The Most Important Financial Milestone

Millionaire? Billionaire? 6-figure salary? Nope.

None of these are the most important financial milestone and it shows in too many people's mindsets.

This is why everyone is barely making enough to maintain their existing lifestyle.

The most important milestone is reaching $100,000 net worth.

Here's the crazy part...anyone that lives in a capitalistic system can get there in 5 years or less!

I believe that because I'm not special and I did it. 

Also, I've replicated my process for others so I know it can be done regardless of your existing income.

My First $100k

When I was 25, I had a major mid-mid-life crisis that left me with $5000 to my name and living with my parents again.

I made a decision that I would never be vulnerable financially again and made getting to $100k net worth as fast as possible my primary financial goal.

It should've taken me 2 years but it ended up taking me 5 years because I married an amazing woman with $265,000 in student loans.

The goalpost moved but the endzone was still the same and we were going for it.

So why am I on my soapbox about this issue?

The median net worth of people 35-44 in the US is $91,300 and most of that is tied up in their primary residence.

While home equity counts, people need to reach the $100k threshold well before 35 and preferably have most of it liquid. I'll explain further below.

The Most Important Financial Milestone

I want to explain why, in my opinion, reaching $100k may be the most important financial milestone to reach for a few reasons.

  1. It usually has to be done through income and not achieved through investments.
  2. Reaching $100,000 quickly is usually more about discipline, habits and mindset than it is financial knowledge. That's harder to change than acquiring knowledge but it sticks with you.
  3. Every $100,000 milestone after that takes less time and requires less income to achieve if managed properly.
  4. There is a level of accomplishment and freedom that comes with hitting a 6-figure net worth. That swagger is usually enough of a reward to propel you further along your financial journey.
  5. You will have more options than you ever had before because you have TIME. This can enable you to earn more money and/or ignore jobs that you don't want because you aren't desperate. Life just feels better in every way when you have that.

There are more but I think you get the point. It's a really big deal. 

So What's The Urgency?

Charlie Munger is a billionaire investor and he said, "The first $100k is a bitch, but you gotta do it."

It may be difficult, but the longer you put it off, the less time you have to let your money work for you. And time is your greatest ally when it comes to investing. 

The longer it takes you to invest in assets that grow in value or cash flow means the longer you will have to wait for retirement, the longer you'll be stuck in your existing lifestyle or both.

This is why it should be your #1 FINANCIAL GOAL!

Let's do some quick math here to show you the importance of having $100,000 to invest.

You save up $10,000 annually at a 7% interest rate, a very reasonable long-term return since the stock market usually returns 9% over time. Doing that will result in you having your first $100k in 7.84 years.

Seem like a long time? You can accelerate that by making more money and doing more than $10,000/year, but let's stick with this example for a second.

Now watch the power of compounding interest go to work.

If you change nothing and keep investing only $10k every year at 7% returns and invest those returns, then this is how much faster you'll hit the next few $100k thresholds.

  • $100k - 7.84 years
  • $200k - 5.1 years
  • $300k - 3.78 years
  • $400k - 3.01 years
  • $500k - 2.5 years

It only gets shorter and shorter as time goes on! Compounding interest is awesome when it's on your side and it's the worst of enemies when working against you.

But it requires time in order to work. By this calculation, to reach $500,000 this way would take 22.23 years.

That's lightning fast considering if you just put $10,000/year into a savings account, it would take 50 years.

That's why urgency is so important. The more money you can accumulate and invest early on, the faster it will build your financial wealth.

How To Get Started

You can't start a journey without knowing where you are. I found out that I had crossed the $100k threshold on accident in when I was in my late 20s. 

It was my goal but I didn't actively track it. Don't make that mistake. Do it on purpose!

  1. Measure your net worth
  2. Subtract from $100k to understand your gap
  3. Make that gap number your goal to eradicate and give yourself the shortest timeline you can think of. If you are starting at zero or negative, then make it 5 years.
  4. Take the # of years you chose and the gap number and divide them.
  5. Create a plan to start earning more income to meet that gap.
  6. Consider a "ramp up" period. Here's an example. You might need another $60k to reach $100k and you gave yourself 3 years to do it. So you need an extra $20k each year. Since you may need to learn new skills, work on a promotion, or start a new side hustle, making $20k the first year may not be reasonable. So do $10k for Year 1, $25k for Year 2 and $25k for Year 3 to hit that $60k. 

Mindset Lessons From...Elves?

That is just how you get started! When you start thinking of your goals in terms of decades instead of days, the journey will get easier and you will find delaying gratification more within your willpower.

In the Lord of the Rings, the elves are borderline immortal and they take FOREVER to do a single thing. But when they actually do something, its excellent. Damn near perfect usually.

Why do elves matter to all this? Because it's the mindset. They think long term and therefore aren't afraid to form small habits along the way that will create something incredible when done over a long period of time.

None of us have forever or know how much time we have, but changing our thinking from 10 days to 10 years in terms of investing can be a powerful frame of reference.

Take some time today to know what your "number" is and figure out a way to get to your next $100k threshold.

Until our paths cross again...

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