Ever wondered why it seems like getting your first $100,000 uphill? Most people find it hard to hit that first amount because one feels so overwhelmed and stuck, sometimes not knowing how to break through to that next level of wealth.
In this video, I’m going to be sharing with you insights from a millionaire mentor who took me through the jigsaw puzzles of how to build wealth. Actually, I found his insight into how to make that first 100,000 dollars really transformational. Today, I’m going to explain to you why that milestone is so important, and also how to get there more efficiently.
I’ll introduce you to the Growth Method, an applicable strategy that I’ve devised for you on how to make and manage your first $100,000 effectively. Once you know why this first $100,000 is tough and once you start using the Growth Method, you’ll set yourself up for accelerated wealth growth.
Why First $100K is Hardest
1.1 Earning Power
- Explain: Another weighty reason is that the first $100K is tough earning power. Think of your financial situation as some kind of video game in which you’re a novice player at the very beginning, with a limited portfolio of skills and resources, where one simply cannot stand his ground with other players who have already passed an advanced level.
Current Trends: Many studies show that a member of Gen Z has about 86 percent less purchasing power when compared to their boomer counterpart at the same age. Older generations are working much longer, thus making high-paying job opportunities more competitive. - Opportunity: Yet, the internet is where the scores are slightly tipped in their favor. The younger generation is better-placed to utilize the internet and hustle as a way of making some form of income, which may be beyond the comprehension of the older generation.
1.2 Lack of Compound Interest
- Explanation: The second reason is because you’re losing compound interest. You might want to visualize your money as a gigantic snowball rolling down a hill. The problem is that the first part of the way, it’s tiny and can only pick up a little snow. It isn’t until your snowball reaches a bigger size that it will start picking up snow at an amazing rate.
Example: $10,000 in an S&P 500 Index fund earning 7% per year grows to $14,176 after five years. Notice that initially, the growth is modest, but your investment grows along with the power of compound interest.
- Impact: Compound interest isn’t that impactful unless a big amount was had in the first place. You want to be concerned with building that initial $100K so you are able to fully take advantage of compound interest.
How to Make Your First $100K – The Growth Method
2.1 Master Your Finances (G)
Budgeting: The way one masters and understands one’s finances. It’s not about refraining from being fun; all it’s about is making active choices.
Action Plan: Record your Income and Expenses. Categorize needs and wants with better allotment towards savings and investment.
2.2 Sow Your Investments
- Explanation: One main consideration of investing is the principle of starting young and often. For instance, $250 per month invested in an S&P 500 Index yielding 7% will become $656K in 40 years, with the lion’s share being compound interest.
- **Action Plan: One should invest, the earlier the better, even small deposits at regular intervals amass to a huge amount over time.
2.3 Optimize Your Tax Management (O)
- Explanation: Tax management involves not paying unrequired amounts by intelligently strategizing and does not pertain to tax evasion. An entrepreneur can claim business expenses against earnings that could result in a lowering of their taxable income.
- **Action Plan: Pay attention to starting a side hustle or business that will align with your passion to leverage deductions. Example: If a person is interested in technology, he or she can open a channel for reviewing technology and deduct all related expenses.
2.4 Weed Out Debts (W)
- High-interest debt is holding one back from earning $100K. List high-interest debts and focus on paying those first of all.
High-Interest Debt: One should be making regular payments for debt taken at high interest. Even small and gradual payments can go a long way in helping one achieve this goal over some time.
2.5 Tap into Additional Streams of Income (T)
Explanations: Diversifying your streams of income with side hustles accelerates the journey to $100K. Most people have full-time employment but also have a side hustle to augment their incomes.
- **Action Plan: Break out a side hustle in one of your many skills or interests. The extra money will give a boost to your wealth accumulation speed.
2.6 Sharpened Self-Discipline (H)
Explanations: Meeting one’s financial goals involves discipline. It means one has to make certain sacrifices, staying focused on the long-term goals amidst all the short-term temptations.
Action Plan: Instill habits that would enable you to reach your goals, such as setting aside part of every incoming paycheck and avoiding unnecessary spending.
Conclusion
Of course, getting that first $100,000 is quite an undertaking, but it is an important milestone in building up wealth. Knowing the hurdles and using the Growth Method will make this easier and faster. Focus on taking control over one’s finances, investing early, optimizing tax management, clearing debts, diversifying sources of income, and discipline over self.
With these in place, you set yourself up for financial success by watching that net worth grow considerably faster once you pass that first 100K.