Once you have reached $100,000 in investments, the road to wealth gets easier. Let’s take a look at what it takes to go from $0 to $100,000 in investments.
In The Words Of Charlie Munger
“The first $100K is a total bitch, but you gotta do it. I do not care what you have to do. Find a way to get your hands on $100K.” – Charlie Munger
Charlie Munger had amassed a fortune of approximately $2.6 billion. He passed away on the 28th of November 2023, at the ripe old age of 99. He was the vice chairman of Berkshire Hathaway, Warren Buffett’s right-hand man.
Charlie was also a great philanthropist, donating more than 75% of his Berkshire Hathaway stock to charitable causes. I have started reading up on some of these legendary investors to gather some insight into their investing strategies and mindset.
It is difficult to reach $100,000 in investments, especially when you are on low wages. Once you have gone past the $100K barrier, however, it gets easier. As the saying goes, “It takes money to make money.”
Most of you will be asking the question “How do I get to $100K in investments?”
I will give you some of the insights I have come across from investors who have managed to surpass this $100K target.
You Need To Set A Deadline
Set a goal of when you would like to reach your $100,000 investment amount. I am based in the UK and I’m working with GBP, so I have set my goal in £’s.
I want to reach an investment portfolio valued at £100,000 by 1st of January 2028. I have given myself approximately 4 years to reach this goal. I know that I will not be able to reach this goal based on my current earnings.
I will have to increase my earnings, but I don’t know yet how exactly I will do this. I have set a goal and will work towards achieving it.
After setting your goal with a deadline, you need to get started immediately. I have started my investment journey with Trading 212. I invested £200 initially, just to test out the platform. I have now topped this up to around £2,200. I will put in £200 every month and increase this amount as my earnings increase.
I am currently investing in mainly UK based dividend paying stocks. I will reinvest all my dividends until I reach my goal of £100,000 in investments.
I can track my investment goal by opening the Trading 212 app on my mobile phone. I get a live update of my investment portfolio value.
I suggest that you set up micro goals leading up to $100,000. As I’m working with £ GBP, I have set micro goals of the following amounts in £’s:
- £5,000
- £10,000
- £25,000
- £50,000
- £75,000
- £100,000
My next micro goal is to get to £5,000 in investments.
Develop The Investor’s Mindset
Most people possesses the instant gratification mindset. They want instant results, like a lottery jackpot win. They want to enjoy the luxuries in life immediately by paying for them using credit. This only get’s them further away from their dream lifestyle as time progresses.
The investor possesses the delayed gratification mindset. They want to pay for their dream lifestyle in the future by building up their investment portfolio. They would ideally want to pay for their dream lifestyle using passive income generated from their investments in assets.
Wealth is created by investing in assets that appreciate in value or ones that pay out a regular passive income. Ideally you want a combination of both appreciation and a regular passive income.
You can take advantage of compounding by reinvesting the passive income the assets generate to purchase more income income generating assets. Continue adding extra funds along with your reinvestments to accelerate the compounding effect.
There are various assets that you can invest in to grow your investment amount and also earn a regular passive income. You could invest in property to earn a passive income in the form of rent from the tenants.
I don’t know much about real estate and rental income yet. It is something that I would like to explore in the future. For now, I have opted to invest in dividend paying stocks.
I am investing in stocks that are likely to appreciate in value and also pay out a regular dividend. I am researching and investing in UK stocks and taking advantage of the Tax Free Stocks ISA at Trading 212. This will allow me to invest £20,000 every year tax free. I will also be able to compound the dividends without paying any taxes to grow my investment pot.
I will be cutting back on many non-essential things that I used to spend money on every month. I will invest the money I save on these into my Stocks ISA.
I should have started investing many years ago, but it is never too late to get started. The earlier you start investing, the more you will benefit from compounding.
Eliminate Debt To Reach Your Investing Goals Faster
If you invest wisely, you may be able to get a yearly return of around 10% in the stock market. If you are paying interest on credit card balances at an annual rate of 25%, I would suggest that you pay this off first.
You need to get compounding to work in your favour and not against you. Credit card debt is the worst form of debt, as it compounds fast and you have easy access to this credit facility.
Credit cards are a debt trap that most people fall into from an early age. You get to spend money that you don’t have to place you into debt that you cannot pay off.
If you are heavily into credit card debt, you should look into an IVA (Individual Voluntary Arrangement) to pay off the debt. The credit card companies may be able to freeze your credit card and let you pay off the remaining balance at a rate that you can afford, without accruing any more interest.
Sometimes you may be able to take out a personal loan at a lower interest rate to pay off your credit card debt. The important thing is to clear high interest debt as soon as possible.
Once you have cleared your high interest debts, you will be in a position to start investing. If you would like to invest into dividend paying stocks, I would suggest that you invest a set amount that you can afford every month.
I will be investing a minimum of £200 monthly to build my stocks portfolio. The amount that you decide to invest every month will depend on your financial circumstance and your investment goals.
Always Pay Yourself First
You should always pay yourself a set amount that you can afford every month. Pay yourself this amount as soon as your monthly wages hit your bank account.
Use this amount to fund your investment goal. Gradually increase this monthly amount as your income grows or by cutting out non-essential spending.
I will be transferring £200 into my Trading 212 Stocks ISA account as soon as my monthly wages hits my back account. Gradually I will increase this amount to £300 monthly, then £400 monthly… and upwards.
If you don’t pay yourself your investment amount first, you will end up spending it on other stuff. Once you start paying yourself first, you will get used to living on the remaining amount every month.
This paying yourself first is a fundamental step in wealth building. Start doing it and gradually increase the amount you pay yourself every month.
Invest Wisely To Avoid Losing Money
“The first rule of an investment is don’t lose (money). And the second rule of an investment is don’t forget the first rule. And that’s all the rules there are.” – Warren Buffett
The above are wise words from legendary investor Warren Buffett, who has amassed a net worth of $143.3 billion (October 2024) from his investments.
Always carry out your due diligence before you make an investment. Avoid risky investments that can lead to you losing money. People say that the greater the risk the higher the rewards, but you need to analyze the risk in detail.
Warren Buffett invested mainly in rock solid companies like Apple, Bank of America, Coca-Cola… Kraft Heinz. The value of stocks in these companies increased and he also benefited from dividends from some of the companies that he invested in.
Investing and trading are completely different. When you invest, you are buying into the company because you believe that it will perform better than what you are currently buying into. You believe that the stock value will increase or the dividends will increase, or both.
When you are trading, you are betting on the stock price going up or down to realize a quick profit. Trading carries a significantly higher risk than investing.
I have delved into trading in the past and lost a significant amount of money. Had I invested this money in dividend paying stocks, I would most likely have increased by investment.
I have made many mistakes in the past which resulted in me losing large amounts of money. I had not carried out the necessary due diligence to avoid these mistakes.
After all the mistakes in the past, I have decided to take the slow and proven road to building wealth. I am now focused on growing my stocks portfolio to £100,000 within the next 4 years.
I am not going to start another bricks and mortar business, as I have been burnt many times in the past. I will concentrate on building a stocks portfolio that will take care of my living expenses by providing a significant amount of dividends in the future.
I will continue reinvesting the dividends and also adding extra money for the next 10 years. Let’s see how much my annual dividend earnings grow to after 10 years.
For now I am buying stocks in reputable UK based companies that pay a good amount of dividends. My goal is to keep the dividend amount to over 5%.
If I can achieve a growth of around 10% from dividends and the increase in stock value, I would be really happy. Currently I have £2,200 invested in my Stocks ISA.
10% £2,200 is only £220…. this may not be much, but I will continue compounding it.
10% of £100,000 is £10,000… this could happen within the next 4 years. If I continue reinvesting and get my portfolio to approximately £500,000…. I could be earning £25,000 yearly from an average dividend of 5%.
I know the above figures are hypothetical, but working the numbers shows us the possibilities. I constantly look at my Stocks ISA portfolio value and imagine it reaching the next target in my goals.
Currently, the value of my Stocks ISA portfolio is £2,240 (October 2024). I visualize this figure reaching my next goal of £5,000. This keeps me motivated and focused on my investment goals.
I am using Trading 212 to invest in dividend-paying stocks to build my passive income portfolio. I have set a 12-Step Goal to enable me to replace the earnings from my current employment using passive income from my dividend stocks portfolio.
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