There are a few money goals every medical professional should be willing to hustle for. One such goal is reaching an investment milestone of $100,000.
$100K invested means total balance invested across all investment accounts. This could include your 401(k) or 403(b), Roth IRA, brokerage account, etc.
Although $100,000 is an arbitrary number, it represents something much bigger. Hitting six figures invested allows the beginning of a transition - the point where your money starts working harder to earn more money than you are.
The beginning of any investment journey is slow. It feels like you're contributing TONS of your income from your W2 job in medicine, but not seeing that beautiful growth of compounding returns that everyone talks about. Here's a visual representation of what a 401(k) portfolio looks like over time, looking at the portion of the total balance that is made up of your contributions vs growth.
As you can see, it takes over a decade of investing $5K per year for your portfolio to start being made up of mostly growth. You have to stay the course. How many times have you started a Netflix series and watched a full season that you didn't even love because your friends said "it gets better"? Apply that same level of dedication here.
If you're investing more than $5,000 per year (because you're hustling to hit that first $100K invested), you will see this tipping point sooner.
Let me first illustrate the significance of hitting the $100,000 investment mark before explaining how to get there. The data says that achieving this milestone earlier can significantly boost your final portfolio balance due to the power of compounding returns over time. By starting early, you can reap the benefits of long-term growth and potentially invest less later on while still achieving impressive results.
This is a visual representation of what your portfolio balance at 65 looks like (Y-axis), depending upon the age you hit $100,000 invested (X-axis). The underlying assumptions behind the numbers are that you continue to invest only $500/month after hitting the $100,000 invested mark, and achieve long term returns of 8%.
Go back and look at those numbers again. If you hit $100,000 invested by 40, you can retire a MILLIONAIRE, while only investing $500/month after 40.
Although $1,000,000 may not be enough to support your future retirement, it's still impressive to see what can happen if you create investing momentum early on.
^To find out what number WILL support your retirement, click here to find out yours in <90 seconds for free.
Charlie Munger, Warren Buffett's longtime business partner, is famously quoted as saying, "The first $100K is a bi***, 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.” These numbers show us exactly why that was Charlie Munger's sentiment.
The earlier you are in your investing journey, the more this principle holds true:
The total amount you are contributing to your investments each month matters more than anything else, including your rate of return.
With inflation eating away at discretionary income, this requires making incredibly intentional decisions. To make the most of your investments in the initial stages, here are five steps you can follow:
1) Structure your budget to "pay yourself first." This involves creating a decision-making framework where you first determine the amount you wish to invest each month, and then adjust your lifestyle expenses accordingly. While implementing this approach may be challenging, it played a pivotal role in helping me achieve millionaire status by the age of 31.
2) Housing is often the biggest expense you face. Therefore, when choosing a place to live, whether it's a rented or purchased property, ensure that your total housing expenses do not exceed 20% of your gross monthly income. This decision can provide you with ample room in your budget to pay off other debts, save, and invest for the future.
3) Ensure your total car payments for your household are <8% monthly take home pay. Transportation expenses often make up a significant portion of your budget. Hence, it is crucial to make prudent decisions while making major purchases in this category, rather than trying to save small amounts by skipping your Starbucks run.
4) Invest before you get paid. Use your 401(k), 403(b), and even Health Savings Account to create investments for yourself before you ever see your paycheck. This removes any possibility of you spending money you intended to invest, and also generates tax savings.
5) When investing outside of your workplace accounts, automate as much as possible. Create a system that will create investments for you, while you do nothing. Remember to automate not just the account contribution, but the investment purchase order as well.
If you aim to gain a deeper understanding of the intricacies of investing and boost your confidence to achieve your first $100,000 faster than expected, select one of the paths below.
As always, invest early & travel often.