How to save $100k
Getting to zero
Before I saved up my first $100k, I actually had to pay off debt first.
I did a video on my personal finance YouTube channel about how I paid off $75,000 in debt (you can see it here) but in short it involved basically saying no to everything, working 24/7 and dumping every cent into paying everything off.
This really set a good foundation for what was to come next, because I was so fed up with having to live lean that I was extremely motivated to starting building up my savings and not making the same stupid mistakes with credit cards/overspending again.
The approach
After paying the debt off I was excited to start actually getting momentum.
I divided the 100k goal into milestones – first getting to 1k, then every 10k increment from 10k, 20k and so on.
Divide and conquer worked well because it wasn’t such a big target I got demotivated.
Reducing expenses
For my expenses I focussed on being ruthless with cutting all costs.
I discovered that ‘half-saving’ just doesn’t work. You need to commit fully to saving money. If you don’t fully commit, it takes way longer and the problem with that is you don’t ever get much momentum.
I personally found it was easier to be ruthless for a shorter period of time, rather than be less ruthless for a longer period of time. Just get it out of the way quick.
For food I didn’t eat out basically at all, bought microwave soups for $2 per meal, microwave rice and tuna for $1.80 per meal. Only had 2 meals per day, did instant coffee. While I don’t recommend this, it was useful in the very early stages to stop money going out the door.
I also made sure I worked 24/7 so I never really had a chance to spend.
With my expenses extremely low, it was time to focus on working a lot.
Starting small
Initially I was putting very, very small amounts of savings into my ING savings account – I’m literally talking like 20-30 bucks per week.
It was a pathetic amount to be honest, but I did like that it meant I was making some progress each month.
After a few weeks there was $150 in there, then $1000, then $2300 and we were off to the races.
Working 24/7
I really believe that increasing your income is the most effective path to getting ahead – while cutting expenses is important, it is finite – whereas making more money is unlimited.
I had business clients through my marketing agency and consulting, and also was working with another company at the time. This basically meant I was working 6-7 days every week. It was boring and repetitive but it worked.
Any extra work I could do, I would do it.
I would track each month how much cash I bought in, and how much cash went out the door. It was very basic but I treated all my personal finances like a Profit & Loss for a business.
Challenges
I basically rinse and repeated the above until I made it to $100k, but it wasn’t all smooth sailing.
The main problems along the way were being sick of not spending and having fun + the affect it can have on social relationships because you’re never going out and it can be interpreted as you don’t want to hang out with them.
This wasn’t the case, but I realised it’s important to communicate what you’re doing and why to your friends and family so they understand it’s not personal but you just need to get some momentum with your money at the moment so you can then ease off a little.
There isn’t anything to party about when you’re broke so you just have to hit it head on.
Beyond 100k
Since then I have got my individual net worth over 7 figures and am aiming to have a minimum of $5m in net worth (not including my wife’s NW) before 40.
Video Transcription:
G’day there, Ray Corcoran here. In this week’s video, I’m going to be talking about how do you make your first $100,000.
A few weeks ago, I posted on my Instagram how I made my first million dollars and I kind of broke down how long it took me to get from zero to a hundred thousand, 100 to 200 and 200 to 300 and so on. And one of the questions I got was, well, how do you make the first hundred grand? So that’s what this video is going to be about. I’m going to explain how to do it. In terms of how to actually do it, on paper it’s very, very simple. It’s work as much as possible. Don’t spend much, invest the difference and rinse and repeat. However, there is a lot of things get in the way of you actually getting to that goal, whether it’s people in your life, whether it’s your current income’s a problem, your spending habits, your own mindset. There’s a whole bunch of other factors that affect you getting to that goal.
In this video, we’re going to be digging a little bit deeper and I’m going to share some of my tips for getting there faster. And as always, if you like these videos, please give a, like, it helps push it out to more people. And if you want to subscribe, I do pretty average videos every single week. Warren Buffet’s right hand, man, Charlie Munga actually once said, the first 100K is the hardest. And I definitely think that’s true. For a lot of people getting that early momentum is the hardest part. And I can definitely reassure you that it does get easier over time. When I posted on my Instagram about how long it took me to get to my first million, zero to a hundred was actually about 18 months or so, at that time.
And 900,000 to a million only took about two months, two and a half months or three months or something like that. Now, if you are in debt at the moment, I’d probably recommend that you start with my debt video, which I’ll put a link in the description or whatever. That’s better if you are in debt and you want to get to zero. But if you are someone that’s at zero or maybe you’ve got 10,000, $20,000 and you want to get to a hundred and do that as fast as possible, this is the video for you. So the first tip is you need to know the rate and the date. So basically we need to work out first, before we start doing anything, is understanding, well, how much are we actually saving per month at the moment? And what estimated date will it be for us to hit the 100K. Say, if you had, I don’t know, $20,000 and you needed to save another $80,000 and you were saving a thousand dollars a month, it would take you obviously 80 months to get there.
For a lot of people, this exercise can be sobering because it might seem like it’s going to take you forever to get to that goal. But the good news is obviously we have compound interest, which will help us along the way. And also most people typically don’t make the same amount of money every year for 10 years straight. People generally get pay rises or their investment start to grow and that sort of stuff. So whatever the rate is now, we really just establishing how long at this current rate will it take for you to get to your target? And then from there, our goal is to try and keep eroding that back and keep bringing it earlier and earlier and earlier, so that we get there.
And what I personally found is usually, say, if you work it out that it’s going to take you 80 months to get there, for example. Usually because you start focusing on it a lot more, you’ll find that you might get there in 60 or 40 or even less. The second thing is making your goal visible. So it’s very, very important that your goal is front and centre every single day. So it can’t be something that you kind of put in a little spreadsheet and you never look at it. My personal favourite thing to do is, for example, when we were saving a house deposit, I actually get a physical piece of paper and I draw a little savings bar. And it’s kind of like the stuff you see in primary school when they do a fundraiser. But for me, I really like visually seeing how I’m progressing. And I like filling it in when I’m making progress. I think psychologically it’s very, very good. And it makes you feel like you’ve got momentum and that further reinforces positive behaviour.
So the third thing that I’d recommend is identifying and mitigating risks. When it comes to saving money and getting to any kind of goal that you have, you really need to ensure that, it doesn’t happen in a static environment. You have things that pop up, there’s going to be speed humps along the way. And these things are a given. Now what we can do to help reduce the impact of those things is start thinking ahead. Some of the things that are going to stop you from getting to your goal and stop many people from getting to any kind of financial security, there’s a few things. So one is certain types of people. So you’ll know these people straight away. When I mention people that you should be avoiding, if you’re trying to save money, it might be your friend that loves spending money.
It could be your friend that has really bad money habits and is broke. It could be your friends that have lots of money and don’t care about how they spend, and it can be hard to socially hang out with these people. And just anyone that you think would be maybe encouraging you to do things where it might slow down your progress to your goal. Now it’s not to say that you just never speak to them again, but if you have a goal to get to a certain dollar figure, like a hundred thousand and you know certain people are going to make it harder for you to do that, we need to limit how much time we hang out with them and just take yourself out of those situations.
And following on from this, the second one is situations and events that you need to avoid. So for a lot of people, they kind of already instinctively know this, but you’re going to have certain situations that you know that you’re going to spend probably a lot of money. For example, you may go out for dinner and then drinks and maybe go to a nightclub or whatever it is, depending on what your life stage you’re at. But situations like that, where everybody’s drinking and nobody really cares and you kind of forget about what your goal is, because you’re having a great time. I’m not necessarily saying don’t do that ever, but you need to understand that if you have no money and you want to get to a 100K, stuff like that needs to be dolled right back.
Now, having your cake and eating it too, I don’t personally believe in that. I think that if you’ve got the target and you know that the first hundred is going to be the hardest, you need to be really, really strict in that early period so that you can get to your goal, you can get momentum and then you can reintroduce more fun stuff later.
And the third thing that you want to avoid when it comes to risk is really investments. If you think about the kind of investments that are going to be high risk, it’s going to be stuff like crypto, NFTs, any random get rich quick things. I personally would steer away from those just for the first 100K. Maybe look at it later, nothing wrong with looking into it. But early on, I personally would go a lot more conservative, build that strong foundation and then we can experiment with other stuff later.
So number four is a bit of an obvious one, but you need to get your money working for you. So with interest rates at all time lows, you making half a percent or 1% on your money, won’t really help you along to get to a 100K. If you think about the first 10K in your portfolio, you want to get this money working as early as possible for you.
So you may have some money set aside for your emergency fund, but everything beyond that, we want to get that working for you. So you want to send them out like soldiers and put them to work. So I can’t exactly recommend individual stocks and stuff for you to buy, but a very, very popular option at this point is something like an ETF and an index fund. Stuff like that, historically has done seven to 10% long term. There’s not no risk, but there’s relatively low risk. And you could start making seven, eight, nine, 10% on your money with not as much risk as picking an individual stock. We want to go through all your expenses one by one and get really, really ruthless about it. My personal philosophy with saving money is that you just need to do what you need to do.
And a lot of people make the mistake of half saving. And I’ve talked about this on the channel before. I think a lot of people make their life a lot harder than necessary by doing a little bit of saving for a longer period of time. For me, I would rather be ruthless for a shorter period of time and just get it over with. You need to do what’s best for you, but if you’re someone that wants to make lots and lots of money and be loaded or whatever you’re into, it’s better to make all these sacrifices earlier on so you can get that momentum as early as possible, whether you are, 20, 30, 40, or 50, whatever it is. I would rather do a lot of the work front load a lot of the work rather than doing a little bit each year over 40 years and being rich when I’m about to die. All right.
And when it comes to cutting expenses, the obvious one is just to go through everything that’s going out the door and look at what we could cut out and just be super, super ruthless. There’s no magic secret. People think about all these budgets and stuff. You don’t need to. Just go through everything that you’re spending and look at what you are not going to spend on. And then from there you need to be watertight and not let anything go out door for a stupid reason. And another thing that I’d recommend when it comes to saving money is swapping things out. For example, some of the things that I did when I was saving money is, say if all my friends were going out maybe on Saturday night, which is, in my head, a high expenditure kind of event, or it’s very likely to get out of hand, I would swap that for catching up with them for coffee, which might cost me $4.
Now some would say that’s tight and I wouldn’t disagree. But for me, if I’m on my way, I just found it’s easier if I’m focused on my goal and I’m fully all in. I’m not half saving and some weeks I’m having to blow out and other weeks I’m being tight. I’d rather just be tight the whole way until I get momentum. Then once I have momentum, I can ease off a little bit and start to enjoy life and all that sort of jazz. When it comes to housing, my personal philosophy is just live somewhere crap for a bit and live, and just accept that you have to be a little bit more low key for that early phase. There’s no shame in living in a place that’s not that nice or a place that needs a bit of work. For me, I would rather do that and be getting closer to my goals rather than living in the most expensive place that I could realistically afford and then taking forever to get to my goals.
It’s not meant to be fun. Nobody said it would be. But the people that are good at making the hard decisions are usually the ones that do get really wealthy because they’ll do it. They’re not going to half save. They’ll make the changes they need to make. They may not live as lavish a life, but they get the job done. And for me, I think that’s what kind of how I approached it and it was super effective and those habits will serve you well when you start making 200, 300, 400K and beyond.
So the next tip is communicating that to your friends, family, and partner. It’s really important that, as I said, saving doesn’t happen in isolation. You’re going to have friends that are going to want to catch up. You’re going to have to buy people certain birthday gifts and all this sort of stuff. And it’s really important that if you are on a really, really strict savings regime and you’re really, really trying to get to the goal, don’t just start doing that and don’t tell anybody. You want to set the expectation with them about what you’re trying to do, why you’re trying to do it and what that looks like for them.
If you have friends that always want to catch up and you’re like, I can’t go, I can’t go, they’re going to get annoyed because you just never want to go out and they’re going to take it personal. And it’s important that we’re proactive and on the front foot, we talk to them to say, hey, I’m trying to do this thing. I want to get to this particular target by the end of the year or by next year or whatever it is. And part of that is I can’t go out every Saturday night. It’s just not going to happen. And whatever the thing is.
And just let them know that, I still want to hang out. I still got time to hang out. However, can we just do coffee or something for now, or instead of doing this, can we do that. And just swap things out. And generally what you’ll find is the right friends won’t care and the wrong friends will get pissed off and we don’t need them anyway, because we’re trying to get rich. So it’s yeah. The right kind of friends, your long term friends will get it. Some family members may not get it, but at the end of the day, you need to do what you need to do to get some momentum. And it’s going to pay off long term.
And the last one is increasing your income. So everybody always scoffs when I mention increasing your income, because they all say it’s very, very hard. And I’m not saying it’s not hard. However, it is something that you can do. And it is something that you probably should do. If you don’t make a lot at the moment and you want to save a 100K and beyond, increasing your income is one of the best, most effective things you can do. So for me not to mention it would be doing you a disservice. This is a huge topic, and I’ve actually already done two videos very recently on this topic in terms of how to make more money in a nine to five job, as well as how to make more money within your business.
So I’ll put links to those. If you’re interested in a bit more of a deep dive. But the main point is focus on increasing your income, whether it’s extra hours, getting a second job, moving to a different job where they pay better, up-skilling yourself so that you are more valuable to another employer or your current employer. And these sorts of things will really, really help. And cutting expenses is finite. The whole personal finance community is so you into cutting expenses and downgrading a life, but a lot of them really neglect the increase in your income part, which is more important in my opinion.
You should definitely not spend too much, but I would focus a lot of your effort on making more money because that will make, there’s no limit to how much money that you can make and you want to get good at doing that anyway. So hope you found that useful. If you like the video, give it a like. And if you have any questions, please let me know. If you found any tips yourself, saving up your own money, I’d love to hear them in the comments. And other than that, I’ll see in the next video. Cheers.