How to Build $100K in Five Years

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I'M.

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Nicole lapin the only financial expert you don't need a dictionary to understand it's time for some money rehab today we're talking about a magic milestone in investing your first one hundred k now some of you might have already hit that number and if so incredible please pat yourself on the back for me because it is the hardest financial finish line you will ever cross for others listening one hundred k might feel impossible but please know this you can do it and it only gets easier from here i wish someone had told me this at eighteen your first one hundred k is the hardest money you will ever.

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Make the next one hundred k way.

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Easier and the one hundred k after that easier even easier and when i say it gets easier i'm not talking about fuzzy squishy feelings i mean mathematically it gets easier so today i'm going to show you how to hit your first one hundred k even if you're earning the average us salary which is right around sixty four k right now we're also going to build a real life doable five year plan to get you there you can of course scale up or down based on your timeline but i'm giving you five years as a baseline and just to be clear this is not going to happen with luck this also won't happen with a hot stock tip and it won't happen because your cousin ch dad is really into crypto right now this happens because of strategy consistency and i'll be honest some compromise and again i totally get it when you're starting from zero or if you're in debt like i was it can feel like you're pushing this big old boulder up a hill or putting money in your four hundred one k your roth ira an index fund and nothing feels like it's happening you start to question everything like is this even working am i doing something wrong shouldn't i be farther along by now so let me show you what's happening beneath the surface and why you do need to stick with it let's say you invest a thousand bucks a month and your investments have a ten percent average annual rate of return that's the historic average of the us stock market to get to your first one hundred k it's going to take a little over six years but then to go.

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From one hundred k to two hundred.

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K it takes a lot less time about three years and ten months the more money you have the more money you make this is how compound interest works and so let's fast forward to get from from nine hundred k to a million bucks the acceleration of wealth.

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Becomes chef's kiss it will only take.

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You around twelve months just one year for your investment to grow from nine hundred k to a million bucks with that same monthly investment and the same rate of return i know the initial slog of investing can feel like the power of compounding is not working for you but it is it just picks up speed later after that one hundred k mark because of the beautiful amazing forecast of compound interest so let's start there i'm going to assume we're working with the average us salary which is around sixty four k after taxes depending on your state you're likely going to take home somewhere around forty eight thousand dollars that's about four thousand dollars a month here's what i want you to do in year one learn the game and save ten thousand dollars your goal this year is to build the habit of the four k a month you're taking home start by investing five hundred bucks a month that's six grand a year now you might be wondering where exactly should i be investing i'm assuming ten percent here which is the average annual return of the us stock market in order to make investments that mimic the stock market pros will invest in s and p five hundred index funds a common low cost example is one with the ticker symbol voo then aim to stash an extra four thousand dollars in a high yield savings account for your emergency fund you can find that four thousand dollars over the course of the year by negotiating bills cutting two hundred to dollar three hundred a month from lifestyle creepy putting your tax refund to work or if you want doing a light side hustle all of that including a little bit of investment growth will bring you to around ten thousand five hundred dollars in year one year two is all about momentum raise your monthly investment from five hundred to one thousand bucks make it a goal not just to invest more but to make more ask for that raise optimize your side gig that way it's going to be much easier to bump up your investment allocation if you can invest one thousand dollars a month you'll invest twelve thousand dollars in year two but we can't forget year one which has been growing in the stock market at year one and year two and you'll have twenty three thousand dollars invested that is nearly twenty five percent of the way toward one hundred k year three is our growth year now that you're comfortable with investing it's time to invest one thousand two hundred fifty bucks a month that's fifteen thousand dollars for the year fifteen thousand dollars that is working just as hard for you as you are working for it meanwhile your existing investments have been growing at ten percent and i'll do the math for you you three with forty thousand five hundred dollars psychologically this is where all of this starts feeling real you can see that snowball forming year four it's all about pushing even harder on those two levers earning more and investing more bump up your investing to one thousand eight hundred fifty bucks a month that's a little over twenty two k for the year by the end of year four your forty grand from last year has hit four forty four thousand dollars add in the twenty two thousand dollars you've invested plus the monthly growth and by the end of year four you'll be at around sixty eight thousand dollars and by the way if you haven't already maxed out your employer match on your four hundred one k please do that now that is free money which means this monthly contribution doesn't have to all be on you okay year five we are investing two one hundred bucks a month and one hundred k is in sight at two thousand one hundred bucks a month you'll be investing over twenty four thousand dollars in year five and as that compounds your nest egg is snow falling to your advantage and tada if you add twenty four thousand dollars from year five to your growing brokerage account you will actually now have a little over a hundred thousand dollars now not everybody will be able to do this and i completely understand that surprises happen sometimes the raise isn't possible sometimes your paycheck to paycheck if you can't commit to these monthly investments look for opportunities to invest one time chunks of money that you get from things like a windfall an inheritance a tax refund or selling a bigger ticket item that you no longer use or give yourself more time this is just one aggressive investing schedule but you can and should do what's best for you but when you do hit that one hundred k mark and i know you will this is the really fun part once you get to one hundred k compounding becomes noticeably faster your money starts making more money than you do it's one of the wildest most liberating feelings in the world of personal finance at one hundred k a ten percent return gives you ten thousand dollars in one year completely passive this is why the rich get richer not because they're smarter but because compounding is doing the heavy lifting and now you're on the right side of the equation your first one hundred k will feel like the longest slowest most frustrating phase of your financial life but after that finally finally the math starts working for you as long as you stay consistent keep lifestyle creep low and keep your eye on that long term game you will get there or today's tip you can take straight to the bank if you want to make your own plan to one hundred k you can use the free compound interest calculator that i have on my website for my course the money school you can play around with different monthly investment scenarios or different time horizons and the calculator will do the math for you and again this is completely free just for you to use as you are plotting your six figure life to get started head over to themoney school dot com tools or check the link in the episode description.

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