Why Net Worth Goes CRAZY After $100k!

this is the best piece of advice I've ever heard about building a high net worth it came from a millionaire I looked up to as a kid and it's stuck with me ever since I was worrying that I'd never have enough money to afford the things that I'd always dreamed about having his exact words to me were don't worry about earning Millions instead focus on the first 100,000 because after that your net worth will go crazy I didn't fully understand him at the time but I did what he said and lo and behold it worked so why is the first 100K the hardest well there are two main reasons for this the first one is your earning power think of this like your level in a video game you just haven't been playing long enough to build up your skills and therefore can't compete with the more experienced players this is the exact same when it comes to making money when you're younger this issue is actually getting even worse a recent study found that gen Z have about 86% less buying power than my generation the Boomers did at the same age this is partly due to older people staying in the workforce for longer meaning that higher paid positions are harder to come by but it isn't all doom and gloom as the internet offers a great way for younger people to make far more money than the older generation as most of them don't understand how to use Instagram let alone build an online side hustle when it comes to tech there aren't that many Boomers that can keep up with you guys not like me the second reason your first 100 K is the hardest is your lack of compound interest think of your money like a snowball you roll it down the hill by investing money and as it rolls it picks up more snow which is your compound interest the bigger your snowball gets the more snow it collects and therefore the more compound interest you make sounds amazing right well yes and no let me explain right now if you don't have at least 100K then your snowball isn't big enough for it to pick up any significant income you essentially can't really benefit from compound interest I mean let's say you invest 10K in an S&P 500 Index Fund and get an average yearly return of 7% which has historically been the amount investors can expect after 5 years your money will have grown from $10,000 into $4,175 that's five whole years to earn $4,175 that's why it's so hard to reach the first 100K it's all about how much you can contribute to your investing pot rather than how much compound interest you're making this means you're going to have to make more money any way you can honestly it was no different for me I remember doing at least three different side hustles at the same time in order to earn enough money working this many hours and also resisting the urge to spend it on vacations and the latest designer clothes is really a killer but trust me it's worth it as once you hit that first 100K it's way way way easier to grow your money so why does net worth go crazy after 100K the answer because compound interest stops being lame and it actually starts to sound pretty unbelievable take a look at this chart if you invest 10K annually with a 7% average yearly return going from not to 100K will take 7. 84 years however going from 100K to 200k will only take 5. 1 years so overall it'll take 2.

74 years less to make the second 100K compared to the first that's 35% faster to make your second 100 Grand than the first and it gets even better if we expand things to go from 200k to 300K only takes 3. 78 years then 300K to 400k takes 3 years and 400k to half a million is only 2.