I was very fortunate to have earned my first million dollars in my early 30s trading Tesla and Nvidia stock both have more than 10x my initial investment over the course of just a few years but there's a big secret behind this sudden financial success that I hav't really share with anyone which is all this Fortune actually just came from $100,000 seed money I might be right one or two times picking the right stock at the right moment but not that would have happened if I haven't got that one $1,000 in the bank in the first place as a late great Charlie Monger also famously said the first $100,000 is a but you got to have that no matter what it takes aim for the first $100,000 so in today's video I'm about to break that down into four principle why 100,000 is probably the most important Financial milestone in your life at the end of the video I should also include some of my own experience and insight on my own journey to help you achieve yours now the first principle why $100,000 Mark is so important is a scale of capital what I mean by that imagine you have $10,000 to invest this 10% return one year later your investment grows to $111,000 resulting in a profit of $1,000 also many of us will happily take that $1,000 profit let's be honest with ourselves that's not really a life-changing amount of money the average US household income is about $75,000 so that $1,000 only adds up to 1.3% of the average annual income however is a $100,000 investment and the same return a much more substantial amount of money that added return will have material impact on both your life and on various financial decision you can make despite the same risk and same time frame The Profit increased tfold with a larger Capital illustrating how scale of capital can really impact the absolute dollar of return under identical market conditions essentially it takes money to make money the second principle of why $100,000 truly matter is the compound interest which is often d the ace wonder of the world why is that well as long as you leave you a capitalistic word any money you borrow you pay interest and any money you lent out generate interest simply put compound interest work on your initial investment where the principle and on the interest already earned creating a snowball effect over time that's why Wells tends to grow at accelerated speed so L that you stay invested let's use an example imagine our friend Adam save $10,000 every year and invested in the S&P 500 which has an average any return of 99.9% over the past 30 years after accounting for income taxes inflation potential fees from financial institution a realistic night return for typical investor might be around 7% under this conditions it would take Adam about 7.84 years to reach the $100,000 me keep in mind during this eight years Adam still have to save $10,000 each year and invest it in this account now if it takes almost 8 years to reach 100K how long do you think it would take Adam to reach $1 million well if you think 80 years you'll be wrong in fact with compound interest it would just take Adams 30 years and 9 months to get there and if your investment compound mostly rather than annually like many fixed income instrument actually do you will likely reach there even a bit sooner this is compound interest at play this each interest payment reinvested both your initial capital and the newly earned interest continue to earn interest for you this leads to exponential growth in your investment allowing them to grow at increasingly faster speed over time so even though it took Adam nearly 8 years to achieve the first 100, the time needed to reach the subsequent 200 S Milestone decreased significantly it will take him about 5.1 years for the next 100, and only 3.78 years for the next one after that as item saving grow reaching new M storms becomes quicker showing that building Wells becomes progressively easier in just under 30 years his net worth will reach $1 million by the year 35 his investment will be generating more than 100,000 each year and by year 39 he will have yet another medon so in summary it took Adam 30 years to accumulate his first million dollars and just nine years for the second Med all this time his strategy was simple he was disciplined consistently saving $10,000 each year and stay invested this demonstrate the powerful accelerating effect of compound interest over time see The yellow section of this curve represent the money Adam consistently saved and invest each year his principle of $10,000 invested on an annual basis what's amazing about this is that the growth rate of this return on his investment just keep on getting higher which eventually matches and then surpasses the amount he save each year a year eight his investment return grows as fast as he saves which notably happened around the time his networ is reached about you get hit the $100,000 that brings us to a crucial Insight if you haven't reached $100,000 the most effective well building strategy is to save diligently because when you have little money to starway it's often times far easier to save 10,000 than to consistently find multibagger stock investment trust me it's really rare than you think CH moner also emphasized that the beginning is the hardest part of wealth accumulation unfortunately money fell at this early stage recent average US household income of $4,5 180 unexpended at72 967 most family save just about $134 a month in contrast Adam in our example save $83 $3 monthly putting him almost six times Well ahead of the average saving rate average US family are only saving $134 monthly will take 25.2 years to reach their first $100,000 which a million dollar mark would almost seem impossible taking above 56 years highlighting the critical differences your higher saving rate can really make in the long run I know this may be different from person to person the point is saving $833 per month would have real impact on your family's financial situation literally for decades this brings us to our second key Insight getting that $100,000 early on equals to a housy margin of safety now what I mean by that when you're younger in your 20s or 30s there are so many absolutely necessary places you need to spend your hard earned money on but shpes of value sure a shiny new car or expensive closing is all seems fine right too many of us are quick to spend our hard earn money without considering the longterm consequences however this extra spending will inevitably delay your saving rate and delay saving can with tougher decisions later with family obligation and unexpected even arise therefore saving early means getting rich early which means you're less likely to have to choose between supporting family having an emergency fund and achieving your financial goal having a substantial Nest act means you do not have to sacrifice one for the other which is ultimately what really matters so this probably is one of the best example why you the audience of this video shouldn't in for just the average family I also heard people blame society government and inflation because of their financial difficulties which in many cases are true and unfortunate yet it gives us even more reason not to spend recklessly and avoid the need of instant gratification after all it's not just about reaching the financial Milestone it's about understanding the consequences of not reaching Zone on later note there is another Insight from my personal experience having $100,000 in your bank do open up more lucrative investment opportunities for instance bank will sometimes offer better investment opportunity with higher return for for high night Wars individuals very recently my bank helped me to invest in a series of structure note worth about 100,000k using a 15% any return is relatively low risk this is not an endorsement for any Financial product but my point is having access to professional Financial advice and the broader range of investment options becomes available once we have significant Capital enabling a more Diversified and potentially more profitable investment so just a recap on what we discussed today the first $100,000 is the most important Financial milestone because of four things what is a Tipping Point of a good skill of capital essentially it takes money to make money two taking advantage of compound interest as early as possible three to create a margin of safety for you and family in the future four a open doors for more investment opportunities not just talking about the importance of reaching $100,000 isn't really very helpful I made my first 100K during college and reached my first million dollars in my early 30s while working as a strategy consultant here are some of the proven strategy that work for me in the past 10 years I share with you a three step strategy that helped me save my first $100,000 the first one is to cut off any material things that is nonenal in your life for at least a couple of years in has a word leave below your means while I was 20 years old my parents bought me a studio apartment near my University that was when back when Toronto releasate Market wasn't that crazy was meant to be a university doy train from M braz it was Tiny it was like 280 Square fet I can't fit probably a double back and basically maros and I swear to God the first moment I L my eye out it I was like like let's rent it out we can actually earn some money out of it so me and my brother took $5,000 from our student loan and remodel the unit R up a pretty advertisement and R it out on Airbnb that was when their logo was still blue we I find another friend who own a house and leaving his basement for busy four years during that time I had zero nice things Drive no cars that very little social life uni life was just horrible for a time but I did host more than 400 guest from o world I made them worth $120,000 just from of that tiny Studio Perman law is about crazy I mean even though edia Tesla later made me close to a million dollars to this day I still find the Airbnb rental in 2015 to be one of the most successful investment in life because it kickstarted so many things afterwards and it all because we were willing to sacrifice our living standard and put saving money first the second suggestion I have for you is to adopt the right mindset about your net wor the way I like to think about it is consider it to be eff fish the water level represent your net wor but unlike closed fish tank consider your fish tank to be open-ended and the water level constantly changing at one end you have money inflow and other end you have expenses or outflow to achieve your desired nworth and to control both end effectively saving alone will be enough which leades us to suggest number three you got have more sources of in and other principal examples early on in my career I was a mechanical engineer in fact that the only real skill I have is about design making Auto card and technical drawings beside my models 60k salary I noticed many local small business couldn't afford a full-time Engineers but needed occasional design work for mechanical Parts before the geek economy boomed I already started BR Lin by making technical drawing for some of these small companies turning some $100 per drawing which typically takes me about 20 30 minutes each securing the first couple kinds was the toughest part really but that got a whole lot easier today platform like Fiverr other freelancer website makes this process much easier which could be a viable pass for any you who are watching now in conclusion my strategy for reaching $100,000 focus on exceling in your daily work the increase earning well at the same time try to save regularly so you can start investing small amount into stock market this approach not only build vable investment habit early but also leverage compan interest by the time you're ready to invest large sum you won't be starting from scratch remember increasing both the amount you invest and the generation of investment can significantly boost your networks and you want to do that as early as possible before here go there's another two video you might also enjoy I mentioned Tesla and the media are the two investment that made me my first million dollars if you enjoyed this video you might also be interested in watching me analyzing these two companies fundamental so you have the most fact about them if you're considering investing in them too I'll see you there cheers
