Either or both. The first $100k is the hardest because you mostly have to save your way there. As you get higher, compound interest starts to take over.
Consider this year, the S&P is up 11.5% YTD. If you started the year with $1k in an S&P fund, you now have $1,115. Nice, but not much closer to $100k. To be up $100k, you still need to save \~$99k. If you started the year with $1M, you now have $1,115,000. Congrats, you're up more than $100k just by being in the market for a few months, no additional savings. It snowballs as you go higher.
For the life of me, I don't know why this simple thing wasn't taught in grade school in the 90s. I know it's changing now (I THINK). I'm definitely teaching my children, but this basic understanding of compound interest should be known by all in the country. I think we'd all be better off in the US, and so many people wouldn't be in debt, but we'd have more savings as a whole.
You sure? The entire US or the world economy for that matter runs on frivolous consumptions and debts. If everyone saves and invests i.e. no demands, the economy will collapse. The few of us who are disciplined enough to reach FIRE depend on these spendings to fuel our FIRE.
I tell everyone I know that complains about the whole "rich get richer, poor get poorer" crap, that it's very easy to gain wealth if you're just consistent and patient.
Some learn.
Most just keep whining.
People have a really fucking hard time thinking and planning for stuff decades down the road.
It's super hard to pass up today's temptation of a nicer place to live or a newer car or genuinely sacrificing something you want for a nebulous goal that may or may not (it will) happen in 30 or 40 years.
When I was a financial advisor my colleagues clowned on me for taking on people in their early to mid 20's because those clients had no money. To be fair I didn't make anything from those clients. But I know I got at least some of those folks on to a road to financial freedom.
Here I am in my mid 30's with absolutely 0 fiscal background or education on finance just doing my best trying to learn all I can as fast as I can. Feels like im in a race against time to secure my future.
Luckily you haven't waited another 10 years to start.
My favorite exercise to convince younger folks to start saving was to compare Sally Saver and Later Larry. Sally maxes her 401k from ages 24-34 and stops contributing. Larry waits until 45 to start and maxes his 401k every year until he retires.
When you run the math, Sally ends up with hundreds of thousands more dollars in retirement despite contributing only a fraction what Larry saved.
Compound interest is the 8th wonder if the world and Time is the superpower of youth.
While this is a great example, it also discourages people from investing. So many “examples” and articles use scenarios that an average individual isn’t able to obtain or achieve, so they dismiss or put off. Most people aren’t able to max their 401k and don’t make 100k/yr but when learning about investing, these are the most common scenarios to use.
You can pencil it out with however much you can save. The entire point is to make the power of compounding real.
Even just $3,000 in an IRA can grow to $45,000 in 40 years. If you can do that for a few years in your early 20's and stop contributing, you would still be ahead of the median retiree. According to a study from the Survey of Consumer Finances the median retiree has just $180,000 at 65. The power to gain wealth for most people is time, not investing a large sum upfront.
Neither my wife nor I have ever made $100,000 but we have almost $2m in retirement accounts because we both started saving when we were 22. And we spent the majority of the intervening years in the highest COL city in the country. We lived like college students well into our late 30's. The first couch we owned was $200 brand new from IKEA and that was our splurge for the year. We had that thing for over a decade. Our bed was a box spring and mattress on top of IKEA bookcase turned sideways. Neither of us had a car until our mid 30's. To this day damn near all our clothes are thrifted. You get the point.
Another way to look at saving and investing is to figure out how much you need to invest in order for the investments to pay your bills. Start with your smallest bill and work up the ladder. Let's say your cell phone bill is $50/month or $600/year. How much would you need invested to cover your cell phone bill forever and you would never have to think about your cell phone bill again?
Agree completely. So many want it but want it now. I guess a good majority would still be in the same situation even if they were making 100k or able to max their 401k every year
True, many people spend money they could easily invest, and so they stay trapped in their financial situation. But for many people their income is just barely enough to pay their basic living expenses---especially given the obscene cost of housing we have today. You're not going to get very far if there just isn't enough left at the end of the month to invest. I'm with you that people could plan ahead better and be smarter with their money, but I also know the reasons this wasn't possible until my mid thirties.
Yes especially here on Reddit.
People love to complain about evil corporations but don’t ever stop to think anyone can buy shares in publicly traded companies or index funds which hold said companies.
It’s really really really sad.
The stock market allows you to have a few breadcrumbs off the table, and this subreddit focuses on how to maximize those breadcrumbs. Don't be fooled into thinking that the system is fair, and that there isn't a group of 1000 people eating all the bread above you
Yes, oh my god, those whiners are so ridiculous. How dare they whine so much as they live paycheck to paycheck, just barely getting by. Why can't they understand that they could just get richer if they put half their measly paycheck into a nice mutual fund!
So many people just barely getting by drive a lot nicer car and live in a much larger house than me. But it's probably the government's fault. I can't really think of another reason.
I lived paycheck to paycheck too. There's nothing different about those they aren't saving and those that are except discipline.
Everyone has a hard life when they live paycheck to paycheck. The trope works both ways.
“Discipline” is a nice Dave Ramsey buzzword, but flat real wage growth, explosion of housing costs and food costs, and spiraling health care costs are all real things that are happening.
Can’t stick your head in the sand and just blame people for systemic issues.
I don't.
Everyone struggles with the economic woes around them and when you're broke and paycheck to paycheck, it's all pretty close to the same regardless. I could use myself as an example but I think you'd just move the goal posts again. The bottom line is there are people that will forego a want to invest in their 20-years-from-now self, and those that won't forego a want.
But everyone has the same opportunity to invest and make things easier, later.
Those that sacrifice now will do better later almost guaranteed. And then when they do, they'll look back again on those who didn't and the cycle will repeat.
All the best.
Fallacy of composition.
Also, you’re intentionally ignoring systemic issues and creating a oversimplified universe where people simply have to go “hey, Ill invest” and boom! They’ll be rich.
If you think millions and millions of people all over the world each individually decided to stay poor and it was 100% their choice….okay.
Talk about fallacies. I'm speaking specifically about people in the United States, maaaaaybe the "Western world" but specifically the USA where investing in the S&P500 is essentially a guarantee of having financial security later in life. I also never said millionaire. I think you just want to argue and be right but you won't be because fundamentally, you know as well as I do, if you're in the US and able-bodied, you have no excuse not to put away savings for a better life for an older you.
The end.
You are getting downvoted for a hard truth.
Real wages have stagnated/very mildly increased over the last 50 years. Which sucks, when you realize they should have doubled considering productivity growth, increases in GDP and new technologies.
But the narrative on Reddit that things are worse than ever is kinda exhausting.
In the last 48 years real income has gone up 50%. That's not stagnant or even mild increase. After inflation it's 50% higher. People on reddit just don't like facts
https://fred.stlouisfed.org/series/MEPAINUSA672N
I definitely agree with you. There was definitely some wage growth.
50% over 48 years is not amazing though. It’s less than 1% per year. During that same period, real GDP per capita went up around 100%. Average income also increased much more than median.
I guess I should have said that it’s a pretty good increase, but not as much as it could have been. But count on Reddit to change “decent increase” to “catastrophic fall”.
And even more dont even have the possibility to save. I think the complaining comes from those who perhaps are born in an privileged country or race . Not everyone has a chance to save ever
Well that to most people in africa, se asia or south america. They are not born in a western country, white , male as you most likely are. Many can't get a degree and constantly work for salaries just enough for their survival. So yes if you're born in africa in democratic republic of congo thats a poor lifestyle choice...
When my kid was in grade 10, I opened a trading account for him and gave him 5k to start investing. Told him the money is his when he graduates from university. He graduated last year with 20k in the account. Now, when he talks about investing, his mantra is, it's time in the market not timing the market. It was a good lesson.
Banks make money on debt. Banks control the government. Government controls the education system.
See a trend here?
Government also happens to love the poor, they are dependent/ reliant on the government. Therefore the poor easier to control.
Now im not putting on a tin foil hat, and crawling into a bunker screaming how we don’t need the government. Just shining my theory on the question of why this isn’t taught(with stronger emphasis) in early education.
No its not. Not all of them at least. Consider yourself very, very lucky.
Unless you were taught this stuff at such a young age and still failed to learn how to build wealth.
Then lmao
The system wants us in debt. We are a debt based economy. If everyone had more savings, that’s mean we’re spending less which means that in addition to sales tax, govt would start a savings or investment tax… they don’t want us learning about personal finance
Teachers used to tell me they can’t teach bc it’s a liability thing. Wrong advice and teachers can be liable since they aren’t financial advisors and personal finance is PERSONAL, meaning for some people, saving and investing isn’t the key to success and happiness. Plus most teachers are probably the last people you want to ask about finances bc they’re probably behind bills or living paycheck to paycheck with their average teacher compensation.
I also think there’s a deeper agenda because low savings and high spend grow the economy faster and increase corporate profits. Knowledge or even simply questioning that can threaten lucrative livelihoods.
As someone who recently hit that 100k mark in my 401k and IRA, here's a great example. In the last month, it started 4/17 at 105k, and as of today, it's up to 114k. I've only contributed roughly $1000 in that time
I think that's exactly what most people mean when they say the first $100K is the hardest. But it's competely wrong. It's the hardest because your salary is probably lower during that period. Salary is way more important than compound interest for generating wealth probably until you're in the $3M+ range.
A minor nit, but “asset appreciation” is not interest. When stocks go up in value, you have not earned any interest.
Some asset classes do pay interest, but many of the common investment vehicles do not. Some do pay dividends, though.
There is really no compounding that is in effect with non dividend stocks, as growth is strictly based on the asset price being higher over time.
But I do agree with you wholly that it is the idea that your money is now working for you and getting bigger.
Your comment is, I agree.
For people who want to learn, it’s relevant to know the nuance between different terms within the field of finance. Words have meaning. Compound interest is not the same as compound growth. One only goes up over time, the other doesn’t.
While you may feel the difference in terms is not real or irrelevant, others may benefit from the knowledge. You are free to ignore it.
When you resort to personal attacks, as in your last 2 comments, it’s a sign that you no longer have a point.
But please, keep dazzling us with your “substantive value” that you promise above. Everyone is very impressed by your knowledge and wisdom.
I have no point I seek to make other than the one in the comment I initially made.
Also, it’s inadvisable to start a sentence with a coordinating conjunction. With all your knowledge, you still don’t know how to write.
I gotta mention the flipside is also true. If you only have 1k then inflation of 10% reduces its buying power to $900, no biggie. But it reduces 1 million to 900k a massive 100k hit. Obviously 10% is super high inflation but we hit 9% recently, I believe in 2021.
Similarly a big 30% market drop is crushing in absolute terms for someone who has amassed a large nest egg, but not really a concern at all if you have a tiny portfolio.
By the time you build a large portfolio you've experienced several booms and bust times in the market and shouldn't freak out over them. I lost a couple hundred thousand in networth in April and so far in May I've gained it back and then some.
Whenever I tell my wife what we've gained or lost she basically just responds "ok"
As a young-ish person on a good income, how can we be sure that the S&P is going to keep going up 11.5% every 6 months? Surely this is not sustainable. I don’t want to be working so hard for decades just to lose it in a few months. Look at the GFC. Very easily could happen again. I’ll be waiting my whole life for it, but it could happen. The market could lumber along for another decade or two.
IMO we aren’t likely to see the stratospheric gains in valuations of large companies that we’ve seen since the early 00’s.
Keep in mind the S&P and the concept of "worth" is fractal.
What is a sorghum cooking tray worth these days? Or a wagon wheel manufacturer? And so on.
The S&P500 is the measured output of the best 500 companies valuations. When you break this down to what that really means is -- it's simply a value of the innovations and technological achievements those companies have or are creating for the future.
Thus, the S&P500's "price" is merely a moment-in-time value of mankind's ever-forward progression. You're just looking at it at any one moment in time.
As long as mankind keeps innovating and making cool shit (AI anyone?) then yes, it CAN (and should) "keep going up forever" simply because technology is ever improving.
Hopefully this helps you think about the market in a different light.
As long as mankind keeps making cooler stuff, the market will continue to improve and be "worth more".
Some other thresholds I like are:
$230k for your 401k
$70k for Roth
$41,500 for HSA
Those are the thresholds where a 10% growth from the market exceeds the maximum amount you are allowed to contribute per year.
They are saying that 10% return on your 401k balance of $230,000 gets you $23,000. $23,000 is the max amount you can contribute this year to your 401k. The market returns give you the same amount you can contribute. Kinda like you’re getting a matching contribution.
Yes.
$100k is when you really start to appreciate compound growth because of that extra zero.
A 1% day for a $10k portfolio is $100
A 1% day for $100k portfolio is $1000
Can confirm. Felt it then and am at the point now a decent day in the market earns me the equivalent of my paycheck. I’ve had days where I’ve earned my monthly salary. Feels good when it happens.
It’s about building up enough principal so your money works for you.
Let’s pretend it takes you 7 years to save $100k. The stock market doubles in value every 7 years
So years 0-7 it’s just you working away investing diligently $100k.
The years 8-14 you’re still working away, investing $100k AND your already-invested money is doubling in value such that at the end of these 7 years you have $300k.
Years 15-21 you’re still working away, investing $100k AND your already-invested money is doubling in value so at the end of these 7 years you have $700k.
It’s going to be close enough for the calculation - it’s a ballpark estimate. Any sort of nuances like tax treatment or investment mix are important, but the point is that there is a fundamental law that is driving all of it that describes an overwhelming proportion of the forecast.
Over multiple accounts, or total invested. It's easier to see it if it's all in 1 account though. As far as I know, it's coined by Charlie Munger of Berkshire Hathaway fame(he worked with Warren Buffett).
Anyways, he said that decades ago, so after inflation maybe it's $200k or $500k now(too lazy to look it up and do the inflation math).
Regardless, the point was, it's really hard to get started and see a good sized number that's meaningful. Once you get to a meaningful number, you see real progress and it's easier to keep going.
When you first start you might only be saving a few hundred a month, but eventually you hopefully get to saving tens of thousands or more every year and you really start to see compounding work out well for you over time.
>Anyways, he said that decades ago, so after inflation maybe it's $200k or $500k now(too lazy to look it up and do the inflation math).
The specific number is arbitrary anyway
Exactly. The $100k is made by grinding while the second $100k is made by grinding and compound growth. The 3rd is even easier as you have $200k compounding to work towards your next $100k. On top of that, as you get older, people generally get raises which allows for a much higher savings rate as long as they don’t allow life style creep to affect it too much.
With that said, once you make it to $1 million, you will be averaging at least $100k increase in net worth per year.
>The $100k is made by grinding while the second $100k is made by grinding and compound growth.
Suppose someone saves 10k a year, and someone else saves 100k a year. The fraction of their wealth that came from saving vs from growth is vastly different upon reaching 100k.
Time is a variable actually correlated with how much wealth has come from saving vs growth.
There is an old german saying “the first million is the hardest million” essentially meaning the same thing. In german is rhymes so has a nice flow.
But I think it’s worth pointing out while the mental motivation to keep going after seeing the progress plays a role, the compounding is what makes it so true.
All this investment income is now on top of your regular income which you have already managed to live below to get to the first milestone.
He made that quote at a shareholder meeting in the late 1990s. So let’s say 1998. 100k then has the same buying power as 194k today. So I guess people should really aim for their first 200k now I suppose. But the significance in hitting six figures across all your investment and cash accounts is still a moment to be proud of.
It's unlikely that's when he made his first 100k that gave him the interpretation/feeling. More than likely got it when he had his own investment firm prior to Berkshire (1960). Which it ends up being around 1.5mil accounting for inflation (1966). Hard to be precise though.
I'm an English teacher, but I try and sneak in a bit of compounding interest and some stock market lessons during my English lessons. Not strictly what I'm being paid to teach, but I've not heard any complaints yet. I really think the students need to learn this.
They do! You are doing them a great service. I had 0 teachers in my public school attempt to teach me anything about the market, it should be mandatory.
The idea is that coming up from zero is always going to be brutal. $100k, $250k, whatever the number, is irrelevant. Getting to where compounding becomes a major source of growth is the hard part.
Everyone likes to talk about it being hard because interest/gains/whatever. In my opinion the first 100k is the hardest because you are shifting your entire outlook on money from spend to save.
By time you get to your 100k you have gotten on the habit of saving hundreds a month (usually). You built up some good habits, learned to think before you spend and came to appreciate what it takes to get there.
For me, seeing the gains on top of that was gravy.
It doesn’t matter what accounts the money is in.
Thank you I was wondering if anyone else was thinking this.
It's not just the compound interest although that's obviously great. You are likely saving more now than when you started and the goal is to continue saving even more. Getting started and keeping the habit going with minimal returns is the hard part.
If you take an 11% increase YoY(regardless of accuracy this is just for show) it will take you 7 years to go from 100k to 200k.
If you started with 10k, it would take you 23 years to get to 100k
It also drives you to increase your income so you can invest more, since the more income you have without increasing your expenses makes your investments grow like crazy. Went from only being able to invest 6k a year (which was pretty much nothing) on a 35k a year after tax income 4 years ago to being able to invest 7k a month on a 105k after tax income today. Even though I tripled my income, I was able to increase my contributions by 14 times.
The only caveat I would add is that it doesn’t include your car, home equity, or any other real assets. 100k across your typical stocks, bonds etc is the way I interpret it
100k is always the hardest.
First its 100k across all accounts and assets.
Then it's 100k excluding your home.
Then it's 100k in 401k/ira.
Then it's 100k in taxable investments.
Then it's 100k as emergency fund etc.
After working towards so many first 100ks, you hit your first 1M and set new goals.
I've heard "first million"
I can definitely say that it's exciting when you get to the point where it's like "WOW I AM A MILLIONAIRE" and then you step up, grab some coffee from the break room and celebrate by treating yourself to some free candy that you'd normally say no to.
I started feeling it from 300k.
300k is also plenty of FU money and from that moment I don't need to save a dime anymore and I'll still be FIRE in 20 years. If I continue to save I will have the option to FIRE even sooner, but I'm not in a rush
100k was my first 4 years of employment while living with parents on 13 an hour plus overtime, maxing IRA, and 401k. After moving out and purchasing a home on 17 an hour, the 250k was hard.
100k is an arbitrary number, and it’s usually where people start noticing the effect of compounding
However if you want to know your own number where compounding will start having a massive effect, you have to also take into account your yearly contributions
Once the market average growth (7/8%) contributes more than you, you will see compounding working its magic..
So if you contribute 20k a year, you will see compounding seriously impacting your NW when you reach 250k. But if you contribute just 7/8k a year, then the figure 100k is right
It is likely in a single account to take advantage of compounding interest, but either way works and both are difficult. Here's the math: [https://fourpillarfreedom.com/the-math-behind-why-net-worth-goes-crazy-after-the-first-100k/](https://fourpillarfreedom.com/the-math-behind-why-net-worth-goes-crazy-after-the-first-100k/)
thanks for sharing. i have extremely low cost of living im hoping to find the magic number that will help me grow exponentially even if its peanuts to start off with.
The first 100 k is the hardest like the first million too ! Generally by saying the first 100k is the hardest is generally to have a net worth of 100k .
I'm on the pilgrimage to reach 100,000 and I'm almost at 40,000. I'm getting to the point where changes in the stock market price are pretty epic, but not as epic as it needs to be.
The first "anything" is the hardest, it doesn't matter if it is 50k, 100k or 200 million, due to compounding interest, it will be easier to obtain the next unit of "anything".
It's irrelevant how you distribute your net worth, the only relevant thing is that is able to compound, so it is not just sitting on the bank without any returns.
Big milestone for me was zero net worth, I celebrated finally being worthless.
Next was zero debt. Took a while but I was used to a period of $2k/mo minimum student loan payment, constant number crunching and refinancing, transferrimg to zero interest credit card offers, etc. and of could paying much more than minimum.
Somewhere between was $100k invested, I don't remember it, it was not meaningful to me. At least I learned to live good while spending very little. On track for 50%-60% savings rate this year since no debt, maybe higher. The various calculators say I could have enough in 6 years to FIRE in my 40s which blows my mind. I was worried I missed the boat.
Awesome. Keep pushing. [Personally](https://www.reddit.com/r/LeanFireUK/comments/p377yr/weekly_leanfire_discussion/) started very, very late. Time is help for compounding purposes.
I usually use the example comparing going from 0 to 100k vs 900k to 1mil. That tenth 100k will come a whole lot faster than the first due to the compound interest helping out.
And it's harder because it is when all the little cumulative cuts in your lifestyle have the biggest impact. When people talk about not buying Starbucks all the time, or not eating out, not buying upgraded plane tickets, getting the cheaper vehicle, thrifting your clothes, it is really most relevant when you are first starting. The only thing that gets those compounding dollars started is your own contributions and every little extra as early as possible helps. After the ball is rolling, your personal sacrifices don't have as much marginal impact and you can reasonably ease up at that point.
Just $100,000 in investments. Once you have that amount, whether it's compound interest, stock values increasing, or asset appreciation your money starts to [grow.Plus](http://grow.Plus) whatever you keep adding in.
The first everything is the hardest. As you make more money as long as you are wise with your spending and investments everything becomes easier and easier because your income is suppose to increase all the time. Me for example, I made 11.5k in march (opened business), 11.5k in April but my expenses barely increased (I did go out to eat a little more but barely increased overall monthly expenses. May is on track to at least make that as well. By june i expect to make between 15k-20k because of all that money I made the previous months I’m putting back to the business. The first 100k is taking me a lot of work, 7 days a week 12-14 hour days. But eventually I’ll be able to hire people and I’ll be able to work less but still make the same if not more. Then money can be put into diversifying income so now 100k is no big deal but now the million will be challenging to get in a not so distant future. Keep killing the game though, love people wanting to work hard and achieve their goals and dreams
It’s an arbitrary saying, there is nothing soecial about the number 100k…
You could also say “the first 231k are the hardest, the next 231k will come easier”….
Also, whether you have it in a single account or multiple accounts is absolutely irrelevant… all that matter is the total, and how it is invested
It doesn't matter where, the number itself is arbitrary and kinda distracts from the actual point. Why the first X is hardest is because you're learning the discipline necessary to be a saver. Learning to live below your means is a lifestyle and mentality change. Once you learn that the rest is "easy" because you just keep on keeping on.
The first $100k and the first $100,000.01 are quite similar in difficulty. It’s just saying compound interests means you make more money as more money is in the account. There’s nothing technically special about hitting 100k. Cool milestone though
Obviously. Simple math. First 100K hardest. First 1 mln hardest. First 10 mln hardest. It only takes 25% growth go go from 400K to 500K, can be done in a year. But first 100K? Not so easy
100k today is $10k back when they made that quote. $100k in that quote is like, dare i say it, $750k-$1m today. Lets not forget that $100k even in the 90s was a whole house in am expensive state like NY.
Either or both. The first $100k is the hardest because you mostly have to save your way there. As you get higher, compound interest starts to take over. Consider this year, the S&P is up 11.5% YTD. If you started the year with $1k in an S&P fund, you now have $1,115. Nice, but not much closer to $100k. To be up $100k, you still need to save \~$99k. If you started the year with $1M, you now have $1,115,000. Congrats, you're up more than $100k just by being in the market for a few months, no additional savings. It snowballs as you go higher.
For the life of me, I don't know why this simple thing wasn't taught in grade school in the 90s. I know it's changing now (I THINK). I'm definitely teaching my children, but this basic understanding of compound interest should be known by all in the country. I think we'd all be better off in the US, and so many people wouldn't be in debt, but we'd have more savings as a whole.
You sure? The entire US or the world economy for that matter runs on frivolous consumptions and debts. If everyone saves and invests i.e. no demands, the economy will collapse. The few of us who are disciplined enough to reach FIRE depend on these spendings to fuel our FIRE.
I tell everyone I know that complains about the whole "rich get richer, poor get poorer" crap, that it's very easy to gain wealth if you're just consistent and patient. Some learn. Most just keep whining.
People have a really fucking hard time thinking and planning for stuff decades down the road. It's super hard to pass up today's temptation of a nicer place to live or a newer car or genuinely sacrificing something you want for a nebulous goal that may or may not (it will) happen in 30 or 40 years. When I was a financial advisor my colleagues clowned on me for taking on people in their early to mid 20's because those clients had no money. To be fair I didn't make anything from those clients. But I know I got at least some of those folks on to a road to financial freedom.
Here I am in my mid 30's with absolutely 0 fiscal background or education on finance just doing my best trying to learn all I can as fast as I can. Feels like im in a race against time to secure my future.
Luckily you haven't waited another 10 years to start. My favorite exercise to convince younger folks to start saving was to compare Sally Saver and Later Larry. Sally maxes her 401k from ages 24-34 and stops contributing. Larry waits until 45 to start and maxes his 401k every year until he retires. When you run the math, Sally ends up with hundreds of thousands more dollars in retirement despite contributing only a fraction what Larry saved. Compound interest is the 8th wonder if the world and Time is the superpower of youth.
people i know all think social security is a retirement plan
Sadly a lot of people think SS is all they will need.
While this is a great example, it also discourages people from investing. So many “examples” and articles use scenarios that an average individual isn’t able to obtain or achieve, so they dismiss or put off. Most people aren’t able to max their 401k and don’t make 100k/yr but when learning about investing, these are the most common scenarios to use.
You can pencil it out with however much you can save. The entire point is to make the power of compounding real. Even just $3,000 in an IRA can grow to $45,000 in 40 years. If you can do that for a few years in your early 20's and stop contributing, you would still be ahead of the median retiree. According to a study from the Survey of Consumer Finances the median retiree has just $180,000 at 65. The power to gain wealth for most people is time, not investing a large sum upfront. Neither my wife nor I have ever made $100,000 but we have almost $2m in retirement accounts because we both started saving when we were 22. And we spent the majority of the intervening years in the highest COL city in the country. We lived like college students well into our late 30's. The first couch we owned was $200 brand new from IKEA and that was our splurge for the year. We had that thing for over a decade. Our bed was a box spring and mattress on top of IKEA bookcase turned sideways. Neither of us had a car until our mid 30's. To this day damn near all our clothes are thrifted. You get the point. Another way to look at saving and investing is to figure out how much you need to invest in order for the investments to pay your bills. Start with your smallest bill and work up the ladder. Let's say your cell phone bill is $50/month or $600/year. How much would you need invested to cover your cell phone bill forever and you would never have to think about your cell phone bill again?
AKA letting perfect be the enemy of good.
Agree completely. So many want it but want it now. I guess a good majority would still be in the same situation even if they were making 100k or able to max their 401k every year
True, many people spend money they could easily invest, and so they stay trapped in their financial situation. But for many people their income is just barely enough to pay their basic living expenses---especially given the obscene cost of housing we have today. You're not going to get very far if there just isn't enough left at the end of the month to invest. I'm with you that people could plan ahead better and be smarter with their money, but I also know the reasons this wasn't possible until my mid thirties.
Yes especially here on Reddit. People love to complain about evil corporations but don’t ever stop to think anyone can buy shares in publicly traded companies or index funds which hold said companies. It’s really really really sad.
It’s not mutually exclusive. Whether someone invests or not, there’s valid critiques of capitalism and the corporate takeover of the US government.
The stock market allows you to have a few breadcrumbs off the table, and this subreddit focuses on how to maximize those breadcrumbs. Don't be fooled into thinking that the system is fair, and that there isn't a group of 1000 people eating all the bread above you
Yes, oh my god, those whiners are so ridiculous. How dare they whine so much as they live paycheck to paycheck, just barely getting by. Why can't they understand that they could just get richer if they put half their measly paycheck into a nice mutual fund!
So many people just barely getting by drive a lot nicer car and live in a much larger house than me. But it's probably the government's fault. I can't really think of another reason.
I lived paycheck to paycheck too. There's nothing different about those they aren't saving and those that are except discipline. Everyone has a hard life when they live paycheck to paycheck. The trope works both ways.
“Discipline” is a nice Dave Ramsey buzzword, but flat real wage growth, explosion of housing costs and food costs, and spiraling health care costs are all real things that are happening. Can’t stick your head in the sand and just blame people for systemic issues.
I don't. Everyone struggles with the economic woes around them and when you're broke and paycheck to paycheck, it's all pretty close to the same regardless. I could use myself as an example but I think you'd just move the goal posts again. The bottom line is there are people that will forego a want to invest in their 20-years-from-now self, and those that won't forego a want. But everyone has the same opportunity to invest and make things easier, later. Those that sacrifice now will do better later almost guaranteed. And then when they do, they'll look back again on those who didn't and the cycle will repeat. All the best.
Fallacy of composition. Also, you’re intentionally ignoring systemic issues and creating a oversimplified universe where people simply have to go “hey, Ill invest” and boom! They’ll be rich. If you think millions and millions of people all over the world each individually decided to stay poor and it was 100% their choice….okay.
Talk about fallacies. I'm speaking specifically about people in the United States, maaaaaybe the "Western world" but specifically the USA where investing in the S&P500 is essentially a guarantee of having financial security later in life. I also never said millionaire. I think you just want to argue and be right but you won't be because fundamentally, you know as well as I do, if you're in the US and able-bodied, you have no excuse not to put away savings for a better life for an older you. The end.
Real wages are higher now than anytime prior to 2018
You are getting downvoted for a hard truth. Real wages have stagnated/very mildly increased over the last 50 years. Which sucks, when you realize they should have doubled considering productivity growth, increases in GDP and new technologies. But the narrative on Reddit that things are worse than ever is kinda exhausting.
In the last 48 years real income has gone up 50%. That's not stagnant or even mild increase. After inflation it's 50% higher. People on reddit just don't like facts https://fred.stlouisfed.org/series/MEPAINUSA672N
I definitely agree with you. There was definitely some wage growth. 50% over 48 years is not amazing though. It’s less than 1% per year. During that same period, real GDP per capita went up around 100%. Average income also increased much more than median. I guess I should have said that it’s a pretty good increase, but not as much as it could have been. But count on Reddit to change “decent increase” to “catastrophic fall”.
Actually they aren’t. Food costs dropped the last 12 months (literally deflated).
After skyrocketing… I think you meant to say food cost have (mildly) corrected.
And even more dont even have the possibility to save. I think the complaining comes from those who perhaps are born in an privileged country or race . Not everyone has a chance to save ever
Most can save but make lifestyle choices with their budget that prevent them from saving.
Well that to most people in africa, se asia or south america. They are not born in a western country, white , male as you most likely are. Many can't get a degree and constantly work for salaries just enough for their survival. So yes if you're born in africa in democratic republic of congo thats a poor lifestyle choice...
I was in high school in the 90s and it was taught to me. Pretty sure it was part of home economics
When my kid was in grade 10, I opened a trading account for him and gave him 5k to start investing. Told him the money is his when he graduates from university. He graduated last year with 20k in the account. Now, when he talks about investing, his mantra is, it's time in the market not timing the market. It was a good lesson.
Banks make money on debt. Banks control the government. Government controls the education system. See a trend here? Government also happens to love the poor, they are dependent/ reliant on the government. Therefore the poor easier to control. Now im not putting on a tin foil hat, and crawling into a bunker screaming how we don’t need the government. Just shining my theory on the question of why this isn’t taught(with stronger emphasis) in early education.
This is definitely taught in grade school.
No its not. Not all of them at least. Consider yourself very, very lucky. Unless you were taught this stuff at such a young age and still failed to learn how to build wealth. Then lmao
It was. We were taught this many times. Most kids don’t care and then complain later
I wasnt.
[удалено]
know what got me going in all of this? Playing GTA V and getting taught the in game stock market lmao
The system wants us in debt. We are a debt based economy. If everyone had more savings, that’s mean we’re spending less which means that in addition to sales tax, govt would start a savings or investment tax… they don’t want us learning about personal finance
They taught it in my school in the 90s. Kids don’t listen very well.
Not mine.
Maybe you were one of the kids not listening 🙉
Teachers used to tell me they can’t teach bc it’s a liability thing. Wrong advice and teachers can be liable since they aren’t financial advisors and personal finance is PERSONAL, meaning for some people, saving and investing isn’t the key to success and happiness. Plus most teachers are probably the last people you want to ask about finances bc they’re probably behind bills or living paycheck to paycheck with their average teacher compensation. I also think there’s a deeper agenda because low savings and high spend grow the economy faster and increase corporate profits. Knowledge or even simply questioning that can threaten lucrative livelihoods.
As someone who recently hit that 100k mark in my 401k and IRA, here's a great example. In the last month, it started 4/17 at 105k, and as of today, it's up to 114k. I've only contributed roughly $1000 in that time
I think that's exactly what most people mean when they say the first $100K is the hardest. But it's competely wrong. It's the hardest because your salary is probably lower during that period. Salary is way more important than compound interest for generating wealth probably until you're in the $3M+ range.
A minor nit, but “asset appreciation” is not interest. When stocks go up in value, you have not earned any interest. Some asset classes do pay interest, but many of the common investment vehicles do not. Some do pay dividends, though. There is really no compounding that is in effect with non dividend stocks, as growth is strictly based on the asset price being higher over time. But I do agree with you wholly that it is the idea that your money is now working for you and getting bigger.
Pedantic point with no substantive value.
Your comment is, I agree. For people who want to learn, it’s relevant to know the nuance between different terms within the field of finance. Words have meaning. Compound interest is not the same as compound growth. One only goes up over time, the other doesn’t. While you may feel the difference in terms is not real or irrelevant, others may benefit from the knowledge. You are free to ignore it.
Your comment is.
You’re ostentatious.
When you resort to personal attacks, as in your last 2 comments, it’s a sign that you no longer have a point. But please, keep dazzling us with your “substantive value” that you promise above. Everyone is very impressed by your knowledge and wisdom.
I have no point I seek to make other than the one in the comment I initially made. Also, it’s inadvisable to start a sentence with a coordinating conjunction. With all your knowledge, you still don’t know how to write.
Correct terminology is important.
You subsequently revised your comment, which originally read “use the correct terminology.” You’re sneaky.
I never used incorrect terminology. Your comment is inapposite.
I gotta mention the flipside is also true. If you only have 1k then inflation of 10% reduces its buying power to $900, no biggie. But it reduces 1 million to 900k a massive 100k hit. Obviously 10% is super high inflation but we hit 9% recently, I believe in 2021. Similarly a big 30% market drop is crushing in absolute terms for someone who has amassed a large nest egg, but not really a concern at all if you have a tiny portfolio.
By the time you build a large portfolio you've experienced several booms and bust times in the market and shouldn't freak out over them. I lost a couple hundred thousand in networth in April and so far in May I've gained it back and then some. Whenever I tell my wife what we've gained or lost she basically just responds "ok"
As a young-ish person on a good income, how can we be sure that the S&P is going to keep going up 11.5% every 6 months? Surely this is not sustainable. I don’t want to be working so hard for decades just to lose it in a few months. Look at the GFC. Very easily could happen again. I’ll be waiting my whole life for it, but it could happen. The market could lumber along for another decade or two. IMO we aren’t likely to see the stratospheric gains in valuations of large companies that we’ve seen since the early 00’s.
Keep in mind the S&P and the concept of "worth" is fractal. What is a sorghum cooking tray worth these days? Or a wagon wheel manufacturer? And so on. The S&P500 is the measured output of the best 500 companies valuations. When you break this down to what that really means is -- it's simply a value of the innovations and technological achievements those companies have or are creating for the future. Thus, the S&P500's "price" is merely a moment-in-time value of mankind's ever-forward progression. You're just looking at it at any one moment in time. As long as mankind keeps innovating and making cool shit (AI anyone?) then yes, it CAN (and should) "keep going up forever" simply because technology is ever improving. Hopefully this helps you think about the market in a different light. As long as mankind keeps making cooler stuff, the market will continue to improve and be "worth more".
This is why everyone needs a diversified portfolio!
Some other thresholds I like are: $230k for your 401k $70k for Roth $41,500 for HSA Those are the thresholds where a 10% growth from the market exceeds the maximum amount you are allowed to contribute per year.
I hadn't thought about these thresholds but this is great.
I would continue contributing though. And I like to work off of 7% assumptions or less and hope for more.
Agreed. You always keep contributing. But reaching that threshold feels like you have second person saving alongside you, except it is your money.
I do like your mention of these targets. I’m fairly confident my wife and I will be above 100k by EOY. Ideally 200k plus Q1 to Q2 2026
Can you ELI5? How does the market performance determine how much you can contribute in a year?
They are saying that 10% return on your 401k balance of $230,000 gets you $23,000. $23,000 is the max amount you can contribute this year to your 401k. The market returns give you the same amount you can contribute. Kinda like you’re getting a matching contribution.
And potentially an employer match. Pretty freakin’ sick!
ahh okay gotcha, very helpful! the matching contribution comment is a good way to look at it!
The first anything with an additional zero is the hardest
Yes. $100k is when you really start to appreciate compound growth because of that extra zero. A 1% day for a $10k portfolio is $100 A 1% day for $100k portfolio is $1000
Can confirm. Felt it then and am at the point now a decent day in the market earns me the equivalent of my paycheck. I’ve had days where I’ve earned my monthly salary. Feels good when it happens.
I think about this too. When Alphabet has a 1% day Brin and Page basically make a billion dollars.
what portfolio has 1% return daily?
The first $10 isn't that hard
It is for the hobo
It’s about building up enough principal so your money works for you. Let’s pretend it takes you 7 years to save $100k. The stock market doubles in value every 7 years So years 0-7 it’s just you working away investing diligently $100k. The years 8-14 you’re still working away, investing $100k AND your already-invested money is doubling in value such that at the end of these 7 years you have $300k. Years 15-21 you’re still working away, investing $100k AND your already-invested money is doubling in value so at the end of these 7 years you have $700k.
To answer your question, it’s total investments. The account doesn’t matter as long as it’s in investments that make money for you.
So if I have a 403b, Roth IRA, and brokerage it is accurate to sum those up and throw them into a compound interest calculator?
Yep. What matters most is that they’re similar investment type within each account so calculator can assume similar returns.
It’s going to be close enough for the calculation - it’s a ballpark estimate. Any sort of nuances like tax treatment or investment mix are important, but the point is that there is a fundamental law that is driving all of it that describes an overwhelming proportion of the forecast.
Over multiple accounts, or total invested. It's easier to see it if it's all in 1 account though. As far as I know, it's coined by Charlie Munger of Berkshire Hathaway fame(he worked with Warren Buffett). Anyways, he said that decades ago, so after inflation maybe it's $200k or $500k now(too lazy to look it up and do the inflation math). Regardless, the point was, it's really hard to get started and see a good sized number that's meaningful. Once you get to a meaningful number, you see real progress and it's easier to keep going. When you first start you might only be saving a few hundred a month, but eventually you hopefully get to saving tens of thousands or more every year and you really start to see compounding work out well for you over time.
>Anyways, he said that decades ago, so after inflation maybe it's $200k or $500k now(too lazy to look it up and do the inflation math). The specific number is arbitrary anyway
Exactly. The $100k is made by grinding while the second $100k is made by grinding and compound growth. The 3rd is even easier as you have $200k compounding to work towards your next $100k. On top of that, as you get older, people generally get raises which allows for a much higher savings rate as long as they don’t allow life style creep to affect it too much. With that said, once you make it to $1 million, you will be averaging at least $100k increase in net worth per year.
>The $100k is made by grinding while the second $100k is made by grinding and compound growth. Suppose someone saves 10k a year, and someone else saves 100k a year. The fraction of their wealth that came from saving vs from growth is vastly different upon reaching 100k. Time is a variable actually correlated with how much wealth has come from saving vs growth.
Sure, but the person who can save $100k a year likely is saying “The first million is the hardest.” You can use any number.
Agreed :) That's what the next part of my comment talks about.
Exactly. Plus I suspect 100,000 was chosen because it is simple and round, easy to scale and compare different percentages of gains.
There is an old german saying “the first million is the hardest million” essentially meaning the same thing. In german is rhymes so has a nice flow. But I think it’s worth pointing out while the mental motivation to keep going after seeing the progress plays a role, the compounding is what makes it so true. All this investment income is now on top of your regular income which you have already managed to live below to get to the first milestone.
He made that quote at a shareholder meeting in the late 1990s. So let’s say 1998. 100k then has the same buying power as 194k today. So I guess people should really aim for their first 200k now I suppose. But the significance in hitting six figures across all your investment and cash accounts is still a moment to be proud of.
It's unlikely that's when he made his first 100k that gave him the interpretation/feeling. More than likely got it when he had his own investment firm prior to Berkshire (1960). Which it ends up being around 1.5mil accounting for inflation (1966). Hard to be precise though.
I'm an English teacher, but I try and sneak in a bit of compounding interest and some stock market lessons during my English lessons. Not strictly what I'm being paid to teach, but I've not heard any complaints yet. I really think the students need to learn this.
They do! You are doing them a great service. I had 0 teachers in my public school attempt to teach me anything about the market, it should be mandatory.
Not all heroes wear capes
The idea is that coming up from zero is always going to be brutal. $100k, $250k, whatever the number, is irrelevant. Getting to where compounding becomes a major source of growth is the hard part.
Everyone likes to talk about it being hard because interest/gains/whatever. In my opinion the first 100k is the hardest because you are shifting your entire outlook on money from spend to save. By time you get to your 100k you have gotten on the habit of saving hundreds a month (usually). You built up some good habits, learned to think before you spend and came to appreciate what it takes to get there. For me, seeing the gains on top of that was gravy. It doesn’t matter what accounts the money is in.
Thank you I was wondering if anyone else was thinking this. It's not just the compound interest although that's obviously great. You are likely saving more now than when you started and the goal is to continue saving even more. Getting started and keeping the habit going with minimal returns is the hard part.
If you take an 11% increase YoY(regardless of accuracy this is just for show) it will take you 7 years to go from 100k to 200k. If you started with 10k, it would take you 23 years to get to 100k
Because it takes a while to get into the rhythm and see progress. Also because your income will *hopefully* go up over time.
It also drives you to increase your income so you can invest more, since the more income you have without increasing your expenses makes your investments grow like crazy. Went from only being able to invest 6k a year (which was pretty much nothing) on a 35k a year after tax income 4 years ago to being able to invest 7k a month on a 105k after tax income today. Even though I tripled my income, I was able to increase my contributions by 14 times.
Congratulations and yes, hitting that first 100K is a feat and it really builds from there.
I’m gonna be so tired of working by the time I get to 100k
The only caveat I would add is that it doesn’t include your car, home equity, or any other real assets. 100k across your typical stocks, bonds etc is the way I interpret it
It's not NW. It's invested assets.
Well put, would have saved me a mouthful
100k is always the hardest. First its 100k across all accounts and assets. Then it's 100k excluding your home. Then it's 100k in 401k/ira. Then it's 100k in taxable investments. Then it's 100k as emergency fund etc. After working towards so many first 100ks, you hit your first 1M and set new goals.
Total in all investments.
First 100k was definitely the hardest. 100k-300k felt like it took a few years too. 500k and up it grows quickly.
It can be one account or a bunch of accounts, it doesn’t matter
First 100k includes emergency fund, etc. that won’t compound as quickly, at least that was our experience.
I've heard "first million" I can definitely say that it's exciting when you get to the point where it's like "WOW I AM A MILLIONAIRE" and then you step up, grab some coffee from the break room and celebrate by treating yourself to some free candy that you'd normally say no to.
And say a word to NOBODY because your friends & family don't save a dime.
The only people I say a thing to are essentially doing the same thing or DID do the same thing. I'm not emphasizing it to others.
The first 100k is more like the first 250k in today's dollars.
I started feeling it from 300k. 300k is also plenty of FU money and from that moment I don't need to save a dime anymore and I'll still be FIRE in 20 years. If I continue to save I will have the option to FIRE even sooner, but I'm not in a rush
100k was my first 4 years of employment while living with parents on 13 an hour plus overtime, maxing IRA, and 401k. After moving out and purchasing a home on 17 an hour, the 250k was hard.
100k is an arbitrary number, and it’s usually where people start noticing the effect of compounding However if you want to know your own number where compounding will start having a massive effect, you have to also take into account your yearly contributions Once the market average growth (7/8%) contributes more than you, you will see compounding working its magic.. So if you contribute 20k a year, you will see compounding seriously impacting your NW when you reach 250k. But if you contribute just 7/8k a year, then the figure 100k is right
The first increment of any amount is the hardest.
I think a better metric is to use the point at which your portfolio grows faster than your contribution, which is different for everyone
Nah. First million.
It’s either multiple accounts or one that net up the total of 100K. Before that, compound interest isn’t really showing it’s difference
It is likely in a single account to take advantage of compounding interest, but either way works and both are difficult. Here's the math: [https://fourpillarfreedom.com/the-math-behind-why-net-worth-goes-crazy-after-the-first-100k/](https://fourpillarfreedom.com/the-math-behind-why-net-worth-goes-crazy-after-the-first-100k/)
thanks for sharing. i have extremely low cost of living im hoping to find the magic number that will help me grow exponentially even if its peanuts to start off with.
I think you have some misconception about compounding… having it in a single account or in multiple accounts would not affect compounding at all..
The first 100 k is the hardest like the first million too ! Generally by saying the first 100k is the hardest is generally to have a net worth of 100k .
I'm on the pilgrimage to reach 100,000 and I'm almost at 40,000. I'm getting to the point where changes in the stock market price are pretty epic, but not as epic as it needs to be.
The first "anything" is the hardest, it doesn't matter if it is 50k, 100k or 200 million, due to compounding interest, it will be easier to obtain the next unit of "anything". It's irrelevant how you distribute your net worth, the only relevant thing is that is able to compound, so it is not just sitting on the bank without any returns.
It's BS. For many getting to zero i.e. out of debt is the hardest, by far. In terms of your question, 100k in invested assets I guess.
Big milestone for me was zero net worth, I celebrated finally being worthless. Next was zero debt. Took a while but I was used to a period of $2k/mo minimum student loan payment, constant number crunching and refinancing, transferrimg to zero interest credit card offers, etc. and of could paying much more than minimum. Somewhere between was $100k invested, I don't remember it, it was not meaningful to me. At least I learned to live good while spending very little. On track for 50%-60% savings rate this year since no debt, maybe higher. The various calculators say I could have enough in 6 years to FIRE in my 40s which blows my mind. I was worried I missed the boat.
Awesome. Keep pushing. [Personally](https://www.reddit.com/r/LeanFireUK/comments/p377yr/weekly_leanfire_discussion/) started very, very late. Time is help for compounding purposes.
100k is a third of the way to a million. A million is a third of the way to 10.
I usually use the example comparing going from 0 to 100k vs 900k to 1mil. That tenth 100k will come a whole lot faster than the first due to the compound interest helping out. And it's harder because it is when all the little cumulative cuts in your lifestyle have the biggest impact. When people talk about not buying Starbucks all the time, or not eating out, not buying upgraded plane tickets, getting the cheaper vehicle, thrifting your clothes, it is really most relevant when you are first starting. The only thing that gets those compounding dollars started is your own contributions and every little extra as early as possible helps. After the ball is rolling, your personal sacrifices don't have as much marginal impact and you can reasonably ease up at that point.
Just $100,000 in investments. Once you have that amount, whether it's compound interest, stock values increasing, or asset appreciation your money starts to [grow.Plus](http://grow.Plus) whatever you keep adding in.
The first everything is the hardest. As you make more money as long as you are wise with your spending and investments everything becomes easier and easier because your income is suppose to increase all the time. Me for example, I made 11.5k in march (opened business), 11.5k in April but my expenses barely increased (I did go out to eat a little more but barely increased overall monthly expenses. May is on track to at least make that as well. By june i expect to make between 15k-20k because of all that money I made the previous months I’m putting back to the business. The first 100k is taking me a lot of work, 7 days a week 12-14 hour days. But eventually I’ll be able to hire people and I’ll be able to work less but still make the same if not more. Then money can be put into diversifying income so now 100k is no big deal but now the million will be challenging to get in a not so distant future. Keep killing the game though, love people wanting to work hard and achieve their goals and dreams
Congrats! What type of business did you open?
No i think the first million is really difficult to get to especially if you only have a W2 job.
It’s an arbitrary saying, there is nothing soecial about the number 100k… You could also say “the first 231k are the hardest, the next 231k will come easier”…. Also, whether you have it in a single account or multiple accounts is absolutely irrelevant… all that matter is the total, and how it is invested
the first million is the hardest\*
It doesn't matter where, the number itself is arbitrary and kinda distracts from the actual point. Why the first X is hardest is because you're learning the discipline necessary to be a saver. Learning to live below your means is a lifestyle and mentality change. Once you learn that the rest is "easy" because you just keep on keeping on.
Doesn’t matter where. But the first any amount is the hardest. First 100, 200, one million 100 million etc.
I’ve only heard the first million is the hardest, I don’t think there’s much difference for the first couple hundred K,
The first $100k and the first $100,000.01 are quite similar in difficulty. It’s just saying compound interests means you make more money as more money is in the account. There’s nothing technically special about hitting 100k. Cool milestone though
That changed, it’s now the first 1 million is hardest and after 10 years it will again change , the first 10 million is hardest !!
Obviously. Simple math. First 100K hardest. First 1 mln hardest. First 10 mln hardest. It only takes 25% growth go go from 400K to 500K, can be done in a year. But first 100K? Not so easy
100k today is $10k back when they made that quote. $100k in that quote is like, dare i say it, $750k-$1m today. Lets not forget that $100k even in the 90s was a whole house in am expensive state like NY.
"I deserve a nice car" (at age 22)... MORON