First $100K Is The Hardest

Charlie Munger said:

“The first $100,000 is a bitch, but you gotta do it. 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.”

But, why?

What's the math behind his statement?

Saving Your First $100K

Let's look at the math together.

Assume for a moment that you're able to save $10,000 per year. And, let's further assume that you're able to earn 7% per year in interest on your investments.

How long will it take to save up your first $100K?

First $100K Is The Hardest
First $100K Is The Hardest

The answer, it turns out, is 7.84 years.

So, 7.84 years to save up your first $100,000.

Many folks, upon hearing this number, thinking it might take them almost 80 years (10 times 7.84) to get to a million.

But, that would be incorrect.

And, that's why the first $100K is the hardest (and longest).

Saving Your First $200K

So, if you keep at it and continue to save $10,000 per year it will only take 5.1 more years to save up your second $100K.

First $200K
First $200K

That's 35% faster than the first $100K.

Saving Your First $500K

Let's look next at how long it takes to save up each $100K until you get to $500K.

First $500K
First $500K

Saving Your First Million

First $1MM
First $1MM

How Long Does It Take to Save a Million Dollars?

So, how long does it take to save up a million dollars?

The first $100K takes the longest, the second $100K is faster.

First $1MM - Total Time 1 of 2
First $1MM – Total Time 1 of 2

It takes about 25.5% of the time to get that first $100K and only 74.5% of the time to save the remaining $900K.

First $1MM - Total Time 2 of 2
First $1MM – Total Time 2 of 2

The second $100K takes up 16.6% of the total time to save up a million dollars. The remaining $800K only takes up a little more than half the time… about 57.9%.

Time To $1,000,000

The following is a table that shows exactly how long it takes to save up each $100K on your way to $1,000,000.

Time to $1MM Table
Time to $1MM Table

Save More or Less

  • How long will it take to save up a million dollars saving just $100 per month? 60.3 years. 47% of that time is getting to the first $100K.
  • How long will it take to save up a million dollars saving $200 per month? 50.4 years. A full 40% of that time is getting to the first $100K.
  • How long will it take to save up a million dollars saving $200 per month? 50.4 years. A full 40% of that time is getting to the first $100K.
  • How long if you save $5,000 per year? 40 years. 32% of that time is getting to the first $100K.

The table below shows a variety of amounts saved and how long it will take to earn a million dollars broken out into $100K buckets.

Percent of Total Time Saving Your First $1MM
Percent of Total Time Saving Your First $1MM

Interest Rate Impact on Road to A Million

The amount you're earning on your investments also impacts how quickly you get to a million dollars.

Num Years to Save Next $100K
Num Years to Save Next $100K

Assumptions

A deeper dive into the assumptions.

When you're saving the $10,000 per year, I made it super conservative and said that you did not actually get your $10,000 until the very end of the year.

That means that you don't earn any interest on the $10,000 that you saved in that year until the very start of the next year.

That's why for year 1, you have $10,000 and not $10,000 plus interest.

That's also why for year 2, you have $10,000 from year 1, the interest you earned on the $10,000 you saved in year 1 and $10,000 from year 2 for a total of $20,700.

If you save the $10,000 each year in monthly installments and can earn some of your money on the amount you're putting in each month, your results will be a little faster… especially early on when you don't have a lot of other money already invested.

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