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Why the First $100k is the Hardest

Estimated Read Time: 2-3 Minutes

When you ask millennial’s, what is your number one financial goal in life, most will answer, “To be a millionaire” or something similarly vague and lofty. What most millennials fail to understand is that it can be hard to become a millionaire, let alone accumulate $100k in a short amount of time.

After talking with many people that have a higher net worth, I’ve come to the realization that the first $100k in savings is the hardest to reach.

In this blog, I want to focus more on the math and why compound interest should be utilized to its fullest extent (especially for people under the age of 30).

We are going to look at Bruce’s financial situation. Bruce, now age 52, saved $10,000 a year for the past 32 years, and his investments got 10% per year.

The far-right column lays out of how many years it took Bruce’s investment accounts to reach the next $100k milestone (all columns to the left of Bruce’s are for demonstration purposes at various percentages):

Take a look at how long it took for Bruce to accumulate the first $100k. It took over 7 of his past 32-year plan, or 23% of the time on his chart. This is basically because in the first few years while he was investing, the amount of money invested was way more important than the rate of return he was getting.

For most millennials, they get discouraged when wealth accumulation doesn’t go faster.

To throw some salt in their wounds, they see their friends buying new cars, big houses, and traveling to wherever their heart desires.

It’s easy to compare yourself to others, but the nugget often lost when comparing yourself is the fact that Bruce can now retire at the age of 52 with $2,000,000 in his investment accounts. The friends that are buying cars, houses and traveling all the time won’t ever be able to fully and comfortably retire, and their life expectancy will be WELL into their 80’s if not 90’s…

…that’s a long time to be working.

Here are the 2 important lessons that not only millennials, but everyone can learn:

1) The first $100k is the hardest, and

2) Don’t be discouraged when it takes longer than expected to get to $100k.

Once you hit $100k, it gets easier, and easier, and easier. Just make sure you have a good investment advisor that can give guidance along the way. At Values First, we can give helpful insight on things like building a retirement plan or what type of account to put it in.

Give us a call today to see if we can make a difference in helping you to accumulate your first $100k and reach your retirement goals.

Authored by: Benji Nunn, CFP®, CKA®, President

This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. The investment performance in this blog is for illustration purposes only and does not represent a guarantee or estimate of future performance.