From what I can tell, it definitely seems like the first one-hundred thousand takes the longest to accumulate. At least for people who don't make six-figure salaries and rely solely on their work income to grow their investments. After considering the reasons behind the statement, I believe there are several factors why this is typically true. First, it takes money to make money. By that, I mean: once you amass that amount of money, the momentum of compounding becomes more noticeable. Second, in the early stages of the journey, most people are still trying to find their groove.
Let me go back and touch on that first point: it takes money to make money. Like I said, I'm not at the 100k mark yet, but I'm just over half way there at the time of this writing. I've been saving for a little over a year and this is where I am (56k). I don't have a six-figure income, although it has been a goal of mine for many years. I'm close. I make 93k and have been in my field for 20 years. Unlike many people in my field who have six-figure salaries, I didn't go to college, nor do I plan to move into a managerial role (been there, done that; not for me!)
I save diligently. I have a routine, which I'll touch on in a minute. But, something I've noticed is that swings in the market have less effect on smaller investments than they do with larger investments. An upward (or downward) tick is more noticeable when someone has a much larger amount invested. The market fluctuations seem exponential with larger amounts than small sums. When I got serious about investing, I had about 17k in an account and kept waiting and waiting for the next big wave to come push that number higher and higher. I was naive and grew despondent at watching my number fluctuate only slightly with market changes. A hundred dollars here, tens of dollars there; both positive and negative swings. The market changes didn't become that noticeable until I closed in on 50k and it took me a while to get there because I was only putting away about a thousand a month; sometimes a little more if I budgeted properly.
This brings me to the second point. When investors take to this path, they waffle and flounder in the beginning as they try to establish habits and routines. They're reading forums and PF blogs (or should be) by people who've already traversed this ground in order to learn tricks and tips to help them along. The first thing I did was create an emergency fund, but not because it was anyone's sage advice to do so. I inherited this money from the sale of my dad's house after he passed. It was only about 17k, and, not knowing how badly the IRS might stick it to me come tax time, I put it into a HYSA where I could get at it in an emergency. This was in April of 2014. The 2013 tax season had just ended, so I had a while to wait. While I waited, I kept checking that bank account to stare at those numbers. I'd never had that much money and was determined to watch it grow for a change instead of squandering it. I was bitten by the savings bug. I visited forums and blogs where I learned about FI and soaked up whatever information I could. I began contributing regularly to my Roth IRA. I enrolled in my employer's 401k at a meager 6% (I had to wait a year and a half before they would match). As time went on, I reached 20k, 25k, etc. Seeing the number grow and knowing that I had control over that really lit a fire under me.
I developed an interest in creating my own spreadsheets to budget my money. I monitored my spending and looked for areas to shave off expenses. Putting away more and more money became an obsession. In 2015, I front-loaded my Roth IRA after New Year's Day. I calculated what my contributions should be in order to max my 401k and gradually began to increase those contributions to see how it would affect my paychecks. Turns out, it wasn't a big impact. Besides, that money was being invested automatically, which was in line with my goals. I looked at the funds I was putting money into and swapped out the ones that had high expense ratios. I opened a brokerage account with Vanguard so I could continue to stash money away once my tax-advantaged accounts were taken care of.
All of this took time to sort out. A year and a half later, I have tweaked and fiddled until I've reached maximum efficiency without living in drudgery. My savings rate is slightly north of 50%, which is where you want it in order to retire early. Based on my newly acquired habits and routine, I've put together a projection spreadsheet to predict where I might be in a year, two years, five years, and ten. If all goes well, I should hit my numbers, but no one knows what the future holds. For now, I've got to take solace in the fact that I can handle an emergency should it arise and land on my feet to replenish the money I use to get out of a jam.
So, I think the reason the first 100k is the hardest is mainly due to these reasons. You've got to find your groove. Settle into a budget you can live with. Hone and refine it if you can. Zero in on your savings rate and try to increase it as much as possible. Once these things are set, you're pretty much on autopilot. Your numbers will grow or shrink depending on the market as you ascend the rungs toward financial independence. Once you reach that magical threshold of 100k though, I think it's the tipping point when momentum is on your side, propelling you forward a little faster. It's like cresting a wave in the ocean. You paddle and paddle, giving it all you've got as you head into that looming wave, but after you crest it, you sail down the other side.
At least, that's my observation. I hope to reach my 100k milestone around this time next year. I'll try to remember to check back in and update my thoughts on the matter once I'm over the hump. Especially once I reach the 200k goal, when I can compare two milestones.
What about you? Have you reached the 100k mark yet? 200k? Do you agree that the first 100k is the hardest?
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