Is the first 100k really the hardest?

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r00ster
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Is the first 100k really the hardest?

Post by r00ster » Tue Feb 24, 2015 10:46 pm

Greetings all. The wiki converted me to a Boglehead and I've learned a lot reading the forum. I passed 100k invested assets two weeks ago and will pass 100k net worth by the end of the month.

I've often heard people say that the first 100k is the hardest...it only gets easier from here...now the magic of compounding begins, etc. I was wondering if anyone had any statistical support for this or if it's more of a cerebral victory.

Thanks in advance!

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Re: Is the first 100k really the hardest?

Post by red5 » Wed Feb 25, 2015 5:04 am

The magic of compounding begins with the first cent.

Reaching 100k is just a psychological event. If the future looks like the past then you would reach 200k faster with the help of compounding. I think that is what is meant by the statement that reaching the first 100k is the hardest.

And congratulations on reaching that milestone.

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Re: Is the first 100k really the hardest?

Post by Tyrobi » Wed Feb 25, 2015 6:39 am

r00ster wrote:I've often heard people say that the first 100k is the hardest...it only gets easier from here...now the magic of compounding begins, etc. I was wondering if anyone had any statistical support for this or if it's more of a cerebral victory.
$100k: It took us 5 long years after graduation from May 2005 to Mar 2010.
$200k: Then it took us another 2 full years in Feb 2012.
$300k: It only took about a year and half in Jun 2013.
$400k: After another year we got it in Apr 2014.
$500k: Less than a year later we crossed this point in Nov 2014.

The first $100k was really the hardest and longest for us. Each additional $100k is relatively easier.
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Re: Is the first 100k really the hardest?

Post by FreemanB » Wed Feb 25, 2015 8:14 am

To me, the statement that the first $XXX amount was the hardest referred more to the idea that getting into the habit of budgeting, saving, and investing for the future are really the hardest steps.(Many people don't even get past the budgeting part) Once you've completed that and stuck with it long enough to hit a significant milestone, be it $10k, $100k, or $1M, then it will get easier. Partially because of compounding, but mostly because at that point the habits have become ingrained enough to stick.

As for statistics, I'd bet that they will show that people that manage to save $100k at some point in their career will have well above average amounts saved at retirement. That's a fairly safe bet though, considering that even $100k is well above the average retirement savings. I think they would also show that the savings for those that hit $100k would continue to increase faster than average as well, due to the same financial habits and goals that drove them to save the first $100k.

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Re: Is the first 100k really the hardest?

Post by tibbitts » Wed Feb 25, 2015 8:31 am

To me, compounding has a lot more to do with income (interest, maybe dividends) than capital appreciation (or lack thereof.) It seems to imply at least some degree of reliability. So considering that both interest and dividend rates are both near historical lows, and, combined with stagnating or declining personal incomes... I'm not so sure the whole "miracle" thing would have gotten much traction in the economic environment we've experienced for quite a while now.

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Re: Is the first 100k really the hardest?

Post by Mitchell777 » Wed Feb 25, 2015 8:43 am

For me, the first $100K was the hardest or seemed to take the longest. I've graphed my net worth over a couple decades or so and it is interesting how fast that curve steepens over the years. When I look at periods when the stock market tanked, although it seemed so bad at the time, it is only a small bump looking back. Of course my income and savings increased over those years but it was compounding and equity increases that made most of the difference

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Re: Is the first 100k really the hardest?

Post by tibbitts » Wed Feb 25, 2015 8:58 am

Mitchell777 wrote:For me, the first $100K was the hardest or seemed to take the longest. I've graphed my net worth over a couple decades or so and it is interesting how fast that curve steepens over the years. When I look at periods when the stock market tanked, although it seemed so bad at the time, it is only a small bump looking back. Of course my income and savings increased over those years but it was compounding and equity increases that made most of the difference
It's the opposite for me. In the early years I was earning 3% real on fixed income and had the 80s/90s equity markets going for me - plus my salary increases were reliably running several percent per year. Then, being a good boglehead, age-in-bonds (remember that? we didn't always subtract twenty or thirty) kicked in, just in time to see zero growth on the now-substantial fixed income side, and of course my now non-savings-rate is based on a declining real income. Not seeing anything steep happening here.

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Re: Is the first 100k really the hardest?

Post by abuss368 » Wed Feb 25, 2015 9:09 am

Tyrobi wrote:
r00ster wrote:I've often heard people say that the first 100k is the hardest...it only gets easier from here...now the magic of compounding begins, etc. I was wondering if anyone had any statistical support for this or if it's more of a cerebral victory.
$100k: It took us 5 long years after graduation from May 2005 to Mar 2010.
$200k: Then it took us another 2 full years in Feb 2012.
$300k: It only took about a year and half in Jun 2013.
$400k: After another year we got it in Apr 2014.
$500k: Less than a year later we crossed this point in Nov 2014.

The first $100k was really the hardest and longest for us. Each additional $100k is relatively easier.
Hi Tyrobi,

Great information and perspective.

Thank you for sharing.
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Re: Is the first 100k really the hardest?

Post by abuss368 » Wed Feb 25, 2015 9:09 am

I believe it is the hardest. I get the whole compounding theory but there si something to the first $100,000. Perhaps it is mental too!
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Re: Is the first 100k really the hardest?

Post by SC Hoosier » Wed Feb 25, 2015 9:13 am

Tyrobi wrote:
r00ster wrote:I've often heard people say that the first 100k is the hardest...it only gets easier from here...now the magic of compounding begins, etc. I was wondering if anyone had any statistical support for this or if it's more of a cerebral victory.
$100k: It took us 5 long years after graduation from May 2005 to Mar 2010.
$200k: Then it took us another 2 full years in Feb 2012.
$300k: It only took about a year and half in Jun 2013.
$400k: After another year we got it in Apr 2014.
$500k: Less than a year later we crossed this point in Nov 2014.

The first $100k was really the hardest and longest for us. Each additional $100k is relatively easier.

I'm just short of $100K and this is encouraging to me. However, these years saw quite a rise in the market, so the timing might be unrealistic. Good for you, though.
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Re: Is the first 100k really the hardest?

Post by abuss368 » Wed Feb 25, 2015 9:14 am

SC Hoosier wrote:
Tyrobi wrote:
r00ster wrote:I've often heard people say that the first 100k is the hardest...it only gets easier from here...now the magic of compounding begins, etc. I was wondering if anyone had any statistical support for this or if it's more of a cerebral victory.
$100k: It took us 5 long years after graduation from May 2005 to Mar 2010.
$200k: Then it took us another 2 full years in Feb 2012.
$300k: It only took about a year and half in Jun 2013.
$400k: After another year we got it in Apr 2014.
$500k: Less than a year later we crossed this point in Nov 2014.

The first $100k was really the hardest and longest for us. Each additional $100k is relatively easier.

I'm just short of $100K and this is encouraging to me. However, these years saw quite a rise in the market, so the timing might be unrealistic. Good for you, though.
That is a huge part of it. The last 5 - 6/7 years, the markets blasted off!
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Re: Is the first 100k really the hardest?

Post by Grt2bOutdoors » Wed Feb 25, 2015 9:27 am

It's all a matter of perspective. My first job was at age 16, back then the first $500 saved was the hardest. Following that, it became $1K, then 10K, then $25K, then $50K, then $100K, you really start to get real compounding traction when assets approach $200K (both ways - up and down :wink: ). Try saving it - if you are of low to average income it will feel like you are climbing Mount Everest. Seemingly takes forever. Far easier to accumulate it when you are a high earning individual with minimal debt levels.
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Re: Is the first 100k really the hardest?

Post by DonCamillo » Wed Feb 25, 2015 9:34 am

My experience (starting when $100,000 was a lot more than it is today)

$100,000 in nine years
$200,000 less than four years later
$300,000 two more years
$450,000 next year
$580,000 next year
$750,000 next year
back down to $440,000 over three years in a down market
recovering to $800,000 in two years.
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Re: Is the first 100k really the hardest?

Post by LateStarter1975 » Wed Feb 25, 2015 9:59 am

DonCamillo wrote:My experience (starting when $100,000 was a lot more than it is today)

$100,000 in nine years
$200,000 less than four years later
$300,000 two more years
$450,000 next year
$580,000 next year
$750,000 next year
back down to $440,000 over three years in a down market
recovering to $800,000 in two years.
Impressive!
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Re: Is the first 100k really the hardest?

Post by shaboob » Wed Feb 25, 2015 10:04 am

First paycheck from first job with a 401k showed a deposit of $395 to my 401k. A year later, the balance was about $6000. Its the first entry on my spreadsheet, which has grown by 115 monthly entries since then. I hit 100k at entry 81. I remember seeing these first couple of entries and thinking, "holy crap, I've got a looooong way to go." But, like others have said, compounding will slowly but surely bend that line into a curve.
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Re: Is the first 100k really the hardest?

Post by empb » Wed Feb 25, 2015 2:33 pm

The first $100k, through brute force savings, is obviously difficult at a time you're likely not making much money. Poking through my MoneyDance file, it seemingly took me quite a long time, even though I'd have guessed it took half that long.

$100k: June 2007 (when I started working) to January 2011, 44 months
$200k: January 2011 to November 2012, 22 months
$300k: November 2012 to August 2013, 9 months
$400k: August 2013 to February 2015, 18 months (assuming I get paid tomorrow)

Also goes to show how much difference sequence of returns can make...

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Re: Is the first 100k really the hardest?

Post by NeutrinoPerson » Wed Feb 25, 2015 2:39 pm

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Re: Is the first 100k really the hardest?

Post by LateStarter1975 » Wed Feb 25, 2015 2:42 pm

NeutrinoPerson wrote:I know it's irrational but I worry about how the stock market has been on a rocket ride straight up the past 5 years. I know it's gambler's fallacy to assume this, but I worry that I'll start investing heavily (now that I've finally been able to start, after paying off my high-interest debt) and it'll just get wiped out by a crash in the near future.

I'm only at $43k right now so I have a ways to go before I hit 100k.

If it gets wiped out and you keep on investing, you'll make a killing in the years to follow when the market eventually returns. Just learn to stay the course and don't peek too much in your portfolio during those periods
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Re: Is the first 100k really the hardest?

Post by NeutrinoPerson » Wed Feb 25, 2015 2:43 pm

LateStarter1975 wrote: If it gets wiped out and you keep on investing, you'll make a killing in the years to follow when the market eventually returns. Just learn to stay the course and don't peek too much in your portfolio during those periods
Yeah, this is what I tell myself as well -- I'm just bracing for that moment when the inevitable crashes happen and I watch all that progress disappear.

I think part of it will indeed require just *not looking at the balances*. In all seriousness, even if I looked, I would just keep on investing, but the act of looking would give me anxiety that I wouldn't want to carry.

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Re: Is the first 100k really the hardest?

Post by Toons » Wed Feb 25, 2015 2:44 pm

LateStarter1975 wrote:
NeutrinoPerson wrote:I know it's irrational but I worry about how the stock market has been on a rocket ride straight up the past 5 years. I know it's gambler's fallacy to assume this, but I worry that I'll start investing heavily (now that I've finally been able to start, after paying off my high-interest debt) and it'll just get wiped out by a crash in the near future.

I'm only at $43k right now so I have a ways to go before I hit 100k.

If it gets wiped out and you keep on investing, you'll make a killing in the years to follow when the market eventually returns. Just learn to stay the course and don't peek too much in your portfolio during those periods
+1
Excellent advice,,,,
Money is made during bear markets as long as you are continuing with your purchases,,you just don't know it at the time :happy
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Re: Is the first 100k really the hardest?

Post by JDCarpenter » Wed Feb 25, 2015 2:49 pm

NeutrinoPerson wrote:
LateStarter1975 wrote: If it gets wiped out and you keep on investing, you'll make a killing in the years to follow when the market eventually returns. Just learn to stay the course and don't peek too much in your portfolio during those periods
Yeah, this is what I tell myself as well -- I'm just bracing for that moment when the inevitable crashes happen and I watch all that progress disappear.

I think part of it will indeed require just *not looking at the balances*. In all seriousness, even if I looked, I would just keep on investing, but the act of looking would give me anxiety that I wouldn't want to carry.
On one level, I think it may help to have this happen early. We were under 100,000 net worth (by a lot) in 1987, but had everything liquid in equities. the 22% DJIA drop on Black Monday (and the bad months before it) hit hard. We just kept plugging away and after that, even 2008-2009 didn't phase us much--notwithstanding a much bigger equity portfolio (and the same 100% AA).
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Re: Is the first 100k really the hardest?

Post by nash031 » Wed Feb 25, 2015 2:57 pm

I don't think the first $100K is the hardest. Really, it's the first $383K. Or $567K. Or $1.2M.... totally arbitrary number that matters relative to what your end goal is. The first $100K took me about 6 working years, and now another 100K takes less than a year (depending on the year!), but considering the end goal $100K is a cupful of water in a large bucket. Eventually we transition from worrying about 100s into 1000s into 10000s into 100000s into 1000000s (if we're lucky!). At any point in that adventure, thanks to compounding the first ____________ is the hardest.

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Re: Is the first 100k really the hardest?

Post by telemark » Wed Feb 25, 2015 3:05 pm

At some point the returns on the money you already have invested start to exceed the new money you are adding. The exact amount will depend on the market and on your savings rate.

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Re: Is the first 100k really the hardest?

Post by lack_ey » Wed Feb 25, 2015 3:08 pm

The sequence of returns and the magnitude matters a lot, and it's out of your hands. Actually, you really want the first $100k to come very slowly (a really bad bear market) and up through $200k etc. too, assuming the same savings rates, because that means more stocks picked up for cheap. For what it's worth, high valuations have usually led to crashes of around 50% or so whenever the next recession hits.

For an example of how things are out of your control:
Even for US investors historically, if one saved 20% of their salary and invested it all in the S&P 500 or equivalent, with no fees or taxes (or salary increases past inflation) it would have taken 37 years for someone starting in 1947 to build up 20 years' worth of salary in wealth from that investing strategy. For someone who started in 1980, that would have taken 19 years. Same strategy, vastly different outcomes. The data and example are from one of Bill Bernstein's books.

Just keep saving and doing the best you can. Earning more money (without spending a lot more of it) will help and is the big ticket item. Everything easier said than done.

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Re: Is the first 100k really the hardest?

Post by MathWizard » Wed Feb 25, 2015 3:13 pm

Let's assume you your salary went up at the rate of inflation, and that you get real return of 6%
Then the doubling time for an investment is 12 years (rule of 72).
Let's also assume you save 15% of your salary.

The first 12 years (the doubling time) you contribute 1.8x salary and earn about .8x salary in interest for a total of 2.6x salary.

Now the next 12 years, you would get the 2.6x salary just like above, from contributions and earnings on those contributions,
plus since this is the doubling time, you double the original 2.6x salary balance you had at the end of the first 12 years.
So at 24 years you have 2.6x doubled plus one more 2.6x for a total of 3 times 2.6x salary.
At 36 years, you double the 3 time 2.6x salary, and then get anoth 2.6x salary from contributions and earning on this contributions.

So you have:

12 years : 2.6x salary
24 years : 3 times 2.6x salary
36 years : 7 times 2.6x salary


For a different doubling time D years , figure out what you would have after the first D years, call that B.

Then you will always have

D years 1 times B
2*D years 3 times B
3*D years 7 times B
4*D years 15 times B

each next D, you double the previous and add on one more B.

So it is the first B dollars that is the hardest.

So if B were $100K, and the doubling time was $100K in this fashion, then you'd have $300K in 20 years. and $700K in 30 years, and
$1.5 million in 40 years.

If you make a straight line average of the growth, The straight-line average over
over years 1-10 it was $10K/yr, but
over years 31-40 it was $70K/year.

Clearly the growth looked hardest the first 10 years, not the last 10.

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Re: Is the first 100k really the hardest?

Post by AWH_CPA » Wed Feb 25, 2015 3:52 pm

Including real estate I hit $100K at about 25. (2011) Now including real estate I'm around $300k.

If we do not include real estate (which for this case we probably should not, I am not yet there. My wife and I were very diligent savers early on in our marriage. Unfortunately as my income has gone up so have our expenses. (Bought a bigger house to accommodate our growing family, bought a bigger car to accommodate our growing family, have more expenses due to growing family).

All in all though, I'm 28, wife is 25. We have $99,405.71 in our 401k, 2 roth IRAs and profit sharing account. I'm hoping that we will soon plateau in expenses (for a while until the kids get expensive) and we can start dumping serious coin into our retirement accounts. The next $100k in assets will hopefully only take about 4 years and then start to increase going forward.

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Re: Is the first 100k really the hardest?

Post by White Coat Investor » Wed Feb 25, 2015 4:04 pm

The first "whatever milestone" IS harder than the next milestone of the same size because you don't have your money working for you as much. When you're going from $100K to $200K, you not only have your work, but also the work of that first $100K to help you get there. Capitalism is a beautiful thing!
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Re: Is the first 100k really the hardest?

Post by slowmoney » Wed Feb 25, 2015 5:20 pm

telemark wrote:
At some point the returns on the money you already have invested start to exceed the new money you are adding. The exact amount will depend on the market and on your savings rate.
+1

Saving is hard. Our net worth passed 100K a while ago but depending upon events, I still find saving hard. The opportunity costs of saving those dollars....it does seem unbearable at times. So, when the market has had a big day or new high, I like to add up the returns. It is basically more than I made working that day. It helps to pay off those pesky opportunity costs. Also, a good time is when your dividend payments are paid out. Added it all up. A lot of other people worked very hard over the months to produce a return for your investments, enjoy them....
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Re: Is the first 100k really the hardest?

Post by LateStarter1975 » Wed Feb 25, 2015 5:33 pm

EmergDoc wrote:The first "whatever milestone" IS harder than the next milestone of the same size because you don't have your money working for you as much. When you're going from $100K to $200K, you not only have your work, but also the work of that first $100K to help you get there. Capitalism is a beautiful thing!
This
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Re: Is the first 100k really the hardest?

Post by texasdiver » Wed Feb 25, 2015 6:22 pm

Well, the first 100k took the longest but I would hardly call it hard. Back in the day I was starting out with the Federal government and just maxed out my TSP (Government 401k plan) due to some great advice by an older co-worker and never really paid it any attention except to glance at the quarterly statements that came in the mail before tossing then in the drawer. I have no idea how long it took to be honest, I was young and single and retirement was so far off as to be unreal. I wasn't using quicken or any online tools to check accounts so it was mostly out of sight and out of mind. It was a pretty stress free 100k because I just wasn't paying attention. I'd have to go back through my old statements to have any idea how long it took.

Now the 100k intervals are coming much faster but I'm also paying so much more attention to every detail of all our accounts and between my wife and myself we have 7 different retirement accounts. But I can now check them instantly on my phone or computer from anywhere. I tend to notice every up and down and obsess about asset allocations, fees, and so forth. I'm not sure faster is any easier, it kind of depends on where you are at in life I think.

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Re: Is the first 100k really the hardest?

Post by vitaflo » Thu Feb 26, 2015 1:29 pm

EmergDoc wrote:The first "whatever milestone" IS harder than the next milestone of the same size because you don't have your money working for you as much. When you're going from $100K to $200K, you not only have your work, but also the work of that first $100K to help you get there. Capitalism is a beautiful thing!
Yup, consider my path to $500k. My first deposit was at the top of the dot com bubble.

$100k: 11 years, 6 months (through dot com bust and housing bust)
$200k: 10 months
$300k: 10 months
$400k: 9 months
$500k: 7 months

That $500k is now really working for me, up almost $25k just this month alone. But an increase in salary, less debt, and the huge bull run we've had the last several years has also really helped in this regard. All of that was non-existent when I was under $100k. I suspect for many people this is also part of the reason the first $100k is tougher.

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Re: Is the first 100k really the hardest?

Post by FireProof » Thu Feb 26, 2015 1:54 pm

Of course, for two reasons:
1) Salaries tend to rise over time
2) Your first 100K will earn money for you.

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Re: Is the first 100k really the hardest?

Post by surfstar » Thu Feb 26, 2015 2:16 pm

The first ___ is the hardest, is the reason I max my tax advantaged accounts, soon after finding Bogleheads.
Wish I had just a few more years head start, but am happy with the current trajectory.
Am hoping to hit the 6fig club by end of the year (barring a correction, although that could be good in the long run!)

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Re: Is the first 100k really the hardest?

Post by pingo » Thu Feb 26, 2015 2:17 pm

The first 10k felt like it took forever.
The first 100k felt like it took just as long.
I expect the first million to feel even longer...if we make it that far.

Then again, once we hit 100k, it didn't take long to hit 250k. Time will tell.

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Re: Is the first 100k really the hardest?

Post by TareNeko » Thu Feb 26, 2015 2:30 pm

The second 100k would be harder if you encounter a bear market right after a bull market that helped you get to the first 100k :)

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Re: Is the first 100k really the hardest?

Post by Hunky-dory » Thu Feb 26, 2015 3:22 pm

Yes, it really is that much harder. Most folks start in a hole, whether due to student loans, bad luck, poor choices or a combination thereof. Keep to your plan. If the markets are kind you won't see five figure net worth again.

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Re: Is the first 100k really the hardest?

Post by Meg77 » Thu Feb 26, 2015 4:05 pm

I think it gets easier to save assuming your income goes up faster than your expenses, but compounding also starts to help which is the main point.

Here is the trajectory of my retirement accounts and net worth since I've been keeping track. I graduated from college in 2006 for the record, with about $12K in a Roth IRA and $265K left in my college fund if I recall.

Year - Retirement - Net Worth
2007 - $24K - $363K
2008 - $24K - $317K
2009 - $49K - $387K
2010 - $87K - $450K
2011 - $108K - $490K
2012 - $145K - $572K
2013 - $201K - $761K
2014 - $250K - $825K

In mid 2014 I got married, but I didn't include my husband's figures in the 2014 number to keep the trajectory straight. It really is interesting to look back over the last 8 years and see this! That growth really does start to accelerate. Of course we are still at the stage where our new contributions make the most difference.
"An investment in knowledge pays the best interest." - Benjamin Franklin

basspond
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Re: Is the first 100k really the hardest?

Post by basspond » Thu Feb 26, 2015 7:24 pm

No statistical support, just personal history. There are three things that make the 1st $100k the hardest:

Most people are at the beginning of their career so salary is lower, at least it was 30 years ago.

Investments are compounding, but with a low balance it isn't much.

Hard to get on a savings plan for retirement at a young age.

BogleBoogie
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Re: Is the first 100k really the hardest?

Post by BogleBoogie » Thu Feb 26, 2015 7:49 pm

LateStarter1975 wrote:
NeutrinoPerson wrote:I know it's irrational but I worry about how the stock market has been on a rocket ride straight up the past 5 years. I know it's gambler's fallacy to assume this, but I worry that I'll start investing heavily (now that I've finally been able to start, after paying off my high-interest debt) and it'll just get wiped out by a crash in the near future.

I'm only at $43k right now so I have a ways to go before I hit 100k.

If it gets wiped out and you keep on investing, you'll make a killing in the years to follow when the market eventually returns. Just learn to stay the course and don't peek too much in your portfolio during those periods
Don't worry about performance now. Just get in, and invest often. 15-20 years from now you will not have one thought about what the purchase price was of today's funds - only that they will seem very cheap.

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CMartel2
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Re: Is the first 100k really the hardest?

Post by CMartel2 » Thu Feb 26, 2015 8:42 pm

Loads of other factors are at play here. The first 100k is harder because typically much more is going on unless you're single.

1) Saving for a home? Hard to save 20% down and save for retirement optimally.
2) School debt
3) Lower starting income
4) Beginner expenses. Much easier to purchase a car outright later in life. Buying a home? You need furniture.
5) Babies. Medical expenses. Etc...

wassabi
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Re: Is the first 100k really the hardest?

Post by wassabi » Fri Feb 27, 2015 5:43 am

DonCamillo wrote:My experience (starting when $100,000 was a lot more than it is today)

$100,000 in nine years
$200,000 less than four years later
$300,000 two more years
$450,000 next year
$580,000 next year
$750,000 next year
back down to $440,000 over three years in a down market
recovering to $800,000 in two years.

Thanks for posting this information. What kind of AA did you have that allowed you to take a 40%+ drop from 750k to 440k? Was that the recent (2008-ish) market drop?

dekecarver
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Re: Is the first 100k really the hardest?

Post by dekecarver » Fri Feb 27, 2015 6:04 am

Is it hard: It really depends on how much you make and how much you spend.

ZumZabo
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Re: Is the first 100k really the hardest?

Post by ZumZabo » Fri Feb 27, 2015 8:39 am

All my life I have heard that the first X is the hardest. Is that not like saying that two miles is a longer distance than one mile? When one is accumulating the first $100,000 they start from zero. Easy numbers here and I used a simple calculator so not necessarily accurate to the hundredth % but you get the point. If they save $20,000 per year at 8% it would take 4.37 years to accumulate $100,000 and that is almost all personal capitol assuming the $20,000 comes from wages. That is obviously going to be the hardest $100,000 in a series of subsequent $100,000 increments. To turn $100,000 into $200,000 one starts with a stake of $100,000 that will grow, if invested, without any work from the owner so less of the that $100,000 is from work. That is easier. And all factors staying equal that $100,000 takes 3.27 years. Easier and faster. To turn $200,000 into $300,000 takes 2.61 years and still more of the that amount is growth of the stake (no work on the part of the owner) and is still faster and easier than previously. Each subsequent $100,000 requires the stake to grow by a smaller percentage to achieve the next. Soon enough the $100,000s come easier that the $10,000s did previously. Very fun. :happy :moneybag
What made me think I could start clean slated? The hardest to learn was the least complicated: Emily Saliers / And if I claim to be a wise man, it surely means that I don't know: Kerry Livgren

acejacksingh
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Re: Is the first 100k really the hardest?

Post by acejacksingh » Fri Feb 27, 2015 9:53 am

wassabi wrote:
DonCamillo wrote:My experience (starting when $100,000 was a lot more than it is today)

$100,000 in nine years
$200,000 less than four years later
$300,000 two more years
$450,000 next year
$580,000 next year
$750,000 next year
back down to $440,000 over three years in a down market
recovering to $800,000 in two years.

Thanks for posting this information. What kind of AA did you have that allowed you to take a 40%+ drop from 750k to 440k? Was that the recent (2008-ish) market drop?
I would think a 80/20 AA.

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DonCamillo
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Re: Is the first 100k really the hardest?

Post by DonCamillo » Fri Feb 27, 2015 12:29 pm

wassabi wrote:
DonCamillo wrote:My experience (starting when $100,000 was a lot more than it is today)

$100,000 in nine years
$200,000 less than four years later
$300,000 two more years
$450,000 next year
$580,000 next year
$750,000 next year
back down to $440,000 over three years in a down market
recovering to $800,000 in two years.

Thanks for posting this information. What kind of AA did you have that allowed you to take a 40%+ drop from 750k to 440k? Was that the recent (2008-ish) market drop?
The decline was not 2008. I was 100% stocks, mostly in hot issue individual stocks, a lot of my employer's stock, very little in equity mutual funds, and not a Boglehead. It was worse than a 40% drop because I was continuing to invest, probably about $25,000 a year. As I look back at that, I regret the hot issues, I regret the employer stock, somewhat regret the 100% equity, but definitely do not regret buying as much as I could when the market was down. But note that the fast rise was from the same issues that led to fast drops.
Les vieillards aiment à donner de bons préceptes, pour se consoler de n'être plus en état de donner de mauvais exemples. | (François, duc de La Rochefoucauld, maxim 93)

Dulocracy
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Re: Is the first 100k really the hardest?

Post by Dulocracy » Fri Feb 27, 2015 1:17 pm

The first 100k of net worth is the hardest for multiple reasons:

1) You get compounding benefits for subsequent milestones.
2) Inflation makes the dollar devalued and therefore easier to get. Your second 100k is worth less than the first (barring deflation).
3) You pay off debt faster. Payments toward debt go towards principal more than they go towards interest as the debt is paid.
4) You will typically get salary increases.
5) Often, much (or some) of the original $100k was accumulated before someone had a financial education. That is, the more you earn, the more you seek knowledge about what to do with that money. Ergo, the more knowledge you have, the easier it is to accumulate wealth. Most people starting a 401k for the first time know nothing about things like expense ratios that drag performance.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.

Confused
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Re: Is the first 100k really the hardest?

Post by Confused » Fri Feb 27, 2015 1:38 pm

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pingo
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Re: Is the first 100k really the hardest?

Post by pingo » Fri Feb 27, 2015 5:14 pm

ZumZabo wrote:All my life I have heard that the first X is the hardest. Is that not like saying that two miles is a longer distance than one mile? [...]
In my case, it's why I emphasized that the first X *felt* like a long time, and the second X *felt* like it took just as long, even though it must have taken longer.

It's like when I spent some time overseas. The first 3 months felt like a long time. The next six months felt like the first 3 months. By the time I reached two years, it still felt like a long time, but it didn't feel any longer than the first 3 months.

Math-wise, it doesn't add up. :D
Last edited by pingo on Fri Feb 27, 2015 9:26 pm, edited 1 time in total.

crg11
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Re: Is the first 100k really the hardest?

Post by crg11 » Fri Feb 27, 2015 5:18 pm

I'm going to run the #'s Sunday morning, but we should be at $100k net worth for the first time ever, which took about 10.5 years.

ZumZabo
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Re: Is the first 100k really the hardest?

Post by ZumZabo » Fri Feb 27, 2015 11:52 pm

crg11 wrote:I'm going to run the #'s Sunday morning, but we should be at $100k net worth for the first time ever, which took about 10.5 years.
crg11, Congratulations on a huge milestone. You should be very proud. I can say with confidence that the next $100 k will come in much less time than 10.5 years.
What made me think I could start clean slated? The hardest to learn was the least complicated: Emily Saliers / And if I claim to be a wise man, it surely means that I don't know: Kerry Livgren

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