Charlie Munger's quote:
The first $100,000 is a bitch, but you gotta do it. 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.
Why $100k?
Compounding early on will add up in the long run. A chart from Monty Fool that illustrate the effects of compounding $100k at certain age with an annual interest of 7%.
The earlier one saves their first $100k and able to invest it to earn more they will have higher odds of reaching $1 million sooner. It is that simple.
Why $100k So Hard?
To be honest starting out at zero is always difficult. There needs to be some form of effort, luck, and skills that is necessary in order to make money. When starting out at zero it will require the simplest form of earning money by working in a 9 to 5 job. Have an income and saving as much as possible to reach to $100k is quite challenging for most.
As of June 2022 the average salary based on government data is around $56k a year. With taxes and spending for necessities you can imagine that it will take at minimum more than two years to save to $100k. Of course it will also depend on luck for person and what contributions they can make to earn additional income, but bottom line it will take significant time to earn the $100k.
Present Value of $100k
Charlie's quote of saving $100k as quickly as possible is a testament of how useful it truly is. He himself has a net worth of over $1.3 billion. Yet realize he probably made the quote many years ago and since then the value of the dollar has depreciated.
If we use www.in2013dollars.com for a rough estimate of $100,000 in 1970 as a starting point that amount in today's 2022 present time is equal to nearly $764,000. This is assuming around the time Charlie obtain his first $100k but of course he likely did it even sooner. In any case that would mean for us to get the same buy power of $100k as when Charlie made the quote it would require over 3/4 of a million of today's current dollars.
I am not trying to be negative here but applying practical values in today's time period. The push for the first $100k today may not be as strong as in the past but its a good start. To really get to where Charlie is saying when it comes to financially free that buying power is equal more towards the $1 million mark rather than $100k.
None of what I write is financial advice. It is for entertainment purposes only. Thanks for reading!
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