Your First $100k: The Foundation of Financial Freedom
Staying motivated at the start of any endeavor is tough. When your retirement account has $4,031 in it, no doubt it's hard to see the benefit of working hard and contributing to the account. It's easier and more enjoyable, short-term to buy cool toys and go on vacations.
Going from $0-$100k is the hardest part of the journey. Imagine if the first 1/2 mile of a 10-mile run was the hardest. As the race progressed you ran faster and faster with little effort. That 1/2 mile is exactly how it feels saving your first 100k, it's a slog, and why 86% of Americans have less than that in their retirement account.
After hitting the 100k mark, it's easy to stay motivated. I'll show you why.
The below chart shows you accumulating a balance of $3,159,244 in 40 years, not too shabby.
Let's say you contribute the maximum in a Roth IRA annually for 40 years, which is currently $7,500 at a 9% return and starting balance of 100k. Your ending balance after 40 years is approximately $5,900,000 !!!!!
When looking ahead and focusing on the end goal, the path can be daunting. Avoid thinking in 40-year blocks but instead focus on getting to that first 100k as soon as possible. If that seems too intimidating set the goal at 10k and move on from there. When people run 100-mile ultramarathons, mile 1 they are not thinking about mile 96, they are focused one mile at a time. If your efforts are put on hitting 100k versus your end goal, let's say 2 million dollars, it's much easier to stay motivated and on task.
Hit 100k and celebrate.
Suggested Reading:
The Rule of 72: The Quick Trick Millionaires Use to Grow Money
Dear Johnny Q&A: I'm Tired of Being Broke, Where Do I Start?