In this article I share key tips, tricks, and resources so you can save your first 100k in less than 3 years. Remember saving the first 100k is the hardest. Here we make it easy.
NOTE: If you like this article, download the free guide on how to save your first 100k at the end of this article.
Cash flow is a simple equation – income minus expenses. Generally, people don’t think about cash flow when it comes to their personal finances, but if you don’t want to work until the day you die, treating your finances like a business is essential. Your first 100k is the hardest for a reason, bur today I will walk you through all the things you need to know to maximize your income, reduce your expenses, and get your money to work for you so you can save 100k easily.
The first 100k is the hardest – Maximize Your Income to accumulate money fast
So let’s start with income. For most of us, our income comes from our 9-5 jobs. Whether you are starting out or are an established professional, maximizing income is key. Your first 100k is the hardest because most people don’t make 100k straight out of college. What it really comes down to is having tough conversations and advocating for yourself.
- If you are in the process of looking for, or getting a new job
- Salary: Make sure that you ask for more than you think you should get, but not too much more. A general rule of thumb that I have followed is asking for about 10 to 15% more in salary then you have expected. This is on top of what you’ve already established the market value of your new position to be. Make sure you apply to and interview for multiple positions and different companies to understand what fair market value for your skill set should be.
- Sign On Bonus: Another key component is ensuring that you ask for a sign on bonus. This is by far one of the largest areas of opportunity when negotiating a new job, and I can ensure if you don’t ask for it, you won’t get it.
- If you already have a job and aren’t considering getting a new role
- Document Everything: Be really thorough and make sure you are documenting everything you work on. Create a rock solid case for why you deserve more. Always keep a running list of every project or task you own and contribute to.
- Have the conversation: Before you ask, make sure you have a rock solid case. I always advise creating a simple slide to emphasize what is in your role scope, what additional responsibilities you’ve taken on. Remember no one is going to advocate for you as much as you.
- Consider Alternatives: If the conversation does not go where you want it to go and you have been stagnant from a compensation perspective for a while, you should consider leaving or at least interviewing elsewhere to see what you could be making. I have many friends and colleagues that have undersold themselves or stuck in jobs for years only to leave and DOUBLE their incomes. This is not an exaggeration. This happened to my friend who left consulting for big tech and even myself when I went from a start-up to another start-up.
While I highly suggest maximizing income from your day job based on my advice above. You can get to 100k faster if you get an additional job or side hustle that doesn’t actually feel like work. Your first 100k is the hardest because you have to be focused on earning and saving as much as possible.
Reduce your Expenses
In my mind this is where many go wrong. There is a reason why more than one third of Americans earning over $200k or more say they are living paycheck to paycheck. This is because they don’t know how to manage their expenses. The first 100k is the hardest because you really need to be mindful of your lifestyle and expenses.
While this is commonly not thought about as an expense, it is by far the biggest. Taxes! I’ve seen many people start their first job or get a new job and think they are taking home substantially more than they actually are.
- Where you live matters: Where you live, and more specifically, what city you live in, dictates how much of your hard-earned money goes straight to the government. States like New York and living specifically in New York City is expensive. If you live in NYC and make 100k, you are paying about $300 a month just to live in the city. And yes, that’s on top of the already incredibly high state income tax rate.
- If you want to live in a city: I highly advise that you consider moving to the outskirts of a major city if you still want the city experience, but not the cost. For example, if your job is in New York, why not move to Jersey City, Weehawken, or Hoboken. Not only do you avoid the city tax, but you also generally pay less in income tax. You also save on food and clothing tax. Now listen, I know this isn’t the ideal city experience, but if you want the ideal life experience, I highly advise you to consider this as an option.
- If you have a remote job or don’t care where you live: If location doesn’t matter to you, consider Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, or Wyoming. All of these states have no income tax. For a list of all state level tax information you can go here.
If you live in another state or are considering multiple states to live in, I highly advise you to go to smartasset and use their income calculator to understand your after tax income.
As I briefly touched on above, where you live also dictates how much you’re spending on other day-to-day expenses.
Also Read How to Work From Home Successfully
Outside of your taxes, the other biggest expense you’ll pay is for your housing. Your first 100k is the hardest because you may need to live a little bit different than you expected.
- Stay At Home: I know not all parents want their kids home after college, and after college, not many want to go back home, but if your parents are easy going you can eradicate college debt fast. If this is an option, and you have college debt, I strongly recommend staying home as long as you can and allocating most of your income to paying off college debt. Living on your own can be very expensive and overwhelming, so getting debt off your plate can make moving out a more enjoyable experience.
- Get a roommate: If living at home isn’t an option, or you don’t want it to be an option, consider getting a roommate. Not only does this benefit you financially, but having a roommate can be nice mentally. If you are moving to a new city or going from living with family to being independent, having a roommate can be a nice intermediary step that saves you cash.
- Be a smart shopper: Shopping around is another critical component to making sure that you’re not overpaying for an apartment, townhouse, or home. I’ve seen many cases in NYC where something’s labeled as luxury and it’s actually not. Do your due diligence and shop around. I also advise that if you’re in the process of actively looking for an apartment you do not get a real estate agent. There are tons of resources available online, such as streeteasy and Zillow, where you can find an apartment yourself and avoid an additional one month’s rent payment in the process.
- Watch out for hidden fees: If you are looking to move into an apartment building or any sort of complex, look out for any additional hidden fees. This can include insanely high security deposits, move in and/or move out fees, amenity fees, unincluded utilities and more.
Outside of housing, the next biggest expense generally is your food. When I say food, it’s not just groceries, it’s going out as well. Getting to your first 100k is the hardest because you need to be more mindful of how much you spend on food.
- Make a list and do one shop a week: In order to stick with a grocery budget, make a list every Sunday of what you need and what meals you’re going to make. Don’t go to Whole Foods everyday and just buy stuff because you are bored and don’t know what to eat.
- Look for alternatives: In terms of grocery shopping, instead of going to Whole Foods, try to go to Trader Joe’s. Quite honestly the food is just as good and I would argue they have more variety, but it’s not as expensive. In terms of going out, you don’t need to go to the fancy Michelin star restaurant to have a good time. Look for local happy hours or deals via apps like inkind. If you really want to save, you can just invite friends over and ask them to bring drinks and food for an at-home event.
How to Manage It All
For any general spending, it all comes down to budgeting. Your first 100k is the hardest because not everyone has the discipline to budget. Take the calculator from Smart assets linked above and understand what your take-home pay looks like. Convert that number to a monthly figure and then put a budget to work for the rest. Make sure you add in a buffer for birthdays, weddings, and holiday expenses. If you stick to the budget and don’t spend more than you make, you can estimate your monthly savings.
If you struggle to figure out budgeting I highly suggest you use apps such as credit karma net worth. I personally just manage out of a google sheet.
Another great tip when it comes to managing your money is to only use one credit card. You can have multiple, as that’s a great way to improve your credit score, but when it comes down to tracking expenses, having a single credit card that you pay off every week or twice a month is the key. That way, it doesn’t look like you’re spending a lot less than you actually are and it’s much easier to manage.
In terms of managing your 401ks and IRAs, if you can, use one resource such as a Vanguard or a fidelity versus having your money spread across accounts. It just makes managing it all that much easier.
Put Your Money to Work
So now that we’ve discussed how to get and retain the money, you need to make money with your money. The first 100k is the hardest for a reason. You’re not going to get to 100K with savings alone.
- Saving for retirement: Roth 401k and 401k: The first place to start is with 401k and more importantly Roth 401k contributions. If you make under the threshold of $161k for Ira contributions, you should also be investing in a Roth IRA and an IRA. For employee sponsored 401ks, the bare minimum you should ever invest is up to where you get a match. If you don’t take advantage of a 401k match, you are instantly losing out on company benefits. Catch our article that explains everything you need to know on company benefits. The reason why you should invest in a Roth 401K is because you pay taxes on the way in and not on the way out. Taxes being paid now, when you’re likely making less than you would at retirement, is a no-brainer and all the money that goes into that account and interest gained is truly yours. The concept of a Roth IRA is the same as a 401k except you don’t have the match.
- What to Invest In: While I won’t give investing advice on how to allocate your portfolio or what stocks are going to explode next, I will recommend reading Tony Robbins “Money Master the Game” which is an absolute game changer when it comes to knowing what key investment products are and how the greatest financial minds have thought about money.
- What to do with all the money you are saving: When it comes to your savings accounts, do not keep your money in non-interest bearing accounts. We are at a moment in time where you can go to Vanguard and get a 4.75% yearly return on your cash. Any and all cash should be in an account like this so you have your money working for you. Just ensure that whatever company you use to hold your money it is FDIC insured and you’re good to go.
While this all may seem relatively simple, it all comes down to discipline and psychology. The first 100k is the hardest because you need to build out skills you haven’t before. You need to act differently than your peers and make tough choices when it comes to your finances. It’s not easy, but if you stay true to saving your money and making your money work smarter, you will live a life that’s much more fulfilling.
If you’re looking for more information or want us to expand on any points in this article, please leave a comment below. Until next time!
