savings rate will transform how much you have in your portfolio. In fact, when saving your first 100,000, your savings rate should be about 80%. Your investment returns will only account for 20% of the total growth. 

The first 100K is the hardest because of this fact. You have to hustle to get there. It is not easy to do on a low income. But you CAN DO IT. 

Where to Invest 

where to invest

My primary investments were in index funds for the first 3 years. I split between total stock market index funds and S&P 500 index funds. It was important for me to keep my investing fees low with a safe return. The index funds provided me that perfect balance. 

I love index funds as they are still the primary place I plow my excess cash. Most of my index funds were in retirement accounts. I use a 401K and Roth IRA. 

I invested in a number of different dividend stocks. Mainly in dividend aristocrats. These are dividend stocks that have increased their dividends for over 25 years. I kept these in a fidelity account and Robinhood account. 

By the way, I still continue to do all of this today. 

This is a tried and true way to invest. If you never want to look at stocks and just want an automated investment strategy, I would stick to index funds only. You can automate this process by having your brokerage account withdraw your money automatically. Fuel that fire! 

Side-Hustles

Side hustle computer

I have tried a number of side hustles. I combined a number of them to increase my income. Here are a few that really helped increase my income: 

  • Starting a Blog

  • Amazon Affiliate Websites

  • Real Estate Agent on the side

  • Selling Items on Amazon FBA 

  • Selling items on eBay 

  • Flipping items on craigslist/offer-up/FB Marketplace 

I combined all of these to increase my income in the early years. Some other options that I know work to consider: 

  • Writing for other blogs or websites 

  • Drop shipping 

  • Coding and building websites 

  • Social media management 

  • Small Ad agency for social media 

Make a Simple Budget 

I use an elaborate budget, but I am a madman. You don’t have to do it my way. In fact, one of the simplest ways to make a budget is figure out how much you need to save every month, and automatically send that to your savings or brokerage accounts. 

Then you spend the rest on your living expenses. Just make sure you pay yourself first. It is that easy. Say you want to save $2,000 a month. At the beginning of each month have 2k sent to your savings account and keep the rest for all other expenses such as food, living expenses, groceries, and bottles full of bub at the club.

Automate Your Savings 

Savings automation is one of the best ways to hit your goal. Pre-determine how much you want to save each month and automatically have it deposited into your brokerage account. This gets the money out of your checking so you don’t risk spending it. This helped me throw an extra 10% of my income into savings that I would otherwise have most likely spent. 

Adjust Your Mindset

When you are working to save the first 100K, you have to change the way you think about money. Before you buy big purchases, weigh out the opportunity cost. 

Would you rather have that fancy new car or add $300/mo to your savings goal? 

Maintaining a mindset like this in the early days is helpful in making good money decisions. You don’t have to cut out smoothie runs or dinner with friends, but be mindful of the impact each purchase makes on your overall financial future. 

Look at items in your cart and say “Do I want this thing or do I wanna be rich?”

Get Rid of Debt

If you have 100K saved up but 30K in credit card debt then you are missing the point. Get rid of non-essential debt first. Student loans, credit card debt, or any other high-interest loan need to be eliminated before you start this journey. 

Essential debt is your house and car. Any debt outside of these needs to be gone. If you do have a loan on your car, look to refinance it to the lowest rate possible. An Index fund historically pays a 7%+ return on average. Have an auto loan but slashing your interest rate below 2% is a winning proposition. 

Don’t Worry About Your Investments Going Up or Down

Recessions are going to happen. Make sure you do not panic when the market begins to fluctuate. It is never a good idea to sell when the economy begins to fall. One way to deal with this is to look at your investments less frequently. This will keep your emotions from getting in the way of your long term goals. You usually can’t predict how you will react when you see the market (and your hard-earned cash) go down.

Understand that this is temporary. It is helpful to look at stock charts over long periods of time. This reminds you of what direction the market goes in the long run (UP!). So, make sure you educate yourself not is imperative to staying the course

Is This Realistic for Me?

Sometimes it may feel that you are pushing to hit this goal but you are just spinning your wheels. Trust me, I get it. This is hard. 

The majority of Americans have nothing saved for retirement. That is partial because saving money is so freaking boring, at the beginning. 

But guess what? As time goes on and you watch those small seeds you planted begin to grow, something inside you begins to feel a spark. Momentum begins to build. YOU ARE DOING IT. 

Even if you can’t hit the goal as quickly as you would like. You have to start somewhere. Maybe your side-hustles aren’t hitting. You are trying to build skills to raise your salary but keep getting passed up for that promotion. Don’t give up. Start saving as much as you can, and you will eventually begin to see the growth. 

Don’t compare yourself to others or me. My journey is unique to me. I was fortunate enough to graduate without student loan debt because my parents worked their butt off to pay for my college (we only had my wife’s to pay off). So I was extremely fortunate to start at 0. Yes, my salary was low, but I was willing to work like a maniac to make up for that. 

The point is, this is YOUR financial journey. We all have different paths. 

The 100K Club

If you have hit the 100K club leave a comment below. Or if you are striving to get there, bookmark this page and leave a comment when you hit that milestone so we can all celebrate together. 

andrew
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