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How to Save Your First $100,000 by Age 30!
553 Plays14 hours ago
💵 Ready to save your first $100K? Learn how disciplined saving, smart investing, and mindset shifts can help you hit this incredible financial milestone.
📈 If you’re a twenty-something aiming to break free from paycheck-to-paycheck living and build wealth for the future, this conversation will inspire you to take action with practical tips and proven strategies.
Watch and Subscribe on YouTube
In this episode, we discuss:
1️⃣ Reaching $100K: Why it’s a critical milestone and how compound interest accelerates your journey.
2️⃣ Case Studies for Success: Three realistic paths—college grad, military member, and service industry worker.
3️⃣ Building Financial Habits: The power of automation, cutting back on expenses, and starting small.
4️⃣ Overcoming Challenges: How to stay consistent with saving despite societal and financial pressures.
5️⃣ 💰 FU Money: The freedom of financial security and how $100K sets the stage for financial independence.
🔗 David’s Links:
📊 Compound Interest Calculator
📈 Compound Interest Can Make You Rich!
🍏 Forget About Money on Apple Podcasts
🎧 Forget About Money on Spotify
📝 Episode Highlights:
🟠 Achieving $100K: Why it's a game-changer for young adults.
🔄 Automation and Investing: Tools to start building wealth today.
🏠 Housing, Food, and Transportation: Top three ways to reduce expenses.
💰 FU Money: The financial freedom to choose your path.
📈 Compound Interest: Let your money work harder for you.
#savingmoney #financialindependence #personalfinance
🎧 Listen & Subscribe: Join us for more episodes tackling financial independence, wealth-building habits, and strategies to transform your financial future. Hit subscribe and tap the bell 🔔 to stay updated!
📜 Disclaimer: This podcast is for entertainment and informational purposes only and is not financial advice. Always consult a qualified financial advisor before making major financial decisions.
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Transcript
Introduction to Wealth Building and MLM Schemes
00:00:00
Speaker
When you hear the term, get rich quick, what first comes to mind? Well, I'll tell you, David, it is this an amazing new miracle weight loss shake that I'm really into. And I'm getting everybody in on it. This is your chance, man. If you get in now, you will be able to make so much money with me and my amazing new product.
00:00:21
Speaker
We're going to put the link below, right? Yeah, obviously. We're going to be tired of getting on the ground floor. Yeah. That's, that's the way to do it. I think that is the first thing that comes to mind for me when I think of get rich quick is multi-level marketing schemes, which are schemes. I don't care how good your product is. If it's that good, like take it to normal market and don't do the MLM insanity. So yeah, not a fan of MLMs, but that's the first thing that comes to mind when I think of get rich quick. What about you?
00:00:48
Speaker
Well, I think it's very similar to you. It's a catchy slogan, but it represents some expectation to get something in a short amount of time. but And time, I think, is completely relative. Some people think three minutes is quick. Some people think 18 years is quick. as You know, they grow so fast. Some people think a lifetime is a long time, but in the course of human history, it's about three one hundredths of the time of human history. So that's relatively extremely quick.
Reaching the First $100K: Strategies and Experiences
00:01:20
Speaker
Yeah. And that's just human history, right? Let alone the history of the planet. And, you know, I look out my window and I see these beautiful mountains that we have here in Colorado. I think of all the many, many millions and millions of years it took to form those. So yeah, quick is a very relative thing. But I think within the span of a human lifetime,
00:01:37
Speaker
getting rich on a relatively quickly, quick scale is something that a lot of people think about. So I love our topic today of getting to your first 100K and how that can change your life and the strategies of how to get there. So I'm excited to chat about this a little bit and dig into maybe how we reached our first 100K and then yeah, how folks can get there themselves if they're not there already.
00:02:02
Speaker
Yeah, I don't remember actually when I hit my first 100K, I wasn't really tracking it. So I'm not going to be a whole lot of value add for that one. I just had the habits. My timeframe was a little bit different because I was an active duty military member. So in my mind, it was always just get to 20 years, have the habits of investing, and then you can really retire at the end of 20 years. That's kind of how my framework went.
00:02:26
Speaker
Yeah, I think the military is such an amazing pathway to reaching financial independence that's kind of underutilized, right? There's just not that many people who are willing to put in that time and effort. But if you are, it's an amazing pathway. Yeah, I was doing a pretty bad job of tracking finances in my early years as well.
00:02:46
Speaker
So I think we were probably in our mid to late twenties when we hit that point, but we also had pretty high paying jobs right out of the gate, which is one of the pathways that we're going to talk about today. Yeah, I think quick to me is just something that has to be taken with a sense of humility and understanding that things just take time to accumulate. You know, if someone is trying to sell you on something that will get you rich in like a year or two. I think your antenna should be going up. there should There's probably a heck of a lot of risk involved in whatever that thing is that they're pitching to you because for the vast, vast, vast majority of people, and not even just people overall, but the vast majority of people who do end up being rich, it took them decades. So I think you just have to keep that in mind when you're at the start.
00:03:36
Speaker
of the gate and just put one foot in front of the other and trust the process because it will end up accumulating over time. and Rich means something different to different people. For some, it might mean $5 million. dollars For some, it might mean $1 million. dollars But to get there, you have to get to your first 100K. That's a significant milestone because it represents a lot of things. It represents one, to believe in yourself that you can do it.
00:04:02
Speaker
that your habits actually do result in a net worth growth. It's a belief in the power of compound interest because that's when you really start to see growth. It's a belief in yourself that if you keep doing those same habits that ah got you to the 100k, it can get you to that 1 million or that 5 million or more.
00:04:22
Speaker
So at a 100K sum, you are looking at $8,000 a year that is just getting added to your net worth without lifting a finger, assuming an 8% growth rate. So if you're invested in a broad stock index fund, something like VTS AX,
00:04:41
Speaker
That's eight grand that's just added to your net worth every year while you are tucked up in your bed warm and cozy at night not doing a thing. So that's pretty powerful. And of course, the next year, you're looking at more than $8,000, right? Because even if you've invested zero, you're now at $108,000. So it's 8% of that. So it's just going to keep growing faster and faster and that s snowball will start to grow. So that's something pretty exciting that starts to happen at that 100K mark.
Case Studies: Paths to $100K by Age 30
00:05:08
Speaker
For most people, especially if you're young or even if you're not young and you just haven't established the habits to build a significant net worth, $100,000 can seem a long way off. However, no matter what age, if you start now, you can get there much quicker than you think.
00:05:27
Speaker
Well, we've got some case studies we want to review. For the purpose of this conversation, we'll have three different scenarios. The first scenario represents a college graduate who starts investing at age 22, a military member who enlists right out of high school at 18 and begins to invest, and someone who graduated high school but didn't get into a ah historically professional course of study at a college or a trade, someone who maybe works in retail or like as a waiter.
00:05:56
Speaker
her Yeah, I think those are three very realistic scenarios for people. So let's talk about our college graduate first. So the first thing that you have to pay attention to when you're thinking about college is that you are at least four years down the road than your counterparts. A lot of people take longer than four years to graduate from college.
00:06:16
Speaker
<unk> I will say, and I do think this is becoming more common, you can get college credits when you are in high school now. I was doing that way back when I was in high school. I graduated high school in 2002, so it's been a hot second. But i even I was able to do this back then, and I got out of college in just three years. So it is possible you can cut down on that time.
00:06:36
Speaker
that you are investing in college as opposed to investing in work, but still you are looking at at least being a few years behind your compatriots who go immediately into the military or into earning a paycheck for purposes of these these three hypothetical scenarios. So you are behind in terms of age, but hopefully you've got a bigger paycheck to make up for that, right? If you're getting a college degree, that's going to set you up for success, which we can talk about.
00:07:05
Speaker
later, then hopefully you're coming out with a bigger paycheck than the folks who went straight into work. So if you're starting at age 22 and you've got a starting salary of $60,000 a year and you're able to save 20% of that, that means you're saving $1,000 a month and after eight years, by the time you're 30,
00:07:27
Speaker
You're going to be sitting on a pile of over $100,000. You're looking at like $122,000. That's pretty powerful. That's a really good scenario. Walk us through the military enlistee, David. So for military, most military enlisted members start out at like an E1.
00:07:43
Speaker
and you'll get normal pay raises every couple years as you go through your career. I do take that into account for these calculations. And E1, right now, this is just base pay. There are other pays that you get, such as BAS and BAH, one's for basic allowance for subsistence, and then the other one is basic allowance for housing. So there this is not all If you hear this number, don't freak out. if you If your kid decides they want to go in the military, this is not all the money or compensation they receive. This is just base pay. For an E1, base pay is $24,000 a year. But for the sake of this, we are only focusing on the base pay. And if they were to invest 30% of that base pay, which is $600 a month, over 12 years, between the time that they're 18 and 30, they will have $109,270.
00:08:29
Speaker
So they even only investing $600 a month and then ah they will get pay increases over time. So and naturally they would probably want to invest a little bit more.
00:08:39
Speaker
109 is a great sum to end end up with by the time you're 30. That's a base of a really solid pyramid that you're going to be building over the course of your life. The third case study is the person who graduates high school and steps into a job as a waiter or works in retail. That person averages $30,000 a year. They start investing when they're 18.
00:09:00
Speaker
If they invested 15% of what they make, which is $375 a month after 12 years, by the time they're 30, they'll have $102,920. So these in each of these three case studies, which represents a broad spectrum of where most people can probably see themselves falling and into their 20s. This is a realistic projection of how you get to $100,000 by the time that you're 30.
00:09:28
Speaker
Yeah, I think all of these folks are in a pretty good spot. Certainly from to my eye, the toughest road out of these three is the kid who graduates directly from high school and goes into like a service role.
00:09:43
Speaker
where they're bringing home approximately $30,000 a year because you know things are going to happen saving that $375,000 monthly every month. There are going to be times when that's tough to do.
Financial Planning and Investment Strategies
00:09:53
Speaker
so I think some of these other paths will be easier for sure, but yeah they're all very capable of ending up at this spot whereby the very young age of 30, they're sitting on this really powerful number of $100,000. Some of my takeaways when I think about these three different paths,
00:10:12
Speaker
are that consistency is by far best friends, right? Every single month being able to put at least something away. And then when you've got months where there were no emergencies and you're able to save more, sucking more away, that is the most powerful thing that you can do for yourself. And when you do it, when you're young, you're looking at so much more time for that money to grow and grow. so Now, listener, I know you're making some assumptions based on what we just said, things like if you're a college graduate, you probably have a 401k and they maybe even match. Yes, that would only get you to a hundred thousand faster. Or for the military member, they have a blended retirement system, which is much like the 401k in the civilian world. They ah but also, after a short vesting period match, will add to the rate at which
00:11:02
Speaker
a military member gets to that 100K by 30. For the service industry worker, you may or may not have a 401K, but you can also use tax-advantaged accounts like a Roth in most cases to save towards that 100K. So let's say you're the service industry worker, you don't have a 401K or you're the restaurant you work at doesn't offer it. You can still open up a Roth IRA with Vanguard or Fidelity or whoever the fund house is and put up to whatever that year, $6,000, $6,500, whatever it is for that year, as long as you make more of that in your W-2 income and then that grows tax free. Yeah, that's incredibly powerful. Those are great tools to take advantage of.
00:11:42
Speaker
And then on top of that, if you have extra money to, if you wanted to invest me even more, you could just open up a taxable brokerage account and invest. And to be clear, we're referring to the reinvestments that we assumed for these ah scenarios is a low cost broad market index fund like Vanguard's BTSEX or Fidelity's SKAX, I think what it that's what it is. I believe so. I wouldn't save my life on that, but I think so.
00:12:09
Speaker
And then they have the same thing in the Thrift Savings Plan, which is for the military that they offer. So it's the C fund would be your broad market, low cost index fund that represents the S and&P 500. So let's talk a little bit about some of the habits that will help people to stay on this path to having that net worth of over $100K by the time they're 30. Because you know for the college graduate, we're talking about roughly eight years of dedicated saving.
00:12:35
Speaker
for the the other two folks who start their path at age 18, we're talking about 12 whole years of dedicated saving. So what are some habits that you think will help people stay on track for those eight or 12 years to help get them to this really powerful position at age 30?
00:12:52
Speaker
One of the biggest things people push back to me on is I don't have that kind of money to invest. I don't have the money to invest right now. What about this? What about that? The problem with that is if if you have that mentality, you will never have enough money to start investing. You have to prioritize investing no matter what, no matter how small. Start the habit. whether it's $50, $100, $500, whatever that is, start it today. and And then what happens then is you actually have a belief in yourself that one, you're doing something to better your future. And the other is you're going to actually realize that you're not breaking the bank. You're still going to be able to eat. You're still going to go out and have a little bit of fun. You're still going to be able to pay your bills. You'll find a way. So I would, number one is automate, automate, automate, automate, but it doesn't stop there. For example, if you're going to the military,
00:13:41
Speaker
and you start your contributions towards your blend of retirement system or the savings plan in particular, that money will go into a government securities fund. Well, you don't want it there, not for long-term growth. Just like if you start a contributions to a Vanguard account, well, that money that comes out of your checking account goes to a money market holding account or a settlement fund.
00:14:02
Speaker
that doesn't do anything for you hardly. There's almost zero growth. So you have to go that extra step and make sure that that money's going to an investment, meaning actually purchasing mutual fund shares or stock shares or whatever it is you've decided you and to invest in. In this case, we're talking about low cost broad market index funds. So if you do that and you automate, you can almost take can almost take your your foot off the gas pedal for a minute and and just watch for a second, see how things settle. You realize you're going to be just fine.
00:14:30
Speaker
Automating is the first thing on my list of habits that will get you there as well. That's what we did at one point when we finally woke up and stopped being nannies about it. We didn't realize we should be investing the money we were earning. Yeah, we just set it up to put a certain amount of dollars into our index funds every single month and we've kept without going.
00:14:51
Speaker
ever since and we don't even have to think about it. It's easy. It's incredibly powerful. Everyone out there who's in this age bracket and probably older should be automating their investments for sure. The other thing on my list is staying off social media because I think it's very easy to get caught up in how much fun it can be to spend money on certain things and how much social pressure there is to spend money on certain things. But I promise you, nothing is more fun in the end than having the freedom to walk away from full-time work forever if that's really what you want to do. So focus on that goal. Keep it close to your heart at all times. Think about your why of retiring retiring early. What is it that I'm going to do with my time? And then think about how much more fun
00:15:41
Speaker
that will be then going to every single concert or having a super nice new car or wearing the latest fashions. And that is a way to expedite. My counter to that, Carla, would be if you actually thought through how much you need to automate, to save, to get to the goal that you you can conservatively plan for and achieve, then that does kind of like it gives you a little bit of gray area to spend on some things on on your daily life. But yes, it shouldn't be inadvertent. It should be intentional spending.
00:16:10
Speaker
Yeah, I certainly don't mean to say no one should spend anything on fun for sure. Enjoy the journey. And in fact, that's something that I think I did wrong and I would caution others not to do is to not just like over save to the absolute maximum level and hit your life from now until the day you retire. But I do think being very cautious about it and not getting caught up in, Oh, just this one more thing, you know, this will mean so much to me. I have to do this thing too. And,
00:16:37
Speaker
Well, I'll only get promoted at work if I'm wearing the right clothes. That kind of mentality I think just ends up being a huge suck and then you'll end up investing less. Even if it is automatic, you could probably be doing more if you're falling into that mentality trap. Yeah. And one thing I'd like to advise, by the way, this is not formal advice. You can't sue me or Carla or the podcast. I don't have that kind of money. Please don't do that.
00:16:57
Speaker
ah One thing you can do is every six months you know set a timer or a google calendar reminder something that says go in and adjust your contributions up a percent or two percent just do it. Don't worry about the know if i need money to go on this trip or just do that you can always.
00:17:15
Speaker
if you truly If you find that it truly hinders your ability to to live your life, then you can go back in and adjust it out. But the chances are you're going to be just fine. Just make it a habit. Every six months, go in, boost at a percent. The next level is like, where are you going to boost it? like That's order of operation stuff. That's not the point of this conversation, you know which account to to up it in. That's a different conversation. But towards your overall goal, up your contributions, one to 2% every six months.
00:17:41
Speaker
I totally love that idea. It's just like a turbo booster added to your life plan. It's an amazing way to do it. So when you're in this phase of trying to reach 100K and you know hopefully you're automating your savings, that's a checked box. But I also think as you are looking for ways to cut back expenses,
00:18:04
Speaker
There are three main areas that I think everybody should be looking at pretty much all the time over the course of your life, unless you've you know really hit that point where you fully made it and you actually need to spend a little bit more. But the three biggest areas that most people spend the most on are housing, food, and transportation. So I'd like to dig a little bit into ways that folks can Cut back in those three years as they are looking to you know again like add those turbo boosters to their savings and increase their savings rate. So david do you wanna talk a little bit about housing and how folks can maximize the savings that they have in the area of housing.
00:18:43
Speaker
Sure, let's let's kind of go in order of those 3K scenarios. We've got the college graduate. If they're stepping out into college, they're making an income, they may have already established some kind of line of credit. Now would be a good time to consider exploring the option of house hacking, buying a multiplex.
00:19:00
Speaker
that's um You know more like a duplex triplex fourplex. I probably won't go any more than that for a number of reasons, but by a fourplex live in one rent the other three out that minimizes your housing expenses greatly even if you're sort of breaking even on cash flow or whatever as far as the traditional.
00:19:20
Speaker
math behind it, does this make a good rental or not? Right now, you're looking at minimizing. As long as you can minimize your housing expense, it's probably worth considering. Do your homework, of course, get a mentor, teach yourself the basics of real estate, and be able to justify the move and the purchase.
00:19:36
Speaker
but that is one popular way many people minim ah minimize or eliminate their housing costs, which frees up additional money for investing or other aspects of their life. For the military member, you move around a good bit. If you're in the Navy, like I was, a lot of that time, especially the junior enlisted live on a ship or they live in barracks on base. They may not get BAH, but if they do get BAH, once you get to be a certain rank, that's an allowance that now you can live out in town. Roommates do it responsibly,
00:20:03
Speaker
and There's a lot of crazy stuff that happens out there with Junior enlisted in living arrangements. But if you're mature and you are because you're listening to this podcast, you're going to keep yourself out of trouble. Do it smartly. You can save some money. Maybe maybe your housing costs go down to half. That's what they would be if you were just paying on on your own.
00:20:21
Speaker
And what a powerful thing that is if you can do that because housing is by far the biggest chunk of expenses for most people. So take these hacks to heart. I think these can be incredibly powerful. And in a service industry worker, it is probably a tougher road. You graduate at high school. Maybe don't and we don't launch out of the nest quite yet. If your parents are amenable to it, stick around.
00:20:42
Speaker
help your parents out around the house, cut the grass, do the dishes, cooked food, you know, earn your keep, but that will also keep your housing costs down significantly. Yeah. If your parents are nice enough, it might keep it to zero, which is pretty damn powerful. I would encourage everyone to really think hard about whether these options would work for them. And again, I know it's so easy to get caught up in seeing your friends around you, you know, renting luxury apartments and living on their own.
00:21:10
Speaker
But if you keep your eye on the prize of being 30 years old and having a lot of money saved and reaching financial independence, maybe in your 40s, that's incredible. And I bet a lot of people who are in their 40s and have not made it would look back on some of those decisions and say, gosh, I wish I had done what you did and I wish I hadn't lived in this fancy apartment all by myself. So I would take those things to heart. Don't let the social pressure get to you.
00:21:35
Speaker
You just focus on you and your goals and people will respect that. I think that is something that takes fortitude and people see it in you when you're choosing something that's hard to do, but really impressive. So don't let the haters get to you. Stay focused on your goal. That's my two cents.
00:21:53
Speaker
The other two significant things to think about are transportation and food. Transportation can kind of go in with housing too, because if you live closer to where you work, you don't have to spend time and money on a vehicle or the maintenance of that vehicle or gas. So that really makes a huge, it can make a huge difference. I mean, California and the gas prices, I think right now, like 450 a gallon. So that's crazy, but they all add up.
00:22:20
Speaker
So if you can design your lifestyle where it's a efficient, logistically, live as close as you can to the things that you do or use the most. Walkable areas, close to if you're if you are a student, it can you live closest to campus? If you are working at a restaurant, how close can you get to that restaurant if you if you have to live on your own? If you're a military member, how close to the base can you be? That kind of thing.
00:22:43
Speaker
And I would think about those things as a package because the places slightly closer to campus or closer to your work might be a little pricier, but you have to balance that out with the transportation costs that you're looking at if you're living much farther away and the value of your time if you have a huge commute as well, right? So I would think about all of those things as one unit transportation, housing,
00:23:07
Speaker
How do these things fit together? Use my decisions in these two realms efficiently to lower the cost of these two things overall. And then there's food. We did an episode on how ridiculously expensive things cost these days. and I live in San Diego, a high cost of living area. You live in Colorado, also not that cheap. It's not one of the cheapest areas to live in in the country.
00:23:28
Speaker
So it costs money to go out. So just think about all those things. If you're 20s, you're going to want to go out and have a little bit of fun. That's fine. Just be aware of what you're really trading. You know, markup on alcohol is ridiculous. Once you go anywhere for a decent meal and then tip the 25% that they're asking you at that on top of that, when you walk out, all of that adds up. And that's just money coming out of your pocket. Please never do your investment for your future. When you might actually be able to cook a better meal at home for a quarter of the cost.
00:23:57
Speaker
It's so true and we live in this age of ridiculous abundance of information. There is no recipe that you cannot find somewhere on the internet or even at your local library, right? So check those things out and try things at home. I used to think it was crazy that anybody would think they could make a meal that was better than what you could get at a nice restaurant. And now I am fully on board with it. You can make amazing food at home and it is not that hard.
00:24:24
Speaker
Motivate yourself to spend some time doing that. Do meal prep so that you can only cook you know a couple times a week and you don't have to face the chore every single night. so Those things can be incredibly powerful, way, way healthier than what you get at most restaurants, and fun. It's a fun new skill to have and people will be impressed by your cooking skills, especially if you're young and you're dating.
Opportunities and Mindset After $100K
00:24:44
Speaker
Whoever you're dating is going to think it's super, super hot that you can make a delicious meal. So that's another fun bonus to add onto there.
00:24:52
Speaker
Check out the next YouTube video where Carla shares how to make a grilled cheese sandwich to her loved ones. I can do a pretty solid grilled cheese. That sounds delicious. We're recording this at lunchtime, so you're making me hungry, David. This is not good. You want to have to leave and go take a break? So Carla, you've turned 30 years old. You now have $100,000. Who? How do you feel?
00:25:11
Speaker
I feel so solid. I am excited about how that's going to grow. I'm excited about what it's going to do for my life and how it's going to open up doors for me. Yeah, I am probably thinking about how to best invest it. I'm probably thinking about my life overall. Am I happy with my work? I now have the flexibility to take some time off to try a different job if I'm not happy with the one that I'm in.
00:25:37
Speaker
I'm feeling really really kick ass at age 30 with 100k in the bank just sitting there earning at least $8,000 for me every single year. I'm feeling pretty solid. What are your thoughts on how people move forward from that pretty amazing spot that they're in?
00:25:52
Speaker
See, that's tough because I think about what I would do and it's probably not what the majority of people would do. I usually just put my head down and keep going strong. So I'd probably increase the amount that I'm investing. Even if I don't like my work, I'd probably still grind it out as long as I was mentally capable and it didn't.
00:26:08
Speaker
hinder me too much in my mental health but i would probably just continue to get there is rapidly as i could with the wild still enjoying my everyday but a lot of people do run in distress in their jobs right around that time because if you like let's assume the college graduate you are you been somewhere you know eight or nine years at this point.
00:26:28
Speaker
or maybe you know seven to nine years at this point, you maybe didn't get that promotion you wanted. You're probably making pretty good money. if you saw of If you had a pretty good major, you're probably making good money. And you might be considering some different things. And in the financial independence community, we have this thing called FU money. can you I'm not sure, can you spell that out? I'm not sure exactly what that means. I hear it. I hear it often. I'm not sure exactly what it stands for.
00:26:51
Speaker
I think I may have already cussed in this episode and I feel like you're trying to bait me into doing it another time, but I'm not going to do it, but it means forget you. That's what a few money means. It means forget you terrible boss. I am going to go find somebody a little nicer to work for or with. I think that's what a few money means. And do you think a hundred thousand dollars at 30 years old is is enough to be a few money?
00:27:15
Speaker
I sure do, yeah. It's certainly enough to say goodbye to a terrible boss or just a very stressful job that you don't feel passionate about. I will say that is not what I did. I did exactly what you were talking about, David. I just, you know, was having a big paycheck come in the drawer and it felt great. And even though I was not enjoying my work, I just ground it out. So I stayed for probably longer than I should have, but I do think In hindsight, and or if I were advising another 30 year old who were in this situation, I would advise them to find something that they actually really enjoy. Because, you know, at this point you are looking at another 15 to 20 years of saving and investing before you are going to reach financial independence. That is a large chunk of one's life to hate. So if you are genuinely miserable, for heaven's sake, get out and find something that's better. That is what that money is there for, is to help you enjoy your life.
00:28:14
Speaker
What are some of the mindset shifts that you might not have seen when you were 22 stepping into the workforce and into your life as an adult that start to come into view after the age of 30 and that kind of wealth building?
00:28:27
Speaker
I think you are starting to feel your mortality a little bit at that point, hopefully not a lot. you know I think the average lifespan in the U.S. these days is like 75 to 79, depending on whether you're male or female. you know You're closing in on the halfway point to 70 as you're reaching 30. And I think you should start to plait out your life and think about what it is you really want out of it and what are the things that you will be really sad if you look back on it and you didn't do. So using your money to help get you to achieving those goals is the most powerful thing you can do with dollars, right? Dollars can do a near infinite number of things for you, but in my probably not humble enough opinion, that is the most powerful thing you can do with them is to look at your goals and help
00:29:19
Speaker
Get yourself there, help check those things off your life to do list and feel the joy and satisfaction that comes with it. What do you think, David? and and I think if someone has practiced the habits and put the habits in place to get them from zero to a hundred thousand dollars in about 10 years, what comes along with that is a belief in yourself that you can action in your own life to have a positive outcome. And that confidence and belief in yourself, you can extend that beyond just money. You can extend it to a new career if you want, a new hobby, a belief in yourself that you can
00:29:52
Speaker
achieve something that maybe when you're 18, you didn't think you could achieve or weren't willing to take their first those first steps because of fear of failure. Life is hard. And if there's challenges every day, some large, some not as large, some painful, some not as painful, but if you have that sense of belief in yourself,
00:30:09
Speaker
and that you have the power to control your life, then I'm not sure like any amount of money can replace that. But you can learn that about yourself by seeing the result of your intentional action result in something that can bring so much value to your entire future. And let's not just stop there. It's not your entire future.
00:30:30
Speaker
It's the future of your kids. It's the future of possibly their kids, your friends, if they ever need help and you're the one in position to help them. That value is just the feeling of that value. How that makes you feel is incredible. Yeah, I totally agree with that. The ability to help others, the ability to figure out what your real passion in life is and explore that. You know, I love the question, what would you do if you knew you couldn't fail? And when you have a big safety net of money that you've accumulated underneath you, you kind of can't fail, right? If you set out to be the next great golfer, you may not become the next great golfer, but you'll have a lot of fun chasing that dream. And financially, it's okay if you spend your whole day just hitting balls on the golf course, right? So whatever that thing is for you, go chase it and see how it goes and have a lot of fun along the way. And you've got that big safety net to catch you. So
00:31:25
Speaker
Yeah, think about what your answer to that question is and maybe build your life around some of those goals.
Long-term Financial Outcomes and Military Benefits
00:31:32
Speaker
So I do think it's helpful to fast forward a little bit and see where our three case studies are going to end up at the age of 50 based on their behavior over the next 20 years. So we're looking at age 30, looking forward to age 50, got 20 years of ground to cover in there. So let's look at where these folks could potentially end up. So if we start with our college graduate,
00:31:58
Speaker
if they are sitting on that balance of $122,000 at age 30 based on the assumptions we made before. And if they continue to do exactly what they've been doing, which is contributing $1,000 a month, by the time they're 50, they're going to be sitting on $1.15 million, dollars which is a very tidy sum, plenty for most people to retire on.
00:32:19
Speaker
certainly in the five community where folks are very careful with their dollars. So the $1.15 million dollars is a great goal to be working towards when you're 50 and that monthly contribution of $1,000 is hopefully going to become you know less and less painful for you to invest over time if your income grows. So that's a pretty nice way for that college graduate to land at age 50. You want to walk us through what will happen to the military enlistee?
00:32:46
Speaker
Yeah, so this isn't exactly right because as you go through a 20 year career, one, they will hit 20 year career before they turn 50. So maybe they're not going to invest that $600 a month all the way till they're 50, but a few things pan out. The assumption that we use for this for this exercise is that they do actually just didn't continue to invest until 50 exactly the same the way they are. And that balance when they're 50, remember at 30, they had $109,270 If they continued to invest that $600 per month until they were the age 50, they would then have $862,715 a month. Again, not chump change, but looking back and I say only 600, if you have zero right now, 600 is a lot of money. But as you go through your career, that $600 is gonna be seem like less and less ah of an amount.
00:33:35
Speaker
Realistically in the military, you're going to get pay advances. That same 4% or 5% or more that you're contributing to your thrift savings plan, plus the matching, if your base pay goes up, the dollar amount of that percentage goes up, you're going to be over time investing more and more money.
00:33:52
Speaker
So that's an extremely low expectation, but still not chump change at 862-715. Additionally, if you retire from the military after 20 years, you get 50% of your base pay. And that's adjusted for inflation even after you retire. So that is not, so this is on top of what you've already invested.
00:34:12
Speaker
So imagine working in a civilian career. You have your 401k, you're contributing to it. They're matching. You work 20 years or 30 years, you get out. You don't have a pension. Likely you won't have a pension. In the military, you work 20 years. Now you get half of your base pay of your last three years. So for my case,
00:34:30
Speaker
I get a monthly payment. I think it's after tax is like $4,700 every month. I retired at 43. That will be adjusted for inflation until I die. And I will get that every single month. That's a pretty good deal. On top of it, you get medical benefits. VA, if you're not a retiree, and even if you are a retiree, you can qualify for VA benefits. But in addition, if you retire, you get tri-care medical. So there's another benefit. On top of that, whatever you've saved in your blended retirement system slash Thrift Savings Plan, a normal retirement plan, like the civilian 401k, that's also sitting there in your Thrift Savings Plan like it would be sitting in ah in a 401k account. So yes, the military service is very challenging. And there are times, even at my 16 year mark, and at the 20 year mark, you get a retirement, you qualify for retirement. Even at my 16 year mark, I was debating on getting out. And like I said before, Carl, like I'm a nose to the grindstone kind of guy, but there were some tough times.
00:35:26
Speaker
yeah It's not a path made for everyone, but it's financially it's worth your while. You can handle it for 20 years. Yeah, and the reliability of that money coming in the door every month has got to feel good too. Whereas if you're taking the more common bypass of just investing a lot, you have to look at your investments and fret a little bit about whether they're going in the right direction and how much can we afford to take out this month. So um yeah, I think the military is extremely powerful. And I think anybody who has interest in it, I would
00:35:58
Speaker
I have the utmost respect for it and think it's an amazing pathway. It's a pretty sweet place to be at when you're you know approaching 48. if you're yeah That's our hypothetical scenario. You're 18, you retire at 38. Yeah. I was thinking about 20 years after the age of 30 here, but been but it would actually be 48 because you started at 18.
00:36:23
Speaker
Anyway, no matter how you slice it, it's a great place to be in at a young age. That's really incredible. so Our service industry worker is in ah a little bit of a rougher spot, but hopefully they're still doing pretty well because this i mean they've accumulated a good chunk by the time they're 50 years old in our hypothetical scenario here.
00:36:41
Speaker
So remember, they were sitting on $102,000 at the age of 30. They're contributing $375 a month. If they just keep doing that by the time they are age 50, they'll be sitting on a little over $700,000 at an 8% return. Again, an amazing place to be.
00:36:59
Speaker
that is far better than the vast majority of Americans are doing at that age. And that's somebody who just you know graduated from high school and never got a college degree, was earning a modest salary for their entire career. But here's the scenario that I would like to put out there because I think this is pretty common, at least it's very common in the Phi community.
00:37:23
Speaker
which is that you do stick around, earn a higher salary, and are able to continue like continue increasing your investments year over year. So if you are at 30 years old, you've been in the workforce for maybe eight, nine years, and you are, let's say, earning a salary of $100,000 at that point, you started at 68 years later, you're at 100k,
00:37:46
Speaker
not a terribly unreasonable assumption. So at that point, if you're able to just continue doing what you were doing, which is living on about $50,000 a year, all of a sudden you're able to invest a lot more money. This example doesn't take taxes into account. I fully acknowledge that, but also your tax rate at a hundred K is not going to be insanely high. So if you are able to invest $50,000 a year starting at age 30 with a starting point of $122,000,
00:38:15
Speaker
By the time you are 50, you are looking at very close to $3 million. dollars And that is an extremely big, juicy, powerful number that's going to buy you a lot of time and freedom. So if you are able to get to around age 30,
00:38:32
Speaker
not have increased your lifestyle by that much and you can keep living like you were when you were in your 20s. You are golden, my friend. You are going to be looking at a very nice chunk of change to sit on that will buy you all the time and freedom in the world. So whether you're 18 years old, whether you're 20 years old, whether you're 22 years old, whether you're 42 years old. I think what we've shown here is the power of compound interest. Just establish some habits.
Pursuing Financial Goals with Positivity and Support
00:38:59
Speaker
Yes, it takes a little bit of work. It takes a little bit of work on your part to learn the basics of investing, learn what you're investing in, why you're doing it,
00:39:09
Speaker
The expected returns, but it is not rocket science. It really is not. And everyone, I believe everyone can do it. And 10 years is pretty quick. So what's also is what's also quick is being able to give somebody a thumbs up like this. You ever do that? Walk around, just give somebody a thumbs up. It might be the weirdo on the street. All the time. I do that all the time. But you could also do it and do like this and then push the like button like this.
00:39:36
Speaker
on your phone, on the YouTube video, or if you're listening to the podcast, select that five star, that fifth one. Right. Please only the fifth one. You made it all the way through this episode. That will help us out a lot and you can do that pretty quick. Smash the like and subscribe button. Thank you very much for listening to another episode and we'll be here again next week. Yeah. Thanks so much for tuning in guys. Catch you next time.