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The first hundred thousand dollars is a bitch. The hardest part is in the beginning. You need to decrease your spending and avoid lifestyle inflation. Once you have that $100,000 saved and invested, compound interest is working overtime for you because the more money you put into your investments and the longer time period that it's in there, the more you are likely going to walk away with. If you're working hard, shouldn't your cash foreign what's up rich friends? And welcome back to another episode of Net Worth and Chill. I'm your host Vivian Tu, AKA Yaritch BFF and your favorite Wall street girly, Now. I've never been shy about sharing my now millionaire status, but before I got to the millions, I had to first hit $100,000. And let me tell you, it was a struggle to get there. I'd happily go on record to say it was actually harder to get to $100,000 in my bank account than it was to get to $1 million in my bank account. So let's get into why it's so hard to hit six figures and ways you can actually get there. Support for this show comes from Lufthansa when you want to get away in style, Lufthansa Allegris offers a range of new features and amenities across all travel classes. The Lufthansa Allegris Business class allows you to choose from five different seat options, including the extra space seat with or the extra long bed in the first class suite. Almost floor to ceiling partitions and closable doors provide maximum privacy and make your trip above clouds feel just like home. But no matter where you sit, your travel experience is tailored to your needs and you'll wish it could last a lifetime. Say yes to Lufthansa allegris and visit lufthansa.com so you've probably heard that famous Charlie Munger quote floating around TikTok the first hundred thousand dollars is a bitch. And honestly, he wasn't wrong. But here's what nobody tells you about why it's so damn hard. Ultimately, it's so hard because of compound interest, AKA the eighth Wonder of the world. Let's look at an example to help understand this. If you have $1,000 invested, returning 7% a year, the market gives you $70 after one year, equaling $1,070 total. In year two, that same 7% grows off of the 1070 already in the counter. So by the end of the year you have $1,144.90. As you can imagine, extrapolating this Gives you even bigger returns. So if you had $100,000 invested, returning that same 7% for a year, you would have made $7,000 for a total of $107,000 in the account, which obviously is significantly more. And you can do a lot with $7,000, but not that much with 70. By year two, you'd end the year with $114,490. Once you have that $100,000 saved and invested, compound interest is working overtime for you. Because the more money you put into your investment and the longer time period that it's in there, the more you are likely going to walk away with. Largely, this is due to two facts. Fact 1 the earlier you are in your money making journey, the more of your overall income is derived from labor, AKA you physically at your desk, or on your laptop or on your feet doing something. But later on, the more money you already have amassed, the more money you'll be able to put to work. So a larger percentage of your total income pie chart will be coming through returns and gains versus just labor alone. Fact 2 as the years go on, even the money you earn from investment returns will continue to work hard for you. That's what we mean by compound your money earns you money back. In our example, with $100,000 the first year you earned 7,000 from your investment. But did you notice how in the second year you didn't earn $7,000 again, you actually earned a little bit more than that because the increase was done off of the $107,000 calculation, not just your initial $100,000. That's why you earned $7,490. Now imagine this snowballing over time. The difficult thing about wealth accumulation is that the hardest part is in the be. It's hardest to get to that $100,000. And when you're trying to build up your investment portfolio and just your overall savings, you're pulling together a smaller amount which has been newly added to the market and therefore isn't going to give you a big return right away. Which can definitely discourage people in the beginning. Especially when older folks who've been in the market for years may see much larger returns in comparison. Don't be fooled. They weren't always making this much off of their investments. It took time and patience. Let's get into some strategies to help you hit this major financial milestone. First, let's increase your income. When you're working towards that $100,000 goal, one of the best ways to get to that number fast is just to make more money. And I know that sounds obviously easier said than done, but if you're really ready to grind and looking to make some extra cash, taking on a side hustle could be great. Some can be super flexible and can help you just reach that goal a little faster. Here are two great recommendations that I've seen people use recently. First up, Reflex. This is essentially on demand retail work where you can get paid in 24 hours. It's so amazing because not only are you actually a W2 employee, but you can pick and choose which retailers you work at and you'll also get a employee discount where you're working. Additionally, there's Papa Pal. If you love working with the elderly, this could be another great alternative. This helps to connect you with seniors in your area who need help with everyday tasks like going to the doctor or picking up groceries. You don't need to be a healthcare professional and you won't ever be asked to administer shots or medication or anything like that, but just to help out with little tasks. This is a really easy way to help someone out, do a good thing and still make money all the while. Another way to maximize your money without any additional work Get a High Yield Savings account. Your traditional savings account might be giving you 0.42% interest, which is basically nothing. But a high yield savings account can earn you up to nine times that. There are some great options out there like Sofi, Ally or Amex, and obviously you should have a savings account. And with a high yield savings account, this allows you to get the most amount of interest earned on your money. If you're working hard, shouldn't your cash now let's get ready to save. If you're just starting out on your financial journey, it can be really hard to part with some of your hard earned money money. But if your paycheck's $2,000, why can't you spend it all? I mean, it's your money, right? If you automate your savings, let's say 10% of each paycheck that'll go into a separate savings account and your money will be out of sight, out of mind. You won't be tempted to spend and you'll be building a nice nest egg for yourself that can later act as your emergency fund or be extra money to fund in your investments. Now this is the important part. You need to decrease your spending and avoid lifestyle inflation, AKA the comparison trap. Social media is a highlight reel and it makes everyone look super duper rich. But what you see on Instagram should not be your financial benchmark as you work on building your own net worth, do not get stuck in the comparison trap. The fabulous vacations and clothes that people flaunt on social media could very well be the result of credit card debt or just rich parents. And I'm not telling you to not spend on things you love or things that'll bring you joy. But as you are working towards that $100,000 goal, you need to avoid spending just to spend. The person with the brand new Balenciaga bag might not have anything saved in it, so don't be fooled. Value based spending is a really great way to determine if you are actually going to derive a return from something. So what I like to do is is calculate how many hours I'd have to sit at my desk to afford a good or service and I call it the Jorvich BFF Is it worth it equation. But say your after tax hourly take home pay is $20. If I go to a store and I'm trying to get a pair of pants and they're $80, I have to sit at my desk for four hours for those pants. Is that worth it? If I don't have many other pairs of pants, it might very well be. But if I've got a dozen other pairs of pants and I don't necessarily need to be buying a new pair right now, maybe this equation helps me realize I would rather have those four hours back than that new pair of jeans. So value based spending can really help you figure out what actually brings you value and what you should kind of just skip out on. Now that we've maximized your income, minimized your spending, let's talk about investing today. First and foremost, we got to go through the step by step. First you're going to pick a brokerage AKA where you actually want to do said investing. Two, you're going to pick an account AKA the type of tote bag that's going to hold stuff. And three, no surprise, you actually have to pick investments. So first and foremost, when it comes to brokerage picking, you're going to want to decide if you want to self direct and have a bunch of resources or if you'd rather have a little bit more guidance, a little bit more handholding and a better mobile experience. Old versus New Guard the reason why it's split up into these is because largely there's the old companies that will provide you a bunch of resources for you to do it yourself and a bunch of these newfangled companies that can help you invest using a robo advisor and they're going to essentially help you along. Once you're ready to invest, you should be trying to maximize your tax advantaged retirement accounts. This is going to ensure that you'll pay less in taxes on your investments and AKA you'll have more money in your pocket. This includes accounts like an IRA, a Roth IRA or a 401K or 403B that might be offered through your work. You should try to max out these accounts every single year because if not, you're giving up more of your money to the government than you'd actually need to be. If you've already maxed out your tax advantaged retirement accounts, you can also think about opening a health savings account or HSA for additional tax savings. This has a triple tax advantage because the money you contribute is pre tax reducing your taxable income. The funds roll over year after year. Unlike a flexible spending account, an fsa, there is no use it or lose it rule. The account belongs to you and even if you change jobs or insurance plans, you will have access to it. And you can withdraw at any point for medical expenses, tax free. And once you turn 65, if you didn't end up having a bunch of medical expenses or you didn't need to pay for things like that, you can actually withdraw the funds for non medical expenses without paying a penalty. You'll just pay regular income tax on it and that can help you save for pricey medical costs or use the unused funds for your future retirement. So now that I've opened my account, what should I actually invest in? Short answer funds that track certain indices or sectors that you're interested in. These are essentially a basket of stocks that you can buy at once. An index fund is a type of mutual fund or exchange traded fund ETF designed to track the performance of a specific market index. So for example, the S&P 500 other fund variations may track the UK market or the real estate sector or companies above or below a certain size. These will help you diversify your portfolio from the get go. So you're not entirely into just one company. Think about it this way. It's Halloween and you only have Snickers to give out to kids. There's a large chance that maybe some of these kids that show up on your doorstep could be allergic to peanuts. But if you were to have bought a variety pack, there's something for everyone and you would have a lowered risk of people coming to your house not being able to eat the candy and then your house getting egged. I never advocate for cherry picking stocks. Because most people who do this will actually lose money. They typically don't perform as well as a diversified portfolio. And most active managers. So folks who are working at hedge funds, what have you, they actually underperform benchmarks. And if people who spend their entire livelihoods trying to pick the perfect investment can't do it right, what makes you think 15 minutes of Yahoo Finance and Googling is going to help you do it? Take the easy way out. Just invest in a diversified portfolio of index funds. Also, I mentioned a little phrase earlier. If you don't know where to begin and you can't seem to make a decision, you can check out a Robo advisor. These are often offered at these newer brokerages. Essentially, you take a short quiz about you and your money goals and the robo advisor spits out a perfect portfolio for you. You would just retake this quiz yearly to ensure that your portfolio still makes sense and is serving your lifestyle appropriately. Long story short, don't get paralysis by analysis because not only are you putting off your investing journey, but by doing this you're literally throwing money and even worse time away. Now onto our Q and A section. We pulled the BFFs online about all of your questions in regards to reaching that first $100,000 milestone and ways to actually get there. If we don't get to your question, I do want you to check out my new platform, ask dolly.com think ChatGPT meets a licensed CFP. Here you can ask all of your financial questions and get on demand answers all approved by certified financial planners. So we're going to make sure that you are actually getting the right answers. Right now we're getting people on our wait list and I want to make sure that everybody who is interested can sign up to be invited on the beta test. As this tool rolls out, I hope you use it, I hope you learn from it and I hope you love it. So check it out. Ask Dolly.com, sign up for the wait list. That's Ask Dolly. A S K D o l l y.com first question how do you balance life and saving? Yeah, this is a great question because one yes, you want to make sure that you are taking care of future you and preparing for what could come. But I also don't want you to hate your life today. That's not the point. It's not just to survive. I want you guys to thrive. So one thing that I really like to do is actually split up what I'm doing with my money. So something that you could consider is a 50, 30, 20 budgeting strategy. So half of your income goes towards needs. Boring stuff like rent, utilities, groceries. 30% can go towards wants. Um, this is getting your nails done, getting drinks with friends, and then 20% is taking care of future you. So that's saving debt, pay down, and investing. Obviously, if you're able to make your 30% less, you'll be have more money to put towards that 20 for taking care of future you. But I want to say this. A healthy budget includes both preparing for the future, but also living for today. And I don't want anybody online to make you feel bad about wanting a coffee or, or wanting to get your kid a present or see your friends. Because what is the entire point if not to actually enjoy your life? Next question on our list, what are the spending habits that yielded the biggest savings over time? Okay, so there's two schools of thought, which is one, make the big moments count, and then the other one is death by a thousand paper cuts. So the school of thought about, you know, make the big moments count is try to lower your housing, transportation and highest costs, because those are going to be the things that make the largest difference. On the other side, it's essentially if you are able to lower those discretionary little treats, those dinks and dunks, you're going to be able to actually put more money towards the things that one are the most expensive, but make the biggest difference in terms of your quality of life. So your apartment or your car. I am personally someone who would rather not give up the little stuff and be more mindful about some of those bigger purchases. So I would say the biggest results in terms of my savings came from the fact that I kept a much cheaper apartment than my peers. Even when all of us started to make more money, they moved into nicer apartments, maybe with better amenities. And I said, it's fine, I'm just gonna stick it out. I'm gonna in my crappy little apartment. Because of that, I was actually able to save so much money that my now husband and I were able to purchase a place. And our friends these days, their rent is more than our mortgage payment. So for me, the biggest difference maker was tackling the most expensive things. Transportation and housing. Support for this show comes from Lufthansa. A flight is more than just a flight. It's a journey and a promise of a destination. But how you travel matters just as much as where you travel. And with Lufthansa Allegris, you can find a high quality travel experience to relish every step of the way. The Lufthansa Allegris first class suites provide almost floor to ceiling partitions and closable doors, creating maximum privacy for travelers. They also come equipped with a spacious dining table, individually adjustable and temperature controlled seats with a do not disturb feature. Plus, the wide seat in your suite can easily be converted into a bed that is over six feet long, ensuring a restful night's sleep. Sleep on board and if you fly Lufthansa Allegris Business class, you'll have five different seat options to choose from such as extra long bed, the privacy seat or the extra space seat. Enjoy your travel experience tailored to your needs. No matter where you sit, you'll want to stay on your Lufthansa flight for as long as possible. Say yes to Lufthansa allegris and visit lufthansa.com what are some of the best life adjustments that can be made to help me get to $100,000 saved? Well, I think something to think about here. Like I mentioned just in the past question like the biggest difference makers are gonna be your largest expenses. So one of the hugest difference makers in terms of my finances versus some of my friends was when I started dating Boo. Instead of having to get a two bedroom apartment that I would split with another person or a one bedroom apartment that we would then flex the living room into a second bedroom and then we would have no living space living with another person that I could share a bedroom with, actually cut down on our expenses quite a lot because naturally a one bedroom apartment costs less than a two bedroom apartment and I noticed like a major leg up because I might be saving an extra $1,000 every single month versus some of my peers and that's $12,000 back in my pocket every single year. Not to mention if I then put that $12,000 to work, it can certainly grow. So if there are ways for you to really, really lower your biggest expenses, this is going to be a strategy to help you save more, invest more and be able to do more with your finances. So things like maybe sharing a car, maybe carpooling, maybe moving into a less expensive apartment, all of these biggest movers are going to happen largely in the transportation and lodging categories. Next question. Do you need to be debt free to hit $100,000? No. No you do not. Not all debt is created equal. Some debt like if you graduated college around when I did, those federal student loans had a 3, 4, 5% handle on them. So there's no real rush to pay that off because you realistically would be able to earn more money investing your cash in the stock market than you would save paying that debt down early. So you can very much get to $100,000 saved, a hundred thousand dollars invested, while still having debt. My only recommendation is that if you have high interest rate debt, you pay that down first because it will compound and start to rack up faster than you are earning if you are investing that money or saving that money, and that largely is credit card debt. So anything above a 7% interest rate, I would say try and get that paid down quickly with the worst offenders being those 20 to 30% APR credit cards. But you can still have debt, still have a very healthy financial picture. I am someone who, you know, I'm proudly a millionaire, but I have a seven figure mortgage and that's okay because I have an incredibly low interest rate. I was able to get that during the pandemic and I'm going to slow roll that debt and take as long as I possibly can to pay it back. Next question up. How do you start when you have less than $100,000 in salary and also pay rent, expenses, etc. And you have no savings? This is a great question. I completely understand that more and more people who are even high earners frankly, are having a really hard time saving because their life just costs so much. I think that the three easiest steps to share is one, make sure that you are maximizing your income. So that is asking for an annual raise, making sure that you have the receipts to back it up. I have been able to increase company revenue by XYZ percent. A raise of this would be commensurate with what I have brought to the team. Don't be shy about asking for that. It's always easier to make more money than it is to scrimp and save and cut out every little discretionary expense that brings you any joy. So I would say one, maximize your income by asking for that raise. Two, I would say where you can try and cut back because I'm not saying you can't have the latte every so often, but I'm saying if you're getting a latte every single morning, is there a cheaper way for you to do that? Is there a delivery service that can ship you, you know, 20 cans of your favorite canned coffee that's going to be cheaper than actually going into a cafe. I'm not saying you have to suddenly go and buy an espresso machine and start making the, you know, drink yourself. But there is a happy medium there of where you can save a little bit on certain days. And then, you know, it's really about maximizing your income, limiting how much you're spending and investing the difference. Because once you get started, it does get so much easier. And something that I've been really good about for when I had a W2 job is going into my employer portal and signing up. So that part of my paycheck was deposited in a checking account, but automatically maybe 5, 10% was put into a separate savings account. Because when I don't think about it, I don't see that money. I don't think I can spend it. And it just helped to naturally curb some of those expenses and that itch to spend that I would have if I saw that money sitting in my account. All right, onto our next question. How do you get to $100,000 saved while also saving for things like a down pay? Do you focus on investing? I would say this is dependent on your timeline. So when it comes to saving that $100,000 to be invested, what you can actually do is invest some of that money and also have some of it invested in more conservative things that can then be used as part of your down payment. So when it comes to longer term investments, yes, you want to be in index funds that are tracking the broader market. Sure. But if you know that you're trying to buy a home in the next two years, you can also invest some of your money in some more conservative investments, whether that be bonds, whether that be certificates of deposit, a money market fund. And these can also return something for you. So your money's working hard, but this carries a lot less risk than just putting your money into an ETF in the stock market. So if you want to save for a closer goal versus retirement, this is going to help you balance both. What I'll say is, don't treat these as competing goals. Think about them in conjunction. That $100,000 that you're setting aside to then be invested, you can use part of that for your down payment. And then for our very last question, what do you do after you hit $100,000 in savings or in net worth? You keep going. In fact, things are likely going to get easier from there. One, because you're just going to sleep better at night knowing that you have a little bit of a cushion, a little bit of a nest egg. But two, with $100,000, if that money is being saved in a high yield savings account or invested, returning you 8 to 10%, your money is going to be working very hard for you so you're not going to necessarily need to be as aggressive with your frugality or cutting back on things. It's just going to make things a lot easier. But that's not to say you shouldn't have further goals. Once you get to a hundred thousand dollars in net worth, maybe it's from there. Okay, now I want to think about if I can get to this number. It's going to help me be able to perhaps semi retire and spend more time with my kids. Or or maybe only one of us in the relationship is going to have to work. Think about what your family's goals are and then utilize the numbers as benchmarks to help get you there. It's not about stockpiling the biggest number possible. It's more about getting you to a point where you feel really comfortable with the number in your bank account, but also what that number is then able to provide to you in terms of security, stability, and lifestyle. And to wrap us up, listen, hitting $100,000 won't solve all of your problems. You'll still have bills, you'll still probably stress about money sometimes, and you definitely won't feel quote unquote rich. But here's what it will do. It'll prove to you that you are capable of more than you thought. If you're sitting there with $0 invested, open that account today. If you have some money but you're not consistent, set up that automatic transfer. The perfect time to start investing was yesterday, but the second best time is today. I wish you good luck. I know you can do it. Bye guys. Thanks for tuning into this week's episode of Net Worth and Chill, part of the Vox Media Podcast Network. If you liked the episode, make sure to leave a rating and review and subscribe so you never miss an episode. Got a burning financial question that you want covered in a future episode? Write to us via podcastourrichbff.com follow Net Worth and Chillpod on Instagram to stay up to date on all podcast related news and you can follow me at your rich BFF for even more financial know how. See you next week. Bye. Thanks to Lufthansa for supporting this podcast. Some think of flying as just a mode of transportation, but Lufthansa understands that how you arrive is just as important as where you arrive. No matter if you fly first class or business class, Lufthansa Allegris elevates your journey. Lufthansa Allegris offers a range of new features and amenities across all classes. The first class suites provide almost four floor to ceiling partitions and closable doors, creating maximum privacy for travelers. In business class, you can choose between five different seat options, tailor your travel experience to your own needs, and elevate your air travel. Say yes to Lufthansa allegris and visit lufthansa.com.