4,595
 

The Math That Explains Why Net Worth Goes Crazy After the First $100k


ADVERTISEMENT
 
1
most viewed right now
  136
93 comments @sports
2
most viewed right now
+17  110
71 comments @sports


section  x5   |  0 bx goons and 5 bystanders Share this on Twitter       Share this on Facebook

section guap
  
 3 weeks ago '07        #1
9600 page views
115 comments


killa55  topics gone triple plat - Number 1 spot x1
space
space
space
Props total: 349 349  Slaps total: 5 5
The Math That Explains Why Net Worth Goes Crazy After the First $100k
 

 
Interesting read

The Math That Explains Why Net Worth Goes Crazy After the First $100k



I love when high-net-worth bloggers share their financial journeys because I always see a similar trend: It takes years to save the first $100k, but after crossing that threshold, compound interest starts pushing net worth higher at a faster and faster rate as each year passes.

Today I want to explore the math that explains why net worth begins to take off like a rocket ship after crossing the $100k threshold.

The Math

Consider our friend Shannon who saves and invests $10,000 every year. At a 7% annual interest rate, her net worth will grow to $100k in 7.84 years.

image

If Shannon continues to invest $10k per year at a 7% interest rate, sheíll be able to save her next $100k in only 5.1 years.

image

As time goes on, Shannon will be able to save each additional $100k in shorter and shorter amounts of time.

image

Although she is saving the exact same amount each year, the money she already saved is working for her behind the scenes, pushing her net worth higher at a faster rate each year.

Here is a chart that shows how long it would take to save each additional $100k (up to $2 million) based on different annual interest rates:

image

If we stick with the example of Shannon investing $10k each year at a 7% interest rate, thereís a mind-boggling stat to be seen: To increase her net worth from $0 to $100k, it will take her 7.84 years. But to increase her net worth from $600k to $1 million, it will only take 6.37 years.

image

This illustrates just how insanely powerful compound interest is once you have a few hundred thousand dollars saved up. As Charlie Munger said, getting the first $100k is a b*tch, but once you cross that threshold, your savings begin to do the heavy lifting for you.

Notice in the chart above that it takes 7 Ė 8 years to save the first $100k no matter what annual interest rate your savings grows at. This is because the amount you save matters far more than your investment returns when youíre just starting out.

As an additional resource, hereís a chart that shows how long it will take to save each additional $100k based on different annual savings. This chart a*sumes a 7% annual interest rate on investments.

image

The Math Works at Every Level

Saving $10k per year at a 7% interest rate is just a hypothetical scenario I chose to explore here. The math holds true for every amount of savings and every interest rate, though. As time goes on, your net worth will ramp up faster and faster each year due to compound interest.

Unfortunately, the magic of compound interest doesnít tend to reveal itself until you cross the $100k net worth mark. Itís around that point that you have enough savings for interest to have a noticeable impact.

Thereís an important lesson to be learned here: Donít be discouraged if it takes you longer than you hoped to save your first $100k. This is by far the hardest $100k to save and will likely take you the longest to save. Iím still chasing it myself. I recently crossed this milestone myself! But once you cross that point, the road only gets easier from there.

I should also mention that I didnít account for any increases in income here. More than likely, as you get older your income will increase, which means youíll be able to save more and more each year. This increased savings combined with compound interest will help you increase your net worth even faster than what these charts show.
visit this link 
Source
+78   



best
worst
115 comments
 

 3 weeks ago '05        #2
pnoi89 
space
avatar space
space
Props total: 13127 13 K  Slaps total: 1480 1 K
Compound interest >>>

The issue is that most people don't consistently save and invest. And they invest foolishly instead of investing wisely.
+57   

 3 weeks ago '07        #3
killa55  topics gone triple plat - Number 1 spot x1 OP
space
space
space
Props total: 349 349  Slaps total: 5 5
 pnoi89 said
Compound interest >>>

The issue is that most people don't consistently save and invest. And they invest foolishly instead of investing wisely.
Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. - Albert Einstein.

And the math works for other dollar amounts too for folks who think 100k is just so much. The point point is saving that foundation and once you do that you can reap the rewards.
+33   

 3 weeks ago '16        #4
Eastcoast 
space
space
space
Props total: 4148 4 K  Slaps total: 1131 1 K
 killa55 said
Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. - Albert Einstein.

And the math works for other dollar amounts too for folks who think 100k is just so much. The point point is saving that foundation and once you do that you can reap the rewards.
The problem is that the cost of living is starting to outpace earnings, which mean if youíre poor you donít get to save much.
+43   

 3 weeks ago '18        #5
Loknows 
space
space
space
Props total: 817 817  Slaps total: 51 51
Where do you obtain the 7% interest rate?
+41   

 3 weeks ago '05        #6
pnoi89 
space
avatar space
space
Props total: 13127 13 K  Slaps total: 1480 1 K
 Loknows said
Where do you obtain the 7% interest rate?
S&P 500 index funds.
+28   

 3 weeks ago '17        #7
AllWins 
space
avatar space
space
Props total: 12424 12 K  Slaps total: 6929 6 K
Look at this rich privileged thread. All rich people are evil we need to tax them at 90% or higher.

We need a government that gives free sh*t to everyone. We need free government healthcare for everyone in the world. I need my student debt paid.

Bernie or bust. If you donít agree youíre in shambles.
-20   

 3 weeks ago '15        #8
Mexicanelvis 
space
avatar space
space
Props total: 4962 4 K  Slaps total: 267 267
 killa55 said
Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it. - Albert Einstein.

And the math works for other dollar amounts too for folks who think 100k is just so much. The point point is saving that foundation and once you do that you can reap the rewards.
The problem with saving is you donít get to spend as much and most people wonít have that lol
+7   

 3 weeks ago '05        #9
pnoi89 
space
avatar space
space
Props total: 13127 13 K  Slaps total: 1480 1 K
 AllWins said
Look at this rich privileged thread. All rich people are evil we need to tax them at 90% or higher.

We need a government that gives free sh*t to everyone. We need free government healthcare for everyone in the world. I need my student debt paid.

Bernie or bust. If you donít agree youíre in shambles.
Poor manís mentality.
+20   

 3 weeks ago '17        #10
Lazy 
space
space
space
Props total: 12670 12 K  Slaps total: 1505 1 K
 Mexicanelvis said
The problem with saving is you donít get to spend as much and most people wonít have that lol
Saving and investing just as much a gamble as spending

But if it pays off you life gets turned on easy mode

 3 weeks ago '07        #11
TH35 
space
avatar space
space
Props total: 24848 24 K  Slaps total: 2920 2 K
good thread
+4   

 3 weeks ago '17        #12
92baby 
space
avatar space
space
Props total: 37821 37 K  Slaps total: 5835 5 K
 Lazy said
Saving and investing just as much a gamble as spending

But if it pays off you life gets turned on easy mode
n*gga no itís not


If you spend there is no chance on returns

If you save and invest there is a chance you can become Rich or at least weíll off


I canít believe you typed that
+26   

 3 weeks ago '18        #13
Loknows 
space
space
space
Props total: 817 817  Slaps total: 51 51
 pnoi89 said
S&P 500 index funds.
So this is for stock market investments. Give me an example. Big Corp stocks like apple Amazon etc. You will invest $10k a year in that?
+2   

 3 weeks ago '09        #14
six6nine9wpk 
space
space
space
Props total: 1167 1 K  Slaps total: 473 473
 killa55 said
Interesting read



 
Source
The biggest question of the day is where are you going to find something to invest in thatís going to give you a steady 7%
+13   

 3 weeks ago '15        #15
Brewklyner 
space
avatar space
space
Props total: 10569 10 K  Slaps total: 3574 3 K
Ye that 7% is iffy. What if I have 50k saved up and I take the whole 50 put it in a compound interest . The govt gonna ask me where i got that 50k from?
+16   

 3 weeks ago '04        #16
Tastemaker331  topics gone triple plat - Number 1 spot x7
space
avatar space
space
Props total: 30657 30 K  Slaps total: 4069 4 K

 3 weeks ago '16        #17
krazyl3gz206 
space
space
space
Props total: 124 124  Slaps total: 34 34
 Loknows said
So this is for stock market investments. Give me an example. Big Corp stocks like apple Amazon etc. You will invest $10k a year in that?

Vanguard S&P 500 ETF (VOO)

Easy money. If your investments ain't making more than this you might as well dump it in here.






+17   

 3 weeks ago '17        #18
danmar123 
space
space
space
Props total: 523 523  Slaps total: 222 222
Solid threat, thanks op.
+2   

 3 weeks ago '17        #19
Pythagoras 
space
space
space
Props total: 11584 11 K  Slaps total: 2923 2 K
So n*ggas are just learning about compounding returns?

+2   

 3 weeks ago '17        #20
Pythagoras 
space
space
space
Props total: 11584 11 K  Slaps total: 2923 2 K
 Brewklyner said
Ye that 7% is iffy. What if I have 50k saved up and I take the whole 50 put it in a compound interest . The govt gonna ask me where i got that 50k from?
I don't understand this question....
+2   

 3 weeks ago '17        #21
Pythagoras 
space
space
space
Props total: 11584 11 K  Slaps total: 2923 2 K
 Lazy said
Saving and investing just as much a gamble as spending

But if it pays off you life gets turned on easy mode
Jesus Christ. They need to require personal finance classes to graduate high school. With the right time horizon, the S&P makes money every time. There is no gamble. Invest in a diversified S&P fund and set it and forget it. If you have money on the side you can take more risk on single companies and stuff like that to try and get a higher return. Over the past 90 years or so, the S&P has averaged a 10% yearly return - this doesn't include reinvesting dividends (taking cash that some companies pay out quarterly if you own their stock and putting it right back in the S&P) which will probably get you another 3-4% over that time frame.

How do y'all n*ggas think retirement pensions and 401ks work? It's just growing money via investments over a long time as you pay into the account monthly.

My son is one now and I just started an investment account that I'm putting in monthly to pay for his college....

Y'all need to start reading/learning IMMEDIATELY.


Last edited by Pythagoras; 02-04-2020 at 06:06 PM..
+27   

 3 weeks ago '17        #22
fallinginpie 
space
space
space
Props total: 3951 3 K  Slaps total: 843 843
 Pythagoras said
So n*ggas are just learning about compounding returns?

Your special because you been knew? You dont even know the ages or background of most people posting so yes, learning this now may just be the start they need. If your not participating with game or learning then get the fu*k outta here
+22   

 3 weeks ago '17        #23
fallinginpie 
space
space
space
Props total: 3951 3 K  Slaps total: 843 843
 Pythagoras said
Jesus Christ. They need to require personal finance classes to graduate high school. With the right time horizon, the S&P makes money every time. There is no gamble. Invest in a diversified S&P fund and set it and forget it. If you have money on the side you can take more risk on single companies and stuff like that to try and get a higher return. Over the past 90 years or so, the S&P has averaged a 10% yearly return - this doesn't include reinvesting dividends (taking cash that some companies pay out quarterly if you own their stock and putting it right back in the S&P) which will probably get you another 3-4% over that time frame.

How do y'all n*ggas think retirement pensions and 401ks work? It's just growing money via investments over a long time as you pay into the account monthly.

My son is one now and I just started an investment account that I'm putting in monthly to pay for his college....

Y'all need to start reading/learning IMMEDIATELY.
Thanks for the gems bro
+5   

 3 weeks ago '17        #24
92baby 
space
avatar space
space
Props total: 37821 37 K  Slaps total: 5835 5 K
 Pythagoras said
I don't understand this question....
He means 50k Iím dirty money
+3   

 3 weeks ago '16        #25
hakim1 
space
space
space
Props total: 728 728  Slaps total: 49 49
7% is legit, especially right now. There's gonna be a crash at some point and as long as you aren't retiring at that very moment it's fine, just keep investing and it'll bounce back.
+8   



ADVERTISEMENT
Sign me up
 
 

yesterday...


most viewed right now
+90online now  30
Image(s) inside Husband Plucks 4 Teeth From Wifeís Mouth After Discovering His 3 Child..
208 comments
1 day ago
@wild'ish
most viewed right now
online now  23
Feb 22 - drug dealer loses $60 million in bitcoin...when landlord threw his co..
66 comments
1 day ago
@news
most viewed right now
+88online now  20
Idiot prefers a Rolex and chain over a rental property
108 comments
1 day ago
@wild'ish
most viewed right now
online now  9
Deontay Wilder vs Tyson Fury II @9PM ET 2/22 PPV
3169 comments
1 day ago
@sports
back to top
register register Follow BX @ Twitter search BX privacy