How to save $100,000. Yes, the covenant six-figures. It’s one of the hardest things to do in your personal finances but is also a revolutionary financial milestone. It’s a lot of damn money. It also can take years to get to this point, but it is well worth it when you have that number saved and invested.
For one, when you have $100,000 saved and invested, compound interest can really go to work for you. It’s the point where your net worth can really start to exponentially grow. Additionally, it adds a really nice cushion to your finances where you’ll hopefully feel less stressed about bills, debt, and the unexpected expense.
Below is my transparent journey to this financial milestone. You’ll see where I’m at currently, how I got where I am so far, and how I plan on crossing the $100k threshold. It feels weird sharing this nor do I want anything to come off like I’m bragging. This stuff below was HARD and took a lot of TIME. But let’s dive in, shall we?
How to Save $100,000: My Journey So Far
- Sick of paycheck to paycheck lifestyle
- Tired of my career going nowhere and making less than $40k/year
- Wanted to learn how to invest and save
- I had a small 401k at my company, didn’t know anything about, what was invested, how it worked and didn’t contribute enough for a company match. D’oh!
Late 2014 is when I first started taking an interest, then in December, I was laid off from my job. Needless to say, that all kicked my butt into high gear. And since 2014, I’ve worked hard to learn about personal finances and investing, fixed my career worth to generate a better income, and have stuck to my processes since. I opened my Vanguard account in September 2014, transferred $500 to a brokerage account (half of my savings at the time). In December, once I was let go from my job, I rolled my sad 401k over to Vanguard as well.
As I’m writing this today, I now have $69,500+ saved in Vanguard, in just under five years.
I also have about another $3,000 in my bank account for bills and quick emergencies. So total right now is $72,500+. Maybe you are thinking it seems I should have more. Or you may also think that’s a lot. I honestly never saw this much money in my life ever. So it’s without a doubt, a substantial amount to me.
Some other things worth mentioning and being transparent about.
Especially now, when everyone makes excuses or wants to say, “It’s so easy for you because….” without knowing some facts.
- I graduated from college in 2010 with $28,000 in student loan debt. Yes, not as bad as many of my peers, but debt is still debt. It was a $40,000/year school but between scholarships and my parents working hard to help, I wasn’t left with a huge burden.
- In 2011 I bought a new car (financial mistake). So add $23,000+ to my remaining student loan debt (around $25,000) so, $48k in 2011. I also had just over $1,000 on my credit card too.
- Until 2015, I never made more than $36,000 pre-tax.
- Until 2017, I never made more than $46,000 pre-tax.
- I moved out 3 months after graduating college in 2010, 5 years later I moved back in with my parents for a year after being financially defeated. Yes, that does help your finances a bit. I still paid them some rent (significantly less than on my own of course).
- I knew the basic of personal finance like having a credit card, keeping a good credit score, and saving. That’s it until I learned more on my own.
- From mid 2017 – Present, I now make between $70,000-$95,000/year. I like to stay private on the exact number, but I do have a healthy salary. I’m fortunate, but it took me 7+ years of work and learning to get to this level.
- Yes, I have this blog and treat it like a business. I’m not even a year in, I made $500 bucks so far off it. And it goes all back to the business. So, not making six-figures a month from a blog (one day I hope!).
- I’m not married (yet) and do not have kids. Not currently having kids at 31, certainly puts me at an advantage without the extra expense. I do plan on having kids in the next few years. I live with my girlfriend and we currently rent an apartment where we split bills pretty evenly. So no, we don’t own a house yet.
Yes, I’d say I’m fortunate and I know there are people who wish to have experienced what I have. Like parents letting me move back in, being able to go to college, etc. And there are people in far better situations than me too. The point is, even if I have it better than you so far, don’t make excuses to not try to improve your financial health.
How to Save $100k
Initially when I started my personal finance journey, saving $100k was never a goal. If you revert back to above, it was more about having a cushion, investing for my future, boosting my salary, and retiring early. Yet, goals change over time. As I got more financially savvy and vested in my career, I no longer cared about retiring early. Especially when I found my work passion for marketing
And second, I realized how saving and investing $100k can really make a HUGE difference in my financial health. Below, are the steps I took (and currently taking) to save $100,000 by the end of this year. I may not hit my goal, but I’m certainly working hard to ensure I do. Hopefully, these actionable tips can help you save for any specific number or your even your first $100k.
Improve Your Salary or Career Worth
I’ll be the first to tell you, this is not always easy and can take time to get where you need to be. Also, I think the personal finance community lacks talking about how making more money is so crucial. Cutting back your expenses, budgeting, and spending wisely should be incredibly obvious. But at the end of the day, you can only cutback so much.
What you save adds up, but the “not spending $5 on coffee will make your savings huge” argument is just lame. Don’t “@” me yo! During these last five years, I found that I was passionate about digital marketing. I did everything I could to learn online in my spare time, take on freelance gigs, and applied to a marketing agency to get more experience and learn as much as possible.
I saw the demand for this job, I liked the work, and the payscale can be huge as you get more experience. Not every job is the same, but you need to find ways to improve your career worth, understand the direction of your job and skills, and not be afraid to ask for what you are worth.
When I started to take control of my finances, I had limits to as much as I could save. But when I grew my salary, that helped me save A LOT more. Yet, a high salary is no guarantee that you’ll save big money. It’s about your mentality and discipline to not immediately inflate your lifestyle. Had I been making what I do now, back in 2010- 2013, I would probably have spent majority of it.
In 2017, I nearly double my salary by making the move to a new gig, which was also a remote position. Now I cut travel expenses and increased my salary. And all that extra salary went to paying down some debt faster and doubling my savings rate.
Free Up Some Debt
While I started to aim for $100k, I was still paying down debt. I paid off my car in 2017 after six years, and now only have $4,000+ in student loan debt. Some will disagree with my approach, but instead of paying all my debt as fast as possible, I chose to save and invest too. I felt that while I was paying interest on the loans (4.5%-6%), I didn’t want to have zilch saved by 30, miss good bull market rallies, and miss years of compound interest. I’ve averaged great returns each year until more recently. It certainly won’t last, but that’s fine.
Was this the right approach? Not sure. But to me it was. By doing this, I free’d up my car right when I got that nice salary bump, because that sent me back $320 a month! It was also higher than my two student loans. That $320 was now going into Vanguard (Brokerage and Roth IRA). And freeing up some debt added over $3800/year more back to my savings. In hindsight, I probably could have caught up to my current savings had I paid all my debt off. But I also would have missed out on some awesome travel experiences that I definitely would not have been able to afford.
Don’t Just Save, Invest
Want to know how to save to $100k? You have to invest your money in the stock market besides just saving. This does not mean throw all your cash at a stock. Be smart. Do your homework and of course have cash reserves.
- But, I invested in low-cost index funds in a Roth IRA. Since my company does not have a 401k yet, I max my Vanguard Roth IRA out every year.
- Once I had enough for a good emergency fund (I aimed for 6 months to a year's worth), I started investing in my taxable Vanguard brokerage account too. Most is just in the money market generating more interest than my bank account. Another portion is invested in a tax-managed balanced fund.
The reason for investing is with dividends, capital gains, and compound interest, I can accelerate towards my $100,000 goal. Yes, there are ups and downs in the stock market. And no, you shouldn’t be throwing all your money in. And no, you shouldn’t copy what I’m doing. But you should be putting your money to work for you while you sleep.
Increase Your Savings Rate Steadily
The average American saves less than 5% of their income. In many cases, it might be worse. This can be a combo of not making enough or just plain not paying attention to spending. And we all have to start somewhere. I certainly was that demographic from 2010-2013 in my working career. In 2015, I managed to get it to 15% and up to 30% before my big salary bump in mid-2017. I did this by removing unnecessary spending, budgeting a bit, slowly increasing the savings rate, and anytime I got a raise or extra money, I saved it. It took from 2014-2017 to get to 30% and then 2017-2018 I maintained 55%-56% savings rate. The higher your percentage, obviously the better. But start off where you can and overtime with raises and extra cash, you should also be increasing this percentage.
Learn To Be Like the “Millionaire Next Door”
One of my favorite books is The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. The book identifies common traits among the wealthy, many whom you wouldn’t realize they are because of how they manage their money. If you want to save $100,000 and beyond, you need to learn to be like the examples in the book.
Keeping your lifestyle simple, being frugal, spend less than you earn, investing money, etc. All principles that really spoke to me and I think have been huge in helping me get this far. Even when I doubled my salary in 2017, nothing changed about my living, my car (still drive the 2011 Subaru today), etc. What changed was the ability to save more and pay off debt faster.
How I Am Currently Getting To $100,000
Besides doing the above that I recommend everyone do if they are attempting to save $100k, below are my exact steps based on my current financial state.
Increasing My Savings Rate
In 2018, I was able to maintain around a 55% savings rate. This year I moved it to 60%, with my goal to be closer to 70% by mid-year. It took me a long time to get to this rate, but improving my salary was key to adding more. Prior to my salary bump, I was able to get to about 30%. A great number, but no doubt you have to make more money.
Spending Way Less Than Last Year
Last year was a bit crazy with spending, but I don’t regret really any of it. I traveled at some point in 7 different months out of the year, was in a wedding, and had two bachelor parties. That stuff adds up, but the experience of traveling was well worth the money. And was the first year I could afford to do a lot of cool things too. However, it still makes me cringe a bit because that money could have put me up 12% higher in assets than I am now. Luckily this year I have no weddings and are being more conservative with travel.
If I Get A Raise, Then Increase My Savings Rate…Again
In May, I’ll be with my current company for two years, which I’ll have an annual review again. I never expect a raise or a healthy one, but last year I got a 13% lift. Any bump in salary this year is immediately being factored into my savings rate. So if I do get an increase, this will add some extra cash towards my goal.
Stick To My plan and Don’t Get Tempted
If the market takes a dive a bit or if a serious emergency expense comes up it could set me back. And based on just my savings numbers, I’m potentially going to be $3,000 short conservatively. But with dividends, capital gains, and pending if the market is up or down, I have a really good shot of achieving this milestone this year. My plan is aggressive, but I need to stick to it and that may mean saying “no” a lot more this year. I’ve been tempted to travel somewhere or buy something now that I have the cash to afford it. But, temptations need to be ignored. It’s not always easy and even after four years of personal finance discipline, I still get tempted.
If you were looking for any big secrets on how to save $100k then you came to the wrong place. There is no huge secret other than planning, saving, investing, and being patient. Time and mentality are key to your overall success in anything with your personal finances. I could say if I made more money sooner, that I’d be at this $100k milestone sooner. But I don’t think mentally I was ready to handle that nor do I think I would have actually saved.
Republished with the permission of InvestedWallet.com_.