The Personal Finance Podcast - How to Save Your First $100K

Episode Date: May 27, 2020

Got questions? Ask me on Instagram Here. @mastermoneyco This is the fastest way to get a response from me.  Episode 1. When you are trying to get to your first 100 stacks, it is hard. The reason behind this is most of your money will have to come from savings. You won’t have enough money yet to begin to reap the heavy rewards that your investments will gain.  If you are in your early 20’s, and your salary is, well, less than you would like. Then you have to find other ways to make additional income so you can hit this milestone. Let me tell you, it is truly a pain. If you are in debt, it is an even bigger hurdle to climb.  But in the end, it is all worth it.  Money is a tool to create freedom and this is the first phase to create wealth.  In this episode we cover:  The format of The Personal Finance Podcast  Why you would want to save $100k  How long does it take to save 100k  How Andrew saved $100k before 25 What Andrew Invested in to get to his first $100K  How to increase your income to hit your goals How you can save your first $100k Resources in this episode:  Corporate Politics Book: How to Win Friends and Influence People  M1 Finance  Personal Capital  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Find your advisor at IG Private Wealth.com. On this episode of the Personal Finance Podcast, we're going to talk about how you can save your first 100K, your first 100 stacks, your first 100 smackaroos, and have a silly goose time while doing it. Please up, everybody, and welcome to the Personal Finance Podcast. My name is Andrew, founder of dollar after dollar.com. And thank you so much for joining us on the first episode of the podcast. And before we get into today's episode, I just wanted to lay out the podcast structure and how we're going to roll this thing out.

So our biggest goal is to bring as much value to you guys as possible. And we're going to have a silly goose time while doing it because your boy doesn't take himself too serious. And this show is going to roll out every single week. So we're going to have a weekly show, new episodes every single week. And it's just going to be your boy up front. But soon in the future, we're going to do a bunch of interviews as well. And we'll talk to experts in investing, side hustles, business, real estate.

We'll throw in a little budget action for good measure because, budgets are pretty sexy. And then my goal, again, is to bring as much value to you guys as possible. So if you have a friend who you think would like to level all up their finances, share this podcast with them. Because I believe anybody can be a millionaire. You just need a little knowledge and some discipline, and you can too. So let's get into today's episode. So today on the podcast, we're going to be talking about how you can save your first hundred thousand dollars. And if you're just starting out, we are talking about this to plant the seed. in your mind and get your mind turning, and your wheels are churning.

The reason being is getting to your first $100,000 is a huge milestone because it allows you to start to reap the benefits of compound interest, but you have to get to that level first before you can actually start to reap some of those benefits. And this is not about cutting back on lattes. It's about increasing your income. And if someone tells you out there to cut back on your lattes to get wealthy, tell them to get a best with a bunch of pockets in it, get a big old stick, and go. Go ahead and take a hike, dude, because that is not the way to financial independence.

Increasing your income along with cutting out expenses that don't bring value to you is how you get wealthy. So I saved my first $100,000 before I turn 25, and this is probably the most difficult financial milestone I've ever tried to accomplish. Nothing has yet to compare. And Charlie Munger, if you don't know who Charlie Munger is, he's Warren Buffett's business partner. and Warren and Charlie are the two greatest investors of all time. And they're in their 90s now. They're really cool guys. But he actually said that the first $100,000 is a B word, but you got to do it.

Now, I'm not going to say the B word because this is not an explicit podcast and my mom listens to the podcast and she'd be extremely disappointed if I said it. But this shows how necessary it is to get to this point. Because what he goes on to say is, 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. So when you're trying to get your first 100 stacks,

it's extremely hard because most of your money is going to come from savings. You won't have enough money to begin to reap the benefits that your investments will begin to gain. And if you're in your early 20s and your salary is less than you'd like, then you have to find other ways to make an additional income so you can hit this milestone. And let me tell you, it truly is a pain because that's what I did. I had to add additional income sources to hit this level.

If you're in debt, it's an even bigger hurdle. But don't fear, because this really is something that once you hit that first $100,000, you really can take your foot off the gas a little bit. And for a lot of young people, you may have student loans. And student loans can get in the way. And if you're older, maybe you're just getting your finances put together and you want to get to the level where you can retire. Well, both options have to be able to hit this 100,000 milestone to really get their finances moving.

And here's why it's so hard to get to your first 100K because your savings rate is so important in the first 100,000. 20% of your first 100K is going to come from your investments, but 80% is going to come from your savings rate. So if you saved $10,000 a year at a 7% interest rate, and where do I get that 7% from? that 7% comes from the historical average of the S&P 500, and the S&P 500 is just 500 of some of the largest stocks in the United States, and it's a great index fund to invest in in the long run. The S&P 500 has returned 7% historically. So if you save $10,000 a year, it would take you 7.84 years at that 7% return. Now, that seems like a really long time, and it is. But here's the great thing.

As time goes on, and I'll show you here why, as time goes on, you are actually going to reap the benefits of compound interest. And that time horizon, that 7.84 years is going to shrink down more and more and more. So your next 100,000, to get from 100,000 to 200,000 at a 7% return would only take 5 years. That's cool. But from 200,000 to 300,000, now it's only going to take 3.7 years. But here's where it gets really interesting. once you jump to the level from 600,000 to 700,000, it takes 2.1 years. From 900,000 to 1 million, it only takes a year and a half. The coolest thing of all is the range from 600,000 to 1 million

only takes 6.37 years. So to get from 600,000 to 1 million or $400,000, takes less time than it does to save your first $100,000. And that's why your first $100,000 is such a grind, but once you get over that hump, then you'll be able to save more, invest more, and that money's just going to start to compound, and it's going to turn into a machine for you that returns cash flow that you will be able to use for the rest of your life. So let's talk about how I did this. I remember when I needed to hire someone fast, but finding the right person quickly felt impossible. And if you've ever been there, you know how stressful this can be. That's where

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financial future that I wanted. And I wanted to invest in stocks and bonds and real estate and other various aspects of businesses that I just couldn't do. I was restricted with my income. So what I decided to do first was start some side hustles. And what a side hustle is is a side business that you work on from five to nine every single night and you can wake up early and work on it as well but it allows you to start to increase your income slowly and it's usually based around your passion so this is what I started to do and the first thing I did was start an Amazon affiliate site where you can link to products on Amazon and earn a commission every time someone clicks through and buys a product then I started a Christmas tree stand during this time as well yeah the side of the

road Christmas tree stands I had one of those and it made a little bit of money and we We learned a lot through that process, but at the same time, I was growing some more online income sources as well. So I started the blog. I also was flipping things on Craigslist and offer up and doing all sorts of different things in order to increase my income. So I was working all the time. I would wake up early, work on my side hustles, then go to work all day long, then come home, work on my side hustle some more. And I was constantly working trying to get to that first $100,000 because I knew the math that once I got to that first $100,000, I didn't have to do as much in order to reap the benefits that my wealth would start providing.

So the second step after I started those side hustles was I wanted to increase my income at my job because the majority of my time was spent at my job and I knew that I could make more than $30,000 at my job. So I did a couple of things. The first thing I did was look at the people one level ahead of me and I said, how are those people at this level? And I realized very quickly on that in finance, they're very good at Excel reports. So they could create really cool Excel reports that show different metrics within the company

that people would find valuable. So I went all in on Excel. And I took as many courses as I could. I took every single book on Excel that I could find on Amazon. I read through those. I went through all the YouTube tutorials. Within a year, I got really good at Excel. And I finally got promoted because I could create these reports that nobody else in the company

could actually create. So I was creating unique reports and creating unique value for myself that I was able to go ahead and move up to the next level. And there's one small lesson in there that you guys need to take with you. And how can you create value at your own job to get to the next level? Is it getting a certification? Is it additional education? Is it creating more skills within your job level? How can you get the next level?

And what is the person one level ahead of you? How did they get to that point? And a lot of you may say, well, they don't deserve to be there. Well, don't think that way. How would someone who deserve to be there get to that level? Because a lot of times people are one level above you. You're better at your job than they are. And a lot of times you just have to find that additional skill to give you that additional bump to get to the next level.

And that's what you've got to think through. To get to the next level, what I did was I said, okay, well, what are the people one level up doing? And the next level up, they were really good, I noticed, at corporate politics. There were some other little small aspects as well, but they were amazing at corporate politics. So I said, okay, how do I get back? at corporate politics. I hate corporate politics more than anyone else, and I'm sure you do too. But if you're in a corporate environment, you have to do it. There's no way around it. You got to have some level of corporate politics knowledge in order to be able to move your way up. So,

I actually went out and found this book called How to Win Friends and Influence People by Dale Carnegie. And it's a really old book. You can probably pull it off your grandma's bookshelf, dust it off, blow off all the extra dust and residue, and give it a good old-fashioned read. But this book is actually filled with amazing knowledge on how to make people like you. And I started to practice the principles inside of that book, and sure enough, it worked. And I moved to the next level up by being able to communicate with other people effectively, essentially. So now I have these side hustles that are making an income, and now I've gotten a couple of raises

at my job. And that's what allowed me to increase my income enough to be able to save enough to get to the first 100K. Like I said, remember, 80% of it is your savings rate. and so I knew I had to catapult that savings rate to get to that level. Now, did I cut back on expenses? A little bit, but the only expenses that I cut back on truly were things that did not bring value to me.

So if I had extra subscriptions to something that I just didn't care about, I cut it out. I cut out cable because I didn't watch a ton of cable. All I watched was sports on there. So I went ahead and cut out my $150 cable bill and went to Hulu Live for $40. I did small things like that that started to add up that just didn't bring much value to me. And it allowed me to invest every extra dollar. And speaking of investing, what did I invest in during this time? Well, I had two primary investment vehicles, and the majority of my money went into index funds.

Now, you heard me talk about the S&P 500 earlier. I actually invest in the S&P 500 index fund. And what that is, is a compilation of 500 of like the best stocks in the U.S. all compiled into one big fund. You can think of companies like Facebook, Amazon, Netflix, Apple, Microsoft, all. all these companies are compiled into this one big fund, and then you're able to invest and be extremely diversified in all these different assets, and all these companies have international exposure and things like that.

So the first thing I did was I automatically invested into index funds. But if you're willing to look at stocks and look at some financial reports and things like that, then the second thing I did was I invested in dividend growth stocks. And the cool thing about dividend growth stocks is they produce cash for their shareholders. So every quarter dividend growth stocks will actually pay a percentage of their share price to the owners of the company, which is moa, the shareholder. And the reason why they do this is it actually creates incentive for other people to invest as well. But I didn't specifically invest in just any dividend growth stocks. I invested in the dividend aristocrats.

And these are companies that have increased their dividend for 25 years or more. And what that means is that these companies have increased a percentage that they're paying out to. the shareholders for over 25 years. And this becomes a extremely powerful strategy because your income goes up every year. So as you start to compile these dividend growth stocks and your income goes up every quarter, the really cool thing is the income just keeps rising and rising and it compounds and you can reinvest those dividends back into those stocks and all of a sudden you got a little snowball building up into a great big snowball that's going to start rolling downhill and providing you cash flow for the rest of your life. So those are the two investment vehicles that I use.

Now let's get into the steps that you can take so you can save your first 100K. So if you want to get to your first 100K, the first thing I would do is set up a simple budget. It doesn't have to be a spreadsheet with all these crazy formulas coming out of it or anything like that. All you have to do is what I call a minimalist budget. So here's how it works. When you get paid, every single time you get paid, you take out how much you want to invest right off the top. And then the rest of it, you spend on your fun money. You can pop bottles, buy some Yeezysys.

You could also pay your bills, which I recommend that, pay your bills. first and then pop bottles and buy your Yeezys and do whatever else you guys want to do. Go on your fancy vacations and put your nails next to your BMW on Insta, all kinds of stuff like that. Then all you have to do is two steps. You just have to take your money out and then spend the rest of it on your expenses. And what most people fail to do when they budget is they can't stick with it because people make it really difficult. They make it where they have 25 line items that they have to configure and figure out how to where this money went and how this money moving around and things like that. Don't do any of that when you're just starting out.

Just take your investments off the top and your savings and your emergency fund and things like that off the top, then go ahead and spend the rest of it on your expenses. And that's how you can set up a pretty simple budget. Now, the next thing you're going to do is look at your income. And most likely, if you're young, your income's not exactly where it needs to be. And if your income is not where it needs to be and you think you are worth more or you need to make more, then go ahead and look for potential side hustles and side hustles can be based around your passion there's so many of them out there now it can be anything from starting a blog which is almost free nowadays to amazon affiliate sites you can have a you can be a real estate agent on the side which is something that i've been doing lately that can

actually create a ton of income um you could sell items on amazon fb a or fulfillment by amazon so that's finding a product and selling it through amazon you can sell items on ebay you can flip items on craigslist And there's other things you can do as well, like drop shipping or coding for other people if you have specific skills or social media management, you know, small agencies like that or small ad agencies. And there's all kinds of other aspects and different side hustles that you can do based around your passion. And so that is the second step. And that's something I would look at doing because if you can find something to do from five to nine, because your nine to five pays the bills and then your five to nine builds the empire.

And if you can find a great five to nine, you will level up your money. so much so that maybe that becomes your full-time job. And it's an absolutely amazing way to start a small business. So that would be the second step, and that's the next thing that I would do. The third thing is now look at your current job, where you spend most of your time and say, how can I level up in this job? What are the people above me doing? And or what are the people two levels above me doing? Maybe you can do a double jump. What are the people two levels above me doing? Do they have a master's degree? Do they just have additional certifications? What skills do they have? look at those people and talk to some of them.

Maybe some of them will be your mentor and ask them, how did you get to this level or what do you recommend for me to get to the next level? Because increasing your income at the place that you spend your most time is obviously going to have a tremendous benefit for you because you're going to get more fulfillment out of your job and you're going to feel better about where you're going every single day. And that is a huge aspect to increasing your income and getting to that first 100K. You know, you got to adjust your mindset and you've got to believe that you can do this

because a lot of people will get through the slog because it is a slog at the beginning and it's tough at the beginning and they'll push and they'll fight and then all of a sudden they'll give up when they're a third of the way there because it's so hard and you really can't see the light

at the end of the tunnel at the beginning. Adjust your mindset and realize once you get to this point your snowball's gonna start rolling downhill like we showed you. The time horizon shrinks as time goes on and as you accumulate more money your money is just going to produce more money

and more money and more money and you have this asset that's building up for your future where you're never going to have work again. You're going to be financially independent and you're going to be able to do whatever you want with your life. And that's what money does. It creates freedom. Money is not to restrict you. It creates freedom for you. And that's what's amazing about it. Stocks and bonds and real estate and all these things, they ebb and flow. They go up and they go down. But keep your head within your

investments. Do not start selling your investments and panic when a recession hits or anything like that. Just leave your investments as be. Stick to the plan and make sure that you continue to put money into your investments, even when the market goes down. And actually when the market goes down, obviously buy, low, sell high. When the market goes down, it's actually a better time to put your money in, but sometimes psychologically, it's hard to see that in the long run. And one thing I like to do is if I ever doubt my investment plan is just take a go take out like your stocks app on your iPhone or if you have an Android, take out a stocks app, and turn the stock market app sideways. It's going to show you the stock market over a long period of time. And if you

look at the stock market over a long period of time, you're going to see small dips going up and down, but over time, that stock market is going in one direction, and that's up. And you've got to look at that to remember and remind yourself, because a lot of investing is psychological, and you just got to keep doing it. Or if you don't care about investing, just automatically put it in an index fund, and just don't look at it again. Just let it go, and it's going to keep building, and it's going to keep going up over time. It may go down. It may get cut in half in a recession, but it doesn't matter because over time, it's going to go up and it's going to go well beyond what you put into it. And that is the coolest

thing about investing. And listen, guys, you can do this. Trust me, I know it's hard. I get it. I know it's difficult, but the majority of Americans have nothing saved for retirement. You're going to be 10 steps ahead of the majority of Americans. And as time goes on, you're going to see this seed that you planted grow into something that is massive, producing cash for you so you can live without having to work if you don't want to, or you can work on your projects or anything else you want to do. It's a creation of freedom. And even if you can't hit this goal as quickly as you would like, you have to start somewhere. And maybe your side hustles aren't hitting and you're grinding and you're trying to build these skills, but you're just not getting anywhere. Do not give up.

Start saving as much as you can and you will eventually begin to see this growth. And don't compare yourself to others. Don't compare yourself to me. I work like a maniac to get to my first $100,000 in three years. You don't have to do it that fast. You can do it in four years, five years, seven years, eight years, it doesn't matter because once you hit that point, like we talked about, it's going to start to roll downhill. The point is, this is your financial journey. Personal finance is extremely personal, and we all have different paths, but you can get there. You can do this. You just have to stick to your plan. Thank you guys so much for listening. And if this is our first time meeting, consider subscribing so you never miss an episode. And hey, we're giving away a free one-on-one

money coaching session with me. All you have to do to enter is subscribe to this podcast and leave a rating or review on Apple podcasts, then send it over to Andrew at dollar after dollar.com, and you'll be instantly entered to win the one-on-one, one-hour coaching session with me. Again, thank you guys so much for listening. We truly appreciate it. And we'll see you on the next episode. Have a great day.

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