Financial Freedom Starting With $100k?

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Charlie Munger's quote:

The first $100,000 is a bitch, but you gotta do it. 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 $100k?

Compounding early on will add up in the long run. A chart from Monty Fool that illustrate the effects of compounding $100k at certain age with an annual interest of 7%.

The earlier one saves their first $100k and able to invest it to earn more they will have higher odds of reaching $1 million sooner. It is that simple.

Why $100k So Hard?

To be honest starting out at zero is always difficult. There needs to be some form of effort, luck, and skills that is necessary in order to make money. When starting out at zero it will require the simplest form of earning money by working in a 9 to 5 job. Have an income and saving as much as possible to reach to $100k is quite challenging for most.

As of June 2022 the average salary based on government data is around $56k a year. With taxes and spending for necessities you can imagine that it will take at minimum more than two years to save to $100k. Of course it will also depend on luck for person and what contributions they can make to earn additional income, but bottom line it will take significant time to earn the $100k.

Present Value of $100k

Charlie's quote of saving $100k as quickly as possible is a testament of how useful it truly is. He himself has a net worth of over $1.3 billion. Yet realize he probably made the quote many years ago and since then the value of the dollar has depreciated.

If we use www.in2013dollars.com for a rough estimate of $100,000 in 1970 as a starting point that amount in today's 2022 present time is equal to nearly $764,000. This is assuming around the time Charlie obtain his first $100k but of course he likely did it even sooner. In any case that would mean for us to get the same buy power of $100k as when Charlie made the quote it would require over 3/4 of a million of today's current dollars.

I am not trying to be negative here but applying practical values in today's time period. The push for the first $100k today may not be as strong as in the past but its a good start. To really get to where Charlie is saying when it comes to financially free that buying power is equal more towards the $1 million mark rather than $100k.

None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!



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13 comments
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Starting to be great is not an easy thing but a gradual step

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One step at a time. Got to start it first which often time is the hardest.

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Yeah, you are right. It's often hard to do sometimes

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It's true that first 100k is a B a BIG ONE as you're most likely going to change a lot of your old bad habits in the process which is 90% of the real stuggle here. Once you hit that 100k though even if you did something very minimal low risk at 3% you'd still have 3k a year which would most likely be taxed at a lower rate so it's really like replacing 3,5k of your income or about a months worth of work. Compound that while now keeping up those same habits and that next 100k is going to come much faster and easier now replacing 2 months of pay and so on.

It's hard to see the compounding in action at first because 3% of 10,000 doesn't add up to much day to day. Once you hit that 100k+ it starts to show as you're maybe now covering the cost of a meal essentially for free each day. It's tangible and something you can really see.

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Slow and steady. Put it in another example if I was to earn $1million overnight I may not spend it wisely as I considered it easy to earn it. On the other hand if I spent 30 years to earn $1 million I won’t spend it all that quickly. !WINE !LOL !PIZZA

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It is the starting point to see the full effect of the snowball in motion.

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I think it's more symbolic and I agree that 100k in the past is worth more than it is today. It is a milestone and it's a place where you can see a substantial gain in your income with compound interest.

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