Is it true that my wealth will explode after reaching $100,000?
There is a saying that has been around for several decades, stating that making your first $100,000 is the most challenging. Originally said by Berkshire Hathaway titan and investment legend Charlie Munger, he’s absolutely not wrong about how hard it is to make this amount of money. While there is no question that the first […] The post Is it true that my wealth will explode after reaching $100,000? appeared first on 24/7 Wall St..
There is a saying that has been around for several decades, stating that making your first $100,000 is the most challenging. Originally said by Berkshire Hathaway titan and investment legend Charlie Munger, he’s absolutely not wrong about how hard it is to make this amount of money.
There is a widespread belief that after you earn your first $100,000, generating more wealth becomes easy.
It was Charlie Munger who said that your first $100,000 is the hardest.
With good investments, you can accumulate a substantial amount of wealth with $100,000.
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Key Points
While there is no question that the first $100,000 is the most challenging, one Redditor raises an interesting point in a post on r/dividends. Their question is, what happens after you save $100,000? Does your wealth then continue to grow, and if so, is the growth explosive?
The $100,000 Question
In the case of this Redditor’s post, the question is essentially whether other people have had similar experiences with this scenario. They are generally curious as to whether or not wealth starts to build up much faster when you hit this presumably magical $100,000 number.
While the Redditor doesn’t explicitly state this, there is a strong belief that they are referencing the idea that wealth begins to accelerate due to the compounding effect of interest. What the Redditor could be referencing is something along the lines of the “snowball effect,” which shows something starting small and as it rolls downhill, it gets larger and larger.
This “snowball” is the $100,000, and it begins to accumulate more and more interest, compounded over time. Even if you invest moderately, there is a good chance you end up with far more wealth. Of course, the bigger question is where you put this money so that it grows.
As this question is being posed in r/Dividends, are you considering dividend stocks, or are you sticking with safer options like popular ETFs or mutual funds? The answer to this question will determine just how significant a wealth explosion there is, as well as your overall risk tolerance.
Focus On Your Financial Goals
Whether you aim to reach $100,000 or are already close to this number, the single most important thing is to focus on your financial goals. Start by setting clear goals for yourself so you can hone in on what your investment strategy will be.
You may want to try a high-yield savings account initially, which is perfectly fine. You can still earn a nice amount of money, even if members of this Reddit will start complaining about inflation percentages. Alternatively, you can also consider diversified index funds to help spread out your risk, so you won’t feel the market downturns as much as you would if you were invested in individual stocks.
The most important thing to know is that it’s crucial to review your portfolio and holdings constantly. If you want to just invest and forget, that’s okay, but it’s not ideal. Your financial goals are going to change as you age based on your needs and wants, so it’s going to be important to adjust your financial strategy accordingly. The good news is that $100,000 is a great baseline for generating wealth, but you must first determine how much wealth you truly want.
Lastly, but not least, be sure to continue educating yourself on various budgeting techniques. The hope is that you got this $100,000 point or close to it because you have good money habits. This means you need to double down on these habits if building up more wealth is your primary goal.
Don’t Let the Number Fool You
Had it not been for Charlie Munger, there is a very good chance that $100,000 would still just be an arbitrary number. There is nothing about $100,000, in particular, that means accelerated or explosive wealth. It almost sounds as if you can’t build wealth if you only start with $80,000, but that isn’t true at all.
There is no question that $100,000 can be a good benchmark for compounding interest, but if you get to this point, it’s more likely you have established good savings habits, which is far more important than any arbitrary number.
The post Is it true that my wealth will explode after reaching $100,000? appeared first on 24/7 Wall St..
