Saving your first $100k can feel like an uphill battle, but with the right strategies, it’s entirely achievable. Charlie Munger, the vice chairman of Berkshire Hathaway, famously said that the first $100,000 is the hardest to earn. Once you reach that milestone, the journey to building wealth becomes significantly easier. In this blog post, I’ll share practical steps to help you accelerate your savings and investments, just like I did.
Increase Your Savings Rate
The first step to saving your first $100,000 is to increase your SAVINGS RATE. Essentially, your savings rate is the maximum amount you can save each month, which directly correlates with your income. If you’re earning $3,000 a month, that’s the absolute maximum you could save if you spent nothing at all.
To increase your savings cap, you need to focus on earning more money. Here are a few strategies to consider:
- Ask for a Raise: One of the quickest ways to boost your income is to negotiate a pay rise at your current job.
- Switch Jobs: If your current employer isn’t willing to increase your salary, consider moving to a new organization. Many people experience pay jumps of 30-40% when changing jobs.
- Side Hustles: Explore side gigs or freelancing opportunities to supplement your income.
While I initially focused on increasing my salary, I also dabbled in side hustles. Remember, your job should ideally be a platform to learn and earn.
Diversify Your Income Streams
Relying solely on one source of income can make saving your first $100,000 a long and grueling process. To combat this, consider diversifying your income streams.
For instance, once I reached a certain salary threshold, I leveraged my income to purchase my first investment property. This property not only served as my home but also generated rental income, further increasing my savings cap.
Additionally, I tried various side hustles. Although I faced many failures, each setback taught me valuable lessons that I applied to future ventures. Embrace failure as a stepping stone toward success.
Live Below Your Means
Living below your means is crucial when saving for that first $100,000. However, I prefer to use the term “creatively live below your means.” This doesn’t mean depriving yourself; it’s about making smart financial choices.
For example, I took advantage of living at home for a few years, which allowed me to save significantly. If you can’t live with family, consider creative solutions like renting out a spare room or finding a roommate to share expenses.
Analyze your biggest expenses and see where you can cut back without sacrificing your lifestyle. This could mean shopping smarter, finding cheaper alternatives, or even re-evaluating subscriptions.
Monitor Your Spending
To effectively live below your means, it’s essential to understand where your money goes. I recommend using a spending tracker to visualize your expenses over a year.
By tracking your spending, you can identify areas to cut back and increase the gap between your earnings and expenses. The more you save, the easier it becomes to invest.
Here are the trackers that I use:
- MONARCH MONEY – great for couples
- Empower (Personal Capital)
- You Need A Budget (YNAB)– if you like zero-based budgeting
I also have a Financial Health Monitor if you want to manually track your money.
Invest Early and Often
Once you’ve saved that first $100,000, the next step is to let your money work for you. The power of compounding is incredible; it makes accumulating wealth much easier after you hit that initial milestone.
For instance, if you invest $100,000 at an 8% annual return, you could earn $8,000 in the first year alone. This compounding effect accelerates your wealth-building journey.
You don’t need to wait until you have $100,000 to start investing. Many platforms allow you to begin with as little as $1. Consider using investment apps like Trading 212, which allow you to trade stocks, ETFs, and more without hefty fees.
Conclusion
Saving your first $100,000 may seem daunting, but with focus and determination, you can make it happen. By increasing your earnings, creatively living below your means, and investing wisely, you’ll find that building wealth becomes a much more attainable goal.
I’d love to hear about your journey toward financial independence. What strategies are you using to save your first $100,000? If you’re looking for more tips on cutting expenses without sacrificing your quality of life, check out my dedicated video linked below.
Thank you for reading! Don’t forget to subscribe for more financial insights, and I’ll see you in the next post!
