Why Your First $100k is The Hardest to Invest (2024)

FAQs

Why is saving first 100k the hardest? ›

Your Contributions Tend To Increase Over Time

But there's another factor that makes the first 100k so hard to save. This is the fact that the beginning of your career is generally when you're making the least. I'm making way more per year and contributing way more per year than I was 10 years ago.

With $100,000 to invest, you have a plethora of options for how to invest the money. You can park it somewhere safe, like a CD or high-interest savings account, or you can take a little risk and invest in the stock market. If you go the investing route, you can choose how much risk you want to assume.

The first $100k is the hardest because you mostly have to save your way there. As you get higher, compound interest starts to take over. Consider this year, the S&P is up 11.5% YTD. If you started the year with $1k in an S&P fund, you now have $1,115.

Growing your money from $0 to $100,000 would take 7.84 years, per Tilbury's calculations. But getting from $100,000 to $200,000 will only take 5.1 years, which is 35% faster. And the trend continues.

One piece of wisdom that resonates with investors is his take on building wealth. In the late 1990s, during a shareholder meeting, Munger said, “The first $100,000 is a b****, but you gotta do it.”

There's no one-size-fits-all number in your bank or investment account that means you've achieved this stability, but $100,000 is a good amount to aim for. For most people, it's not anywhere near enough to retire on, but accumulating that much cash is usually a sign that something's going right with your finances.

Earning more than $100,000 per year would put you well ahead of the median American household, which brings in $74,784 as of 2021. Assuming you're an individual without dependents, that salary would qualify you as upper class, according to three different definitions (Brookings, Urban Institute and Pew Research).

“By the time you hit 33 years old, you should have $100,000 saved somewhere,” he said, urging viewers that they can accomplish this goal. “Save 20 percent of your paycheck and let the market grow at 5% to 7% per year,” O'Leary said in the video.

For most individuals and small families, the answer to “Is $100,000 a good salary?” is a resounding “yes.” Cost of living and family size can affect how far $100,000 will go, but generally speaking, you can live comfortably on $100,000 a year. Are you hoping to make the most of your salary?

How do you get to the top 1% of wealth? ›

The top 1% of household net worth in the U.S. was just shy of $13.7 million in 2023. An individual would have to earn an average of $407,500 per year to join the top 1%. A household would need an income of $591,550. The median household income was $74,580 in 2023 and $45,440 for individuals.

The answer may surprise you. According to the U.S. Census Bureau, just over 20% of Americans earn an annual salary of six figures or more. The percentage of Americans in the $100K+ club has actually grown over the past few decades as the cost of living has increased and higher-paying jobs have become more prevalent.

Making $100,000 a year back then was the equivalent of making about $300,000 now. Making $100,000 now is the equivalent of making $30,000 back then: middle class and not particularly comfortable. But this didn't happen overnight in 2021 or 2007.

Choose the right career

And one crucial detail to note: Millionaire status doesn't equal a sky-high salary. “Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”

Most American households have at least $1,000 in checking or savings accounts. But only about 12% have more than $100,000 in checking and savings.

“By the time you're 40, you should have three times your annual salary saved. Based on the median income for Americans in this age bracket, $100K between 25-30 years old is pretty good; but you would need to increase your savings to reach your age 40 benchmark.”