Table of Contents
Overview
The concept that your first $100,000 is the “magical number” for generating real wealth is a popular idea in personal finance. The idea is based on several key principles:
Compound Interest
Once you have a substantial amount like $100,000 invested, the power of compound interest starts to become more noticeable. Even a modest return of 5% would generate $5,000 in a year without any additional contributions.
Diversification
With $100,000, you have more options for diversifying your investment portfolio. You can spread your investments across various asset classes like stocks, bonds, and real estate, reducing your overall risk.
Psychological Boost
Reaching a six-figure sum can be a significant psychological milestone. It often serves as validation that you’re on the right track, which can be motivating and encourage you to continue saving and investing.
Lower Fees
Some investment options and funds require a minimum investment that you’ll more easily meet with $100,000. Lower fees can also contribute to higher net returns over time.
Leverage
Having $100,000 can also give you the leverage to invest in opportunities that require significant capital upfront but offer higher returns, such as certain real estate investments.
Emergency Fund
A solid financial base also allows you to maintain a robust emergency fund. This means you can invest more aggressively with the rest of your money, as you have a safety net to fall back on.
Networking and Opportunities
People who have accumulated a certain level of wealth often find that more opportunities come their way, whether it’s an investment opportunity that requires capital or a business venture that needs funding.
Inflation
Finally, $100,000 today will likely be worth less in the future due to inflation. Reaching this milestone sooner rather than later can help you preserve and grow your purchasing power.
Video explanation
Taken from https://www.youtube.com/watch?v=zCa2qul2WAE
This shows the power of compounding better than anything i have seen.
The initial step is to get to £100,000 as quickly as possible. As it allows exponential growth in the future.
So assuming
This is how long it would take to reach your first $100,000
And this is how long each subsuquent $100,000 would take in years
This is another way to view that and understand how the speed of compounding starts to impact your saving as each $100,000 is reached quicker and quicker.
Its important to note because of compounding how High Growth increases as you move through each Time period.
Also see
there are lots of Video out there on this topic but here are some of the best one’s i have found