“The first $100,000 is a b*tch, but you gotta do it,” said Charlie Munger, the Vice President of Berkshire Hathaway.
Why did the right-hand man to the famous investor, Warren Buffett say you gotta save 100k? I can’t speak for Charlie, but I’m going to dive into why I saved 100k as fast as possible.
If your mindset is like the TikTok trend, “I’ll make the money back, but I’ll never be in my twenties doing XYZ amazing thing,” then this is a must-read!
First, let me set the stage: I was a sophomore in college and wrote down in my journal to save 100k by graduation. This was quite an ambitious goal for a 19-year-old full-time college student.
I was studying finance, but hadn’t even taken any core finance classes yet, didn’t know who Charlie Munger was, or heard his infamous quote on the importance of saving your first 100k.
Here’s Three Reasons Why I Saved 100k by Age 26
1. Security
The number one reason why 19-year-old me wanted to save 100K ASAP was for security. Merriam-Webster defines security as freedom from:
- danger: safety
- fear or anxiety
- the prospect of being laid off: job security
When I was a sophomore in college, I got bit by a tick and was diagnosed with Lyme’s disease.
This was mortifying and I felt incredibly insecure. I took off a semester of school and didn’t know if I’d be bed-ridden and unable to work for the rest of my life.
Luckily, I was able to get a hard-core IV antibiotic treatment to tackle the infectious disease.
This health scare (at a very young age) taught me life doesn’t go as planned. Saving money provided me with security for the unknowns in life. And man almighty, I’ve experienced lots of ups and downs! Having a secure financial foundation helped guide me through the storms of life.
2. Freedom
The second reason why I saved 100k was to experience freedom. Saving 100k isn’t enough to retire, but it is enough to walk away from a toxic job or relationship.
More importantly, I wanted time freedom! Time is a limited and finite resource. Everyone has the same amount of time in a day, but not everyone has full control over their time. Most Americans get two weeks of vacation a year.
After experiencing massive burnout, I took a six-month sabbatical and traveled. I spent over a month in Hawaii zip lining, swimming with dolphins, and drinking pina coladas. Then flew back to the mainland, bought a RV (and SUV to pull it) with cash and continued traveling. I currently still live full-time in a RV and LOVE it! This time freedom gives me the lifestyle to travel and pursue adventures.
I wanted to be free from forced clock-ins or limited time off.
Related Post: Lessons Learned from Selling Everything I Own to Travel
3. Compound Interest
Lastly, I saved 100k by 26 because of compound interest, (aka when your money makes money). Albert Einstein said, “The most powerful force in the entire universe is compound interest.”
The basics of compound interest is a dollar saved now will be worth more later because of interest earned over time. As a sophomore in college, I didn’t have a comprehensive knowledge of the entire stock market. The one thing I had on my side: time.
Or as Albert said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”
Having $100k invested is financially life-changing. Because of compound interest, if you reach $100k in your twenties or thirties you can stop investing completely and simply let your money grow and compound!
For example, here’s what 100K invested by different ages will compound to by the standard retirement age of 65. This assumes you never invest another dime, and your investment earns 8%.
$100k invested by age:
- 20 = $3,192,044 at 65
- 25 = $2,172,452 at 65
- 30 = $1,478,534 at 65
- 35 = $1,006,265 at 65
It’s the same $100k, but time is on your side when you invest early.
Charlie Munger said, “I don’t care what you have to do—if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
Security, freedom, and compound interest is why I saved 100k by 26!
What’s next?
You now see the power of investing your first 100k, but I’m sure you’re wondering, “Carly HOW in the world did you do this?”
I’ll show you EXACTLY how I saved 100k (and paid off over 35K) by 26. Stay tuned to see month by month my income and expenses when I graduated leading up to saving my first 100k.
If you’re wondering, was she a trust fund baby? Did she secretly sell drugs and run a meth lab? This week I’ll share a few things on what I did (and didn’t do) to save my first 100k.
❤️ Carly
P.S. Do you have kids and want to teach them about money, so they can invest young? Join me LIVE tonight at 8PM central @bestmoneyclassever on Instagram with the Clifton Corbin, the author of “Your Kids, Their Money.” Check out his ultimate guide to talking to your kids about money. If you’re like me and don’t have kids, we’ll discuss how we learned money as a kid and how this has impacted us now!
