When you pull out your phone and check your bank account and see that you have 100K dollars
saved up.
That completely shifts your entire mindset.
You are no longer going to have a slavery mentality.
That sounds a bit too harsh, but it's true.
Most people, I would say more than 90 percent of the entire population, stick to their jobs
not because they are so in love with their jobs ( some people are ) but because they
are afraid of the consequences.
You lose your job, you won't be able to make your mortgage payments, that will ruin your
credit score, that will make it harder to borrow money.
It’s like a domino effect that destroys your entire life one by one.
And all of that happened because you lost your job.
Imagine for a moment that if you quit or, god forbid, lose your job, but you wouldn’t
face the same consequences, wouldn’t it be that scary to lose your job?
Not really, because paying your basic bills is no longer the question.
The question is, what do you want to do next?
Maybe you actually want to stick to your job because you love it but you get the point.
$100K is not much of money.
That’s how much you would spend a year living in any major city but do you see what kind
of a difference it makes in your mentality, in your thought process, when you know that
you arent going to end in the streets should everything goes wrong.
Saving your first 100K is the hardest thing.
Like going from 0 to 100K is much more difficult than going from 100K to a million.
Once you get the dice rolling, it gets much easier.
The problem is that when you have set up your life in such a way that when every penny comes
in, has to go somewhere, then you are in trouble.
Like I know people who, if their paycheck is delayed for a few days, they would be in
trouble because the next day, they will receive a phone call from their landlord - what’s
happening?
Why hasn’t rent been paid yet?
Nobody wants to ruin their reputation, that could make it much more difficult to rent
a place in the future, for example.
Investing your first money is also not the best idea.
I am not saying you shouldn’t invest long-term.
You should, but not your first money, not the money that could give you financial freedom,
not the money that would give you peace of mind and let you decide what’s best for
you and not stick into something just because You can’t afford to keep paying your bills.
If you make 70K a year after taxes, that will make it a little less than 6K dollars per
month.
If you manage to save 20 percent of that, which is, to be honest, way more than most
people can, we are going to assume that you are super disciplined and you can make it.
That’s 14K dollars a year, which means you need more than 7 years to save that much money.
To be honest, that’s a pretty long time.
It’s way easier if you get a side hustle and save whatever you make from that side
hustle.
The problem with wealth is that, it's just so hard to make money when you don’t have
money.
It’s actually true that you need money to make money.
When we say that you could be making 7 percent a year.
You look at your bank account, and you have 200 dollars.
A 7 percent on 200 dollars per year is 14 dollars.
What can 14 dollars get you?
2 cups of coffee at Starbucks as best.
Even if you save up even 20K dollars.
7% on 20k is 1400 dollars a year, which would cover your rent at best.
And you are not even guaranteed to make 7 percent.
You might be making that much over the course of 20 years if you average it up and it could
be down at any given other year.
Take 2022.
The entire market is down.
So investing doesn’t make sense at this point unless you are ready to invest and forget
about it.
But what if bill gates got an offer to make 7 percent a year.
What do you think it means for him?
Has he got many, many billions?
If he puts just one billion into that business?
That’s 70 million dollars.
Let’s take out taxes and other expenses, that would amount to around 50 million dollars.
I am not sure how much bill gates spends per month, but 50 million dollars will get him
much more than just 2 cups of coffee at Starbucks.
Even if he is not going to make any return on this particular year, that's not going
in any way to drag down his quality of life.
He can wait another year or two or even 3.
He can spend more on that business to make it happen.
That's why a lot of business people leverage their positions.
If you are certain that you would definitely make money out of this deal, then it's much
more convenient to borrow money even if you have to pay some interest to turn the small
deal into a big deal.
That's what Michael burry did.
When he knew that the housing market is about to crash, he borrowed as much as he could.
When startups find out that they have a working business model, all they do is just keep borrowing
as much as they can to scale their operation.
Even it’s just a 10 percent return.
When you hear the news that Buffett made 10 billion dollars this year, that’s like 10
percent of his 100 billion dollar net worth.
That's like making 10 dollars on 100 dollars.
Of course, investing 100 billion dollars is way different than investing 100 dollars,
but you get the point.
But it has its own share of risks, like if your deal doesn’t work out, what happens
next?
You could be losing your entire company.
If you could ruin your credit score and no one will lend you money again.
You could lose all of your assets and end up in the streets.
It has its own share of risks, that's why it's not like a joke.
You should be aware of what kind of risk you are taking.
So the term - the rich keep getting richer, and the poor keep getting poorer - is true!
That's how capitalism works!
It can’t be otherwise.
Because your income will never rise as fast as inflation and your needs as you grow up.
You moved to a bigger house, that's more expensive, it's really difficult to move back to renting
a room.
You got married, you get extra expenses, you can’t simply back down unless you have a
good reason.
You are a father now.
Welcome to a lifelong financial commitment.
So you are going to get poorer as you age up even though you might be making more money
but if you have got a small loan of a million dollars from your parents that would generate
5 percent annually and if you don’t touch it and let keep growing, you will keep getting
richer regardless.
That's why the first 100K is that breaking point that will either capitulate you towards
financial freedom or keep you struggling financially, most likely for the rest of your life, and
it also depends on when are going to make that $100K. If you can achieve that in your
20s.
You have done yourself a great favor, but if you achieve it by your 50s, then that's
not going to be as advantages as making in your 20s, since you will have lived most of
your life, assuming you will have an average life expectancy of 77 years.
I can say that from my personal experience.
When I got to the point where I was confident that no matter what happened, I can at least
not work for an entire year and I will be fine, my entire perspective on life changed.
I stopped looking short term and focused on the long term.
If you have the discipline to go to 100K, you will have the discipline to go to a million.
That's not always the case, but that's usually what happens.
The only thing that I would strongly advice you to keep in mind is that - its not forever.
Its temporarily.
It's like a journey to go to somewhere that's better than where you are.
If you are afraid planes like me, then you force yourself to be a little bit patient
because you know that once you reach that destination, you are going to feel far better.
Focus on that destination.
Whenever you feel like you are about to give up, imagine how life would be once you get
there and if you don’t get there, imagine how horrible life will be further of you do
not hit that milestone.
I wish you all the best.
You can let me know in the comments how do you plan to hit your first 100K.
Thanks for watching and see you in the next one.