Charlie Munger: Why your first $100,000 will CHANGE YOUR LIFE

Saving and investing

your

first

100,000

will

change

your

life

, the faster you can reach that milestone the better, but this advice isn't coming for me, it comes from legendary investor and billionaire Charlie Munger, who heard what Monger had to say about the importance of Getting Your First Hundred Thousand Dollars Saved and Invested Completely Changed the Way I Think About Money and Wealth Creation. In fact, hearing this advice from Charlie helped me grow my own investment portfolio to almost half a million dollars at age 24, I'm not saying. This is to brag that there are many people my age who have much more money than me.

Instead, I say this to demonstrate that the wealth creation principles laid out by Charlie Munger really work. I've seen probably every interview that Charlie has given that I've read. Most of everything he has written publicly I am summarizing the most important takeaways you need to know about wealth creation in this video. All I ask in return is that you hit the like button and subscribe to the channel if you aren't already. Seriously, that's it, you guys are great. Now let's get into the video. We all come across popular quotes from successful people all the time. They are often not very practical or simply too abstract to really be of any practical help, but they do know. anything about

charlie

munger

, you know, he let me say it the same way, with words.

He is famous for his classic quotes. At an old Berkshire Hathaway shareholder meeting in the 1990s, a young man asked Charlie for his best advice on building wealth. The young man complained that he was having difficulty getting started. His net worth was not increasing as fast as he would like. This was when Charlie Munger uttered a quote that quickly became famous within the financial industry. The

first

hundred thousand dollars are a but. you have to do it while that definitely caught the audience's attention. He didn't stop there. He went on to say, "I don't care what you have to do if it means walking everywhere and not eating anything that wasn't bought with a coupon." a way to get a hundred thousand dollars, after that, it can relieve some of the gas.

Basically what the dealer is saying here is that it is extremely important to get to your first 100,000 saved and invested as quickly as possible. do whatever it takes to reach that 100,000 mark the first 100,000 is the hardest milestone to reach on your wealth creation journey every subsequent milestone two hundred thousand dollars five hundred thousand dollars one million dollars gets easier let me explain to you what I mean the reason The reason Munger recommends reaching the hundred thousand dollar mark as quickly as possible has to do with two very simple and powerful words: compound interest. The words compound interest are two of the most magical words for your wealth creation journey once you really understand the concept of compound interest it

change

s the way you look at money the technical definition of compound interest is the following compound interest is the interest of a loan or deposit calculated based on both the initial principal and the accumulated interest of previous periods that definition is far from inspiring and does not really do justice to compound interest.

Instead, I like to think of compound interest as a snowball rolling down a long hill. You do the work of making the first small snowball as you start at the top of the hill and then roll the snowball down. hill with each roll, the snowball collects more and more snow and gets bigger and bigger, then at the bottom of the long hill, the snowball is huge compared to the small snowball with which you started, you didn't do any extra work to make the snowball. I just rolled it down the hill and let time and gravity do the work.

The same concept applies to compound interest and wealth creation. Let's say that when Charlie gave his wisdom on the importance of getting to your first $100k, there were two people in the crowd. John and Steve John and Steve were 20 years old when they heard this advice. They both had good jobs and were generally good with money, except when Jon listened to Charlie's advice. Something clicked and a lightbulb went on in his head. He decided that he would do anything. Charlie's advice needs to be followed. John became very serious, became incredibly frugal, and worked harder and harder so he could save more money.

He reached those first 100,000 at age 25. Steve, on the other hand, didn't much appreciate Munger's message. He continued with his normal

life

and hit the 100,000 mark at age 35, 10 years after John guessed that these two guys never put another dollar into their investment accounts once they hit the 100,000 mark, how much do you think? What would each of them have? when they are 70 years old. For the sake of this example, let's assume a return of 10. This return of 10 approximates the long-term historical average return of the stock market at age 70. Steve has 2.8 million dollars. Steve is a millionaire despite never contributing another dollar.

After reaching the $100,000 mark, how much more do you think John has than Steve considering he reached $100,000 10 years earlier? Maybe you're thinking about another $500,000 or $1 million or maybe an additional $2 million if he's really lucky. Those numbers aren't even close. John has a staggering $7.3 million in his account when he is 70 years old. This is about $4.5 million more than his friend Steve's. Remember this was John reaching the 100,000 milestone at age 25 and then never contributing another dollar. in his account, this is what

charlie

munger

meant when he said that you can reduce gas a little after you reach a hundred thousand dollars, this is because once you have a hundred thousand dollars in your account, compound interest begins to generate many benefits. the heavy lifting for you in terms of wealth creation, to use our previous example, with a hundred thousand dollars, you have built an initial snowball big enough to pick up a ton of snow as it rolls down the hill before reaching The practical steps and how you can reach that 100,000 milestone A big part of the magic involved in compound interest is the returns you can generate on your savings.

This brings us to the sponsor of today's fundraising video. Interesting fact: Charlie Munger actually earned the advance money from him. investing in real estate he still invests in real estate today with investments in apartment buildings in california fortunately you don't have to be a billionaire like charlie to have real estate in your investment portfolio with fundrise you can invest in a low cost diversified portfolio of Institutional-quality real estate funds combine cutting-edge technology with in-house expertise to reduce fees and maximize your long-term return potential. Real estate has traditionally been one of the most sought after asset classes by professional investors and now it is available to you.

Fundrise allows you to invest in real estate without the hassles and headaches of ownership. Fundrise handles all of that for you and allows you to sit back and generate passive income for a limited time. Sign up and start investing and you can get ten dollars worth of free stocks use my exclusive link in the link in the description to start investing in cash flow producing assets today. Now back to the video, now that we've established why reaching that 100,000 milestone as quickly as possible. It's so important that I want to spend the rest of this video talking about how you can get there, specifically how I apply Charlie Munger's lessons to my own life and reach the 100,000 mark when I'm in my early 20s again.

I want to provide a practical framework of the things I've learned that can help you solve the equation for wealth creation in simple mathematics. The amount of money you can save in a given period of time is simply the difference between what you earned in income and your expenses. Think of yourself as a business income: what you earned minus your expenses equals your profit, just like a business, your goal should be to maximize the profit line, the larger this profit line, the more you can save and the more big

will

be able to make his snowball.

There are really only two ways to maximize how much you can save in a given period: maximize your income and minimize your expenses. These are the two variables that you can change that will lead to more money that you can save. Now let's talk about the revenue maximizing side. The Equation One of the most important lessons I learned from Charlie Munger is the concept of selling your time to yourself. When Charlie was a young lawyer, he quickly realized that the law firm he worked for billed clients at a rate of say 400 an hour in today's money, of course Charlie wasn't paid the equivalent of 400 per hour from the law firm as the firm was taking a large cut, however, this made Charlie realize that his time was extremely valuable and he needed to get started.

Allocating time each day to his most important client, early in the morning and late at night, Charlie worked for himself on things that would directly increase the amount of money he could make. He dedicated his time to learning about investing and working on real estate deals. An example of how I sold my time to myself is this YouTube channel, in addition to working as an investment analyst at a mutual fund, he also runs this YouTube channel. I spend about 60 hours a week at my day trading job as an investment analyst and then I spend another 20-30 hours a week on this YouTube channel.

There is a natural overlap between what I learn in my work as a professional investor and the content and knowledge I can bring to you as a viewer of the channel. Trust me in terms of income. this channel makes virtually nothing compared to big youtubers like graham steffen, meet kevin or pretty much anyone with a large audience; However, the reason this is so powerful in helping me save money is that all of my expenses are covered by my income from my day job, this means that after paying taxes on everything I earned through my YouTube, all the money left goes to my investment account.

This concept of selling your time to yourself can be extremely powerful in helping you move toward your first or even your next one. one hundred thousand dollars this can come in many different forms depending on your skill set if you are a teacher it could mean tutoring students if you are a software engineer it could mean doing projects after hours or if you know video editing it could mean Reach out to your favorite YouTubers and ask if they can edit them. The possibilities are quite wide. Now I want to move on to the other part of the wealth creation equation, minimizing expenses when Charlie Munger was asked what the secret was. for a successful life is that he gave a list of about five to seven things towards the top of that list was spending less than what he earns charlie munger's business partner warren buffett has minimized expenses to the extreme buffett is worth over 100 billion dollars but he still drives a car he bought in 2014 and his idea of ​​a fine dining restaurant is a restaurant with two dollar signs on Google when it comes to building wealth, it doesn't matter how much you make, it matters how much you keep if someone makes two hundred fifty. thousand dollars a year but spends two hundred and forty thousand dollars, they are left with ten thousand dollars that they can save and invest, however, if we have someone who earns sixty thousand dollars a year and only spends forty thousand dollars, they can save and invest twenty thousand dollars means that the person who earns sixty thousand dollars a year is actually accumulating wealth at twice the rate of the person who earns two hundred and 250,000 simply because the person who earns 60,000 is better at minimizing expenses, this phenomenon where people spend more money as they earn more money is called lifestyle inflation.

This is where, as people make more money, want to have a fancier apartment, a nicer car and more expensive clothes, lifestyle inflation is the reason why, according to a recent study, almost one of every three people who make 250,000 a year live paycheck to paycheck, let me show you the numbers that explain why lifestyle inflation is the biggest barrier preventing the average person from reaching the hundred thousand dollar milestone . Let's say we have two people, John and Steve, the same guys. From our example above, Steve recently graduated from college and accepted a job with a starting salary of $65,000.

Let's say that Steve is an extremely ambitious person who works very hard at his job through additional responsibilities and promotions. Steve can get 8x annual raises, however, as Steve makes more money, he also spends more money in his first year out of college. Your living expensesIt's sixty thousand dollars, which saves him five thousand dollars, but every year Steve succumbs to lifestyle inflation. His income increases by eight percent a year, but that's it. As a result, Steve alone has been able to increase how much he can save each year from five thousand dollars in year one to just under ten thousand dollars at the end of year ten.

Even though he went from making sixty-five thousand dollars a year in year one to making 130,000 a year in year 10. Over the 10-year period, Steve managed to save about 72,000, a solid amount of money, I don't think so. they understand. bad though, let's see how our friend John did, Steve Jon also made 65,000 the first year. He is also a great employee and was able to get eight percent annual raises. However, there is a big difference between John and the Steve John example above. He was able to resist the temptation of inflation in his lifestyle rather than having his expenses increase at the same rate as his income.

John was able to limit the growth of his expenses to just two percent a year. How much more money does he think he could have saved? At the end of year 10 that his friend Steve's answer is honestly shocking that Jon was able to save almost 285 thousand dollars in total, almost four times more than Steve simply because Jon was able to resist the temptation to drastically increase his lifestyle as he earned more money . Jon and Steve earned exactly the money over the 10-year period in this example. However, John made a point of continually spending less than his income. charlie munger would be very proud if you were watching this video.

I can already tell that you are an intelligent, ambitious and motivated person. Probably the biggest threat to you building wealth will be lifestyle inflation. Do everything you can to fight it. Remember Charlie's advice about how underspending on your income is the key to a happy and successful life. I hope you learned something from this video. Make sure you like this video and subscribe to the investor center because my goal is to help you. a better investor studying the best investors in the world we will talk to you soon