Is 100k in savings a lot? Well, that depends a little on the currency and what you could do with it or buy with it where you live.
In general yes £$€100k is a fair chunk of change and shows a level of success at reaching that amount.
How you reached, that figure would be an indicator of how much of a success it was as inheriting it is a little easier than earning and saving it.
The habits and behaviours you are going to need to learn and adopt to get to 100k will likely set you up for life.
Habits that could well have a very positive impact on your lifestyle and making work optional one day.
Here are a few ideas why saving 100k might be a game changer for you.
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What it means to have 100,000 in savings?
Having a 100k in savings or investments might mean quite a bit to you.
It could be a number of years expenses depending on your lifestyle costs.
This could mean you could take one or more years off work or work part-time because you don’t need the money.
You could do that around the world trip in the style you like. Visiting as many countries as you can or more slowly to savour the experiences as you went. It might mean you could stay in one place for a more extended period of time to learn the culture and language.
All because you didn’t need to be anywhere else but especially not at work for that year.
You could take a year or more out to learn a new skill or take that degree course you have always wanted to do. Being able to study full or part-time because you don’t need to work full time or at all for the length of the course.
You could pivot your career without being worried about money for some time whether that is being able to take the risk of a new career later in life or starting your own business without the pressure of needing it to work out straight away.
In fact, with a 100k savings, you could possibly even fail and just go back to what you used to do.
Having a 100k in savings might mean that you don’t need to worry about money for some time or ever depending on your needs as you know you have a serious stash behind you.
Is 100k a lot of money?
It’s a lot of money if it represents a lot of your lifestyle costs.
Let’s say you spend £40k a year, a little over £3000 per month. £100k could mean you have 2.5 years expenses, even more, if you could reduce your outgoings. Doesn’t sound too bad.
If you had £100k invested in a low cost, globally diversified index tracker and you sued the “safe withdrawal rate” of 4%, then you could earn £4000 per year. Or just over £300 per month. What could you do with that sort of money?
The first 100k is the hardest
Charlie Munger – the multi-millionaire and business partner of Warren Buffet, one of the richest people in the world, has said that accumulating your first 100k from zero is the most difficult part of building wealth. If you have some seed money to get, you going it’s easier, but still takes time to build up the momentum.
Building your first 100k is like rolling a snowball. Its start small but slowly and surely it begins to get bigger and bigger gathering momentum.
All you have to do is keep rolling it. Or adding to your savings in this context.
This is the tricky bit and where many give up as they feel, see or think nothing is happening.
The trick here is to understand the process of compounding. Interest building on the interest, building on the interest. Regular additional deposits will slowly lead to your fund’s growth and progress towards your first 100k.
How do I get my first 100k?
OK so to get to your first 100k is going to take some work both behavioural and practical to get the snowball building.
Shift your mindset: it’s going to need you to really really want 100k beyond just the greed factor but because of what it will do for you and how it will make you feel. It needs to be something you are focused on and ready to make changes to reach asap.
You’re going to need a plan.
- When do you want to hit your figure?
- Where are you starting from?
- What are you able to save?
- How might you earn more and save more?
With these numbers, you can plug some figures into a calculator to see what reality looks like.
It might mean you need to make some adjustments to the figures, i.e., it’s going to take longer than you thought, you need to save more
Educate yourself – surround yourself with the right people, either virtually through books, podcasts YouTube or in person.
Are they the people that support and challenge you in the right way or just keep asking you why you aren’t spending your money like them?
Read a book or two about personal finance or the great investors and entrepreneurs of the world. Find the right podcast for you on business, investing and personal finance and see what you can learn about that might help you on your journey.
“Compound interest is the 8th wonder of the world. He who understands it earns it; he who doesn’t, pays it”
Keep your expenses low – keeping more of your money through lowers costs helps you towards your target. Paying less for food, rent/mortgage, utilities and investing costs all help you keep more of your money, putting these savings towards your 100k.
Savings costs can have a compounding effect as you don’t just save the money once you save it for every month that you would have been paying that higher cost.
Earn more, obviously having a massive salary is an easier way to save 100k. But whatever your paycheck there is usually always a way to earn more (legally). Could you have a side hustle in an area you have skills or experience in that people will pay you for? Could you work towards a promotion or shift to a new higher-earning position? Every little bit of extra cash will add more fuel to your 100k target.
Beware of setbacks – if your money is invested in the stock market, you might well see its value go up and down so brining you closer for further away from your goal. Take these advances and drawbacks as what they hopefully are, temporary setbacks.
Automate your savings – take yourself out the way and set up automatic savings every month. This will help remove procrastination or dithering whether to save or not that month. Save first and live off what’s left.
How can I save 100k fast?
Earn a lot more than you spend and keep doing it again and again and again.
Have a laser focus on reaching your goal. Not necessarily at the expense of everything else but certainly, as a way to gauge if what is in front of you is taking you towards or away from 100k.
Have inspiring goals – have something you really really want to spend the money on. Without inspiring destinations, you basically won’t be bothered to save and invest that much.
Keep track of your money, where is it going? Are you happy with that? Is enough of it coming in so that enough of it can go towards your 100k? Keep track of the savings creeping up and up.
Save or invest your money into something that will generate more money. This could be a high-interest account, the stock market or something else that gives you a return on your money. Just make sure you do your due diligence that it will also return your money. Remember, more risk may result in more reward or not.
Set and celebrate reaching milestones, that first 1k, 10k, 50k and finally the 100k, think about how you will celebrate and enjoy the milestone? Hopefully not buy spending all the money but acknowledge the wins small and big ones. Make sure you enjoy the ride.
Is it hard to save 100k?
Yes probably, and maybe.
Yes, if you are starting from zero. It a bit like when a rocket is taking off from the earth. The initial take-off uses up nearly all the rocket fuel and energy to pull away from the earths gravitational pull.
The same is for you trying to pull away from zero. For a long time, your additions might feel like little is happening. You add more and more, but it’s too small to earn any significant interest.
Then there is the temptation as soon as you have a few or even more so tens of thousands to spend it on something.
You will have to battle the voices in your head and your friends “why aren’t you spending that money go on treat yourself, you deserve it”
Social gravity might pull you back spend rather than save.
A few tips to help you save to 100k are
Build good habits
- Ones that involve you tracking your finances regularly
- Spending less than you earn
- Automating your finances
- Stay away from things you can’t resist: sales, certain shops or chocolate whatever is your weakness to spend money you don’t have.
- It’s going to take time, possibly a whole lot of time, to do it and do it right. Make sure you know how long it will take, so you don’t bale on yourself just when you are making progress.
Think long term even if you want to save quick
- Having patience when building to your first 100k. Think long term about what this 100k will help you to do in the future.
- Think about what you want most and not just what you want right now.
- If you have debt, it’s going to be tricky to deal with this alongside trying to build 100k. You will likely need a plan to deal with the debt possible first before making your 100k stash.
- Debt might well be more like treacle than gravity holding you back from making real progress towards 100k.
How long does it take to save up 100k?
Let’s say you are starting from zero but can save 1000 per month.
You invest this in low-cost globally diversified index tracker, as one option, that returns 5% a year which is relatively conservative.
This scenario would take approximately seven years. Make your calculations here
Depending on your starting point, how much you save and what interest rate you earn may make the time a lot shorter.
Some of you might be saying “7 years! OK I’m out”. OK then what’s your other plan to start building wealth?
How long can you live off 100k?
This obviously depends on what your current lifestyle costs are.
The more lifestyle you have, the shorter the money will last.
If you reduced your lifestyle or moved to a place where your lifestyle was a lot cheaper, i.e., moving within your country to a lower cost of living area, it would last longer.
Or you could move even further afield to a much cheaper country where you 100k might go even further.
If your 100k is not earning any income itself, then it’s just about devising the 100k by your yearly costs and that should tell you how long you can live off it.
Let’s say you spend 10k a year, then 100k could last you 10 years. If you spend 20k a year, it could last you 5 years.
If your 100k is earning some income either in interest or capital growth, then it could last longer with a little bit more sophisticated calculations.
Remember that if your money is invested, it could earn enough interest to last for much longer or not if there are one or more market downturns during your spending spree.
Summary: Is 100k in savings a lot?
Yes, it is potentially a decent chunk of change.
It’s often thought of as one of the most difficult financial goals to reach. This is because you are trying to pull away from the gravity of zero and the temptation to spend it as soon as it starts to become a reasonable amount of money.
It is potentially a lot of money as it may buy you a number of psychological and financial benefits.
You probably won’t need to worry about money in the short term.
You might be able to make a career pivot, take some time off work or pursue a passion without too much worry about how you can afford it or the time to do it.
Some key things to do to get to your first 100k.
Educate yourself about personal finances and how saving more, spending less and investing might help you get to 100k asap
A laser focus on what you want and what you are prepared to do or go without to get it.
Automating your savings and allowing compound interest to give you some additional help.
Keep your costs as low as they need to be but not lower.
Prepare for and expect bumps in the road. Accept that things won’t always work out, but with perseverance, that 100k milestone will with time come into reach.
Anyway those are my thoughts let me know yours in the comments below.
Good luck out there.
Are you tired of living paycheque to paycheque? Never able to save? Sick of being in debt?
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