Achieving Your First 100K

Jun 29, 2024

Achieving Your First 100K

Introduction

  • Focus on earning your first 100K before aiming for a million dollars
  • Two reasons why this is crucial and four strategies to help you

Critical Mass Threshold

  • Money compared to a nuclear bomb: chain reactions
  • Compounding returns need critical mass (100K) to be effective
  • Example: Investing $15K/year in S&P 500 with a 7% return
    • Reach 100K in 5.66 years: 85% cash contributions, 15% returns
    • Milestones after 100K achieved more rapidly
    • Going from 900K to 1M: 62% comes from compounding returns

Psychological Barrier

  • Personal story: Emotions upon seeing account hit 100K
  • Financial habits formed by age seven
  • Changing mindset to believe wealth is achievable
  • Seeing 100K can break mental barriers and limiting beliefs

Strategies to Reach 100K

1. Creatively Live Below Your Means

  • Emphasis on "creatively" to avoid deprivation
  • Compare to dieting: Deprivation leads to failure
  • Use Pareto Principle (80/20 rule)
    • 80% expenses from 20% categories (housing, transport, food)
    • Reduce big expenses rather than small purchases

2. Automate Your Finances

  • Reduce decision fatigue
  • Create automations for saving, investing, and bill payments
  • Personal automation example:
    • Income split to high-yield savings, emergency fund, investment accounts
    • Credit cards paid off automatically
  • Run a free challenge on July 1st for automating finances

3. Increase Your Savings Threshold

  • Your savings max out at your income
  • Increase earnings to save more
  • Tips for raising income:
    • Prepare for performance reviews (keep "win" folder)
    • Biggest raises often come from switching companies
    • Explore high-income side hustles based on personal strengths

4. Learning New High-Income Skills

  • Ideas for side hustles based on skills (social media, cooking, finance)
  • Tips on monetizing talents or learning new skills
    • E.g., tutoring, classes, Google free courses

Conclusion

  • Feeling stuck: stop certain middle-class habits preventing wealth
  • Link provided for further learning on this topic