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Charlie Munger, a famous billionaire investor and vice chairman of Berkshire Hathaway believes that the first $100,000 is the hardest to amass. It's not just him though. Many people who have grown their wealth believe this to be true and the same thing is often said about achieving the first million.

Once you reach $100,000, the next one tends to come much more quickly. Before you know it, you have $200,000, $300,000, $400,000. Then once you hit the million-dollar mark, the second one is right around the corner and it seems to take a fraction of the times the first this is reassuring for those of us that feel like our wealth is growing slower than they'd like.

But why exactly does it get easier? Let's see why it takes a disproportionately long time to reach the $100,000 mark and discuss some things you can do to speed up this process if you become wealthy years sooner.

Make It A Priority

One obstacle many faces is the process of actually beginning to invest. Investing can seem like a low priority and it continually gets pushed to the backburner. Before you know it. You're scratching your head wondering how you're going to retire. How many people do you know that would start investing If only they had more money? When they start making more money they'll invest.

saying you'll invest when you have more money is like saying you'll put wood on fire just as soon as it starts producing heat. You don't invest because you have too much money. You invest because you want more money. Risk is also a common excuse most of us know coworkers or friends that is the reason that investing is too risky so they avoid it entirely.

This is the case with many things in life. Taking the first step is the hardest. When the finish line seems so far away, it's easy to push something off to some time in the future. Achieving the first $100,000 requires you to do the heavy lifting, meaning the majority of your money needs to be personally contributed by you. Once your portfolio reaches a sizable amount, compound interest begins to work wonders. Even though the returns as a percentage don't necessarily increase the returns and dollar amounts become much larger.

For example, if a $5,000 investment earns a 10% return in one year, that's only $500 and it's hardly noticeable. $500 could easily be made just by working a few extra hours once in a while and when the thought of in this way can seem insignificant.

When a $100,000 investment earns a 10% return, that's $10,000 and that's a great start to replacing your salary. Once it reaches $1 million, a 10% annual return of $100,000 That's a large amount that is much more than many people are at their jobs and seeing this huge growth is exciting.

People say that when their portfolio gets to be worth $100,000 they can really notice the progress of their investments. Once the snowball gets rolling, the rate at which it grows accelerates as your portfolio grows to a large amount, the progress is extremely satisfying and that excitement can speed up the process.

Put another way, you'll begin looking for ways to grow your portfolio more quickly because the rewards are substantial. You might look for ways to increase your income so you can contribute more to these investments. You might also look for ways to earn better returns so the growth will accelerate.

Instead of going out to eat and spending $100 In the matter of a couple of hours. You'll think twice. Realizing how powerful compound interest is will make you more carefully consider your purchases. This is because you'll realize how much that $100 will grow and continually reward you if it's invested in it'll be harder for you to part with.

Saving Gives You A Cushion Of Comfort

For example, you spend $100 on a meal out and that money is gone forever. If you had invested that money, it could reward you with $10 The first year it's invested $11 The next year and $12 the next. Of course, $100 isn't a large amount of money, but it's the habit of saving $100 in different categories on a regular basis that will add up.

As you become wealthier, you have more options and this will become more and more obvious. When you have $100,000 saved there are many things you can do that someone living paycheck to paycheck and not if you have the opportunity to take another job with a potentially higher income or more room for improvement but the pay isn't steady.

You have the savings to take that risk your job might pay $50,000 per year, but if an opportunity arises it's likely to pay $100,000 or more per year, but it's commissioned only if you need that $50,000 paycheck. Taking this type of risk isn't practical. Maybe you've always wanted to start a business and have never had the capital or money to fall back on.

The new business could make you millions of dollars. But if you can't begin it's a lost opportunity. Perhaps an amazing opportunity presents itself in real estate. You have the chance to purchase a home way below market value but it's going to be a big risk. When you have money saved up. This might be a risk worth taking. While it's not always ideal to cash out your investments. The fact is that you at least have the option if you need to or for once in a lifetime opportunity presents itself.

Someone who has only a little bit of money saved is so much more limited in what they can do. Adding to the idea of being able to take advantage of more opportunities. When you have more money, you can take on more risk with your investments. If you see potential in stock, it's easy to be more speculative when you have extra money and it's not going to ruin you financially. If that investment doesn't work out. You'll hopefully still have other investments.

A friend of yours could present an opportunity to invest in a new business venture and you're not going to go broke if it doesn't work out. Someone with little money saved doesn't have the option to invest in something like this.

How To Get To $100,000 Faster?

If you're still working on the $100,000 milestone, there are some ways to speed up the process. Since the majority of these funds are going to be money you personally contributed, you need to focus on increasing the amount you're saving. This will be the best way that you can accelerate the process.

In order to save more money on a regular basis. You need to increase your income. This can be done either with another job on the weekends are a couple of nights per week where that extra cash can be deposited directly into savings. Consider starting a side business that would bring in some extra income.

Be careful when spending on unnecessary items. Do you really want to spend $100 on dinner out or would you rather reserve that for special occasions and save more money instead?

Remember, watching pennies like this is only temporary until you reach your goal and you can ease up a little bit. Stay away from large car payments for vehicles that are simply unnecessary as these expenses are common reasons people never reach $100,000 Nevermind $1 million.

Once you become familiar with the process of saving and investing, it will be easier to just continue doing what you're doing. By the time you obtain a substantial amount of money. You'll be used to finding ways to earn extra money and put that into savings. You'll also be used to being more deliberate with your purchases and really think whether or not they're necessary or if it would be more rewarding to put them into savings.

Furthermore, you'll be comfortable with taking risks in the process of investing in different market cycles. And you might even learn how to take full advantage of them once you reach the $100,000 mark you can let off the gas a little according to Charlie Munger.

Although the first million is the next milestone, it becomes easier as a majority of your investments will likely be the result of compound interest instead of money you need to personally go out and earn next time you're stressed about the difficulty of increasing your net worth. Know that it becomes easier, more enjoyable, and more rewarding as time goes on.

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Why Charlie Munger Believes the First $100K is the Hardest to Amass and How to Reach it Faster

2023-04-24 - 23:00

Let's talk about something that's on everyone's mind - money. Specifically, how to accumulate it, and why the first $100K seems to be the hardest to reach.

Now, you may have heard of Charlie Munger, the billionaire investor and vice chairman of Berkshire Hathaway. He and many other wealthy individuals believe that once you cross the threshold of $100K, the next $100K comes more quickly. But why is that?

Well, the truth is, reaching that first $100K takes time, patience, and commitment. It's not something that happens overnight, and it requires a certain level of financial discipline. Many people struggle to save money because they don't have a clear plan or budget in place, and they end up spending more than they earn.

Additionally, there are a number of financial obstacles that can make it difficult to accumulate wealth. For example, student loan debt, low-paying jobs, and unexpected expenses can all slow down the process of saving and investing.

But don't worry - there are plenty of things you can do to speed up the process and reach that first $100K sooner rather than later. One key strategy is to focus on increasing your income. Whether that means negotiating a raise, starting a side hustle, or investing in stocks or real estate, there are many ways to earn more money and grow your wealth.

Another important factor is reducing your expenses. Take a close look at your budget and identify areas where you can cut back on unnecessary spending. This could mean canceling subscriptions you don't use, cooking more meals at home instead of eating out, or buying a used car instead of a new one.

It's important to have a long-term perspective when it comes to building wealth. Don't get discouraged if you don't see results right away - remember that the process of accumulating wealth takes time. Stay committed to your goals and keep working towards them, even if it feels like you're not making progress.

So there you have it - the first $100K may be the hardest to reach, but with patience, commitment, and the right strategies, you can achieve your financial goals and build the wealth you deserve. Let's dive deeper into these strategies in the rest of this blog post.

Make Investing a Priority

In this section, we'll talk about one of the biggest hurdles to reaching $100K - not getting started with investing.

Investing is something that often gets put off, maybe because it seems too complicated or you don't have a lot of extra money to invest. But the truth is, if you want to reach that $100K milestone, investing needs to be a priority.

Now, I know what you're thinking - "easier said than done." But trust me, starting small is better than not starting at all. Even if you can only invest a small amount each month, that's still better than nothing.

And remember, the earlier you start, the better. The power of compounding interest can work wonders for your investments over time. That's why it's essential to make investing a habit and start as soon as possible.

It might also help to make investing a regular part of your budget. Treat it like a bill that needs to be paid each month, and make sure it's factored into your expenses. This way, you won't be tempted to skip investing when money is tight.

Another helpful tip is to automate your investments. Set up automatic transfers from your checking account to your investment account each month. This way, you won't have to worry about remembering to invest, and it becomes a seamless part of your financial routine.

Investing doesn't have to be a scary or intimidating process. By making it a priority and starting small, you can lay the foundation for reaching that $100K milestone. So why not start today?

Compound Interest Words Wonders

Compound interest is one of the most powerful tools in your arsenal when it comes to building wealth. Essentially, compound interest is interest that is earned not only on the original investment, but also on any interest earned on that investment. This means that your money is constantly working for you, even while you sleep!

The earlier you start investing, the more time you have for compound interest to work its magic. Even small amounts of money can grow into significant sums over time, thanks to compound interest.

For example, if you were to invest just $100 per month at a 7% annual rate of return, in 10 years, you would have around $16,000. In 20 years, that same investment would be worth over $43,000! And that's just from investing $100 per month - imagine what you could achieve if you were able to invest more.

It's important to remember that compound interest can work against you too. For example, if you carry a credit card balance with a high interest rate, the interest charges will accumulate over time and can quickly become overwhelming.

That's why it's essential to pay off your debts as quickly as possible, so that you can start putting your money to work for you, rather than paying interest to someone else.

Overall, the key takeaway here is that time is your most valuable asset when it comes to investing. The sooner you start, the more time you have for compound interest to work its magic.

Even if you can only afford to invest a small amount of money each month, it's still better than doing nothing. Every little bit counts, and over time, those small contributions can add up to a significant amount of wealth.

Saving Gives You a Cushion of Comfort

Saving can provide a lot of flexibility and freedom in your life. When you have a cushion of savings, you can take more risks and pursue opportunities that may not have been feasible otherwise.

Whether you're considering starting your own business, investing in real estate, or taking a job with a potentially higher income, having a comfortable amount of savings can give you the peace of mind and financial security to take that leap.

One of the biggest benefits of having a cushion of savings is the ability to weather unexpected financial emergencies. No one can predict when a medical emergency or unexpected car repair will arise, but having some money saved up can make it much easier to handle those situations without having to rely on high-interest credit card debt or other loans.

Additionally, saving money can help reduce stress and anxiety about your financial future. Knowing that you have a safety net can provide a sense of calm and security, which can translate into other areas of your life, including your career, relationships, and overall well-being.

Of course, saving money isn't always easy, especially if you're living paycheck to paycheck or have a lot of expenses. However, even small steps can make a big difference over time. Setting aside just a little bit of money each week or month can add up quickly, especially when you take advantage of compound interest and other investment strategies.

Another way to build up your savings is to look for ways to cut back on expenses. This might mean canceling subscriptions you don't use, shopping for deals on groceries and other essentials, or finding ways to reduce your energy bills. Every little bit helps, and over time, those savings can add up to a significant amount.

Having a cushion of savings can provide a lot of benefits, including the ability to take risks and pursue opportunities that may not have been feasible otherwise. Whether you're looking to start a business, invest in real estate, or simply have more financial security, saving money is an essential part of reaching your financial goals. So, make it a priority, even if it means starting small, and watch your savings grow over time!

Conclusion

It's important to keep in mind that everyone's financial journey is different, and there is no one-size-fits-all approach to building wealth. It's important to do your research, make a plan, and stick to it.

By making investing a priority, taking advantage of compound interest, and building a cushion of comfort through saving, you can reach your financial goals and build a brighter future for yourself and your loved ones.

Remember, slow and steady wins the race. Keep your eye on the prize and stay committed to your financial journey. Good luck!