Do you remember your first time on an airplane?
I still remember my first flight.
My family was headed from Texas to Phoenix for a family reunion. Good vibes, good times, and this 8 year old’s very first airplane trip.
What struck me the most about my first flight? The violence. Or should I say, the violence of that first 20 seconds.
Anyone who’s ever flown on a plane knows the drill, but to this young first-time flyer, it was quite the surprise.
The pilots hammer down the afterburners with a roar loud enough to make the cabin shake. You’re pinned to the back of the seat with g-force that’d make an astronaut squirm. The whole cabin begins ratting and shaking as the airplane struggles to move, then begins picking up more and more speed.
50 mph, 70 mph, 100 mph.
Cabin’s really shaking now. This is the part where the first time flyers have long since closed their eyes, said a prayer, and are fumbling around against the seat-back in hopes of feeling for the puke bag.
110 mph. 120 mph.
The wheels start to bounce on the runway. The plane sways back and forth. Surely it’s going to explode now?
140 mph. 150 mph.
The wheels start to lift. And then… nothing. The chaos suddenly stops and gives way to weightlessness. Silence. Smooth sailing. Liftoff.
Yeah, building wealth is kind of like that…
The First $100,000 is a total grind.
When you start the wealth building game, the mountain looks insurmountable.
You see these personal finance bloggers talking about $500K portfolios. Whoop-de-doo, for them. You’re just looking for $1-2K to get started.
But you start saving anyway, and… It’s even harder than you imagined.
The plane is barely moving.
You keep clawing and scraping. Progress feels like it’s taking forever, and it is.
In fact, even if you’re saving $10K a year and earning average market returns, mathematically that first $100K will probably take you 7-8 years.
But guess what?
After investing $100,000, those afterburners are hammered down.
It’s still a bumpy ride, as anyone who’s ever watched my net worth updates knows. You’re still pinned against the back of your seat and the cabin’s shaking, but that initial $100k of momentum allows you to start building speed.
Zach from FourPillarFreedom.com has an awesome chart showing this:
As the chart shows, mathematically, even if you save the same amount and earn the same returns, you’ll save your second $100,000 about 35% faster than your first $100,000.
But that’s just the beginning. Eventually, your investments get the “all clear” and you’re ready for exponential growth.
By the time you’re near liftoff, your savings will grow from $600K to $1 million faster than it took you to save your first $100,000.
Compound interest is the weightless part of liftoff.
Why do your savings speed up so exponentially?
Well, it’s really just the mathematical law of exponential growth in action. But since our human brains aren’t designed to understand exponential growth, I find it more relatable to attribute this warp-speed growth of your portfolio to that magical moment when your investments turn into money printing machines.
Your money starts earning more money, and you reach a point when even just normal investment returns are actually double, triple, or quadruple your entire initial investment.
- A 7% return when you’re only $50,000 into your savings journey is a mere $3,500… not much to get excited about.
- A 7% return on a $1 million portfolio? That’s $70,000 – more than most people make in a year!
In any case, just like a busy airport, most every takeoff is the same. A slow, frightening start, followed by a weightless liftoff that propels you to wealth.
This pattern happens on every single plane flight. So much so that once you’ve got a few flights under your belt (or in our analogy, a few thousand under your belt) the anxiety goes away.
You stop seeing each takeoff as some sort of death defying feat and instead see it for what it truly is – business as usual, transporting you to the wealth of your dreams.
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Fantastic post this month! I’ve been using this example with my 16 yr old daughter to show how fast consistent investing can grow. As a result she’s caught the investing bug and this chart perfectly explains how being consistent can work. Thanks for the excellent post!
That is awesome! At this rate, it’s only a matter of time before we see a new Money Witch website. 😉
Great.
Your most relatable post yet. Great analogy. From my experience, this is spot on.
Thanks, Nate!
Excellent use of post to show how wealth is achieved!I am surprised at, like plane ride, how that initial start was not impressive, but now like that lifting of wheels I am shock on how much investments have grown!
It really is hard to believe, but crazy when you see it!
I think this chart and analogy should be taught to all in junior high to get them ready. I wish more finance like this was taught in school. The general school system doesn’t do anything to teach or prepare anyone for the future. This should be mandatory. Way to go Money Wizard.
Great post and great analogy but I would not be a proper annoying engineer if I didn’t point out that commercial aircraft do not have afterburners. They are used on supersonic military aircraft. The Concord supersonic airliner did have afterburners but it is no longer in use. However take off thrust from normal jet engines sounds similar and definitely gets your attention.
It was 3-4 years ago when I first found about your blog and subscribed for it. I wasn’t into investment but what I knew back then I needed to save for my retirement. I’m glad that I read your posts and followed basics and now I can say that wheels start to lift and I will make sure to enjoy the flight. Great post again. Thank you.
I remember my first 100k. It literally felt like FOREVER. It was very demoralizing to have a 50-60% savings rate only to progress an inch. There were so many times that I wanted to give up but I’m very glad that I didn’t. You are absolutely right. The first 100k is the hardest, arguably harder than the first million.
“By the time you’re near liftoff, your savings will grow from $600K to $1 million faster than it took you to save your first $100,000.”…Yes, been there, done that !!
I hit my first $100K this year. Definitely looking forward to seeing exponential growth in action!
I can say I’ve witnessed this in my own portfolio too! I started investing in January 2016. I was 25 and had found a downloadable PDF explaining how another 25 year old had saved his first $100k – I had nowhere near $100k and realized I could probably learn a few things from this Money Wizard! 😀
Jump ahead to July 2020 when I crossed (and stayed above) the $100k in investments mark! It took me 53 months (~4.5 years) to reach that number. Now, my investments sit around $127k just 5-6 months later! I’m grateful that I was able to keep my job in 2020, and for the first time I maxed out all my tax-advantaged accounts (401k, roth IRA, and HSA) and made monthly contributions to a brokerage too.
A few years ago I found this quote from Charlie Munger that helped keep me grinding toward $100k when I felt like I wasn’t seeing progress:
“The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do—if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.”
Love it! Thanks for sharing your story, Jess.
And that Munger quote is perfection.
While I know this post was mostly an exercise in showing the power of compound interest, there are other factors that make the first $100K the hardest – as time passes you get better at earning money, better at spending a lower percentage of that money, and better at saving/investing it – a sort of “compound learning” or “compound skills”.
Personally, in 2018 my net worth growth was nearly 3x what it grew in 2017; in 2019 it grew by more than 2017 and 2018 combined; and again in 2020, it grew by more than 2017, 2018, and 2019 combined…! While my salary over this period of time hasn’t grown very much, I’ve found tons of ways to be more frugal (generally by learning more skills so I can do things myself rather than pay someone else to do it), found ways to be much more effective with taxes, and found more ways to earn money outside of my salaried job. This was definitely not a result of my investments/compound interest in my case (though I’m sure that played a small role), but rather the aforementioned skills.
One side note – I’ve had two kids over this period, so popular opinion would suggest that my expenses would have increased over this time. In some ways they have – food, for instance. But I’ve found enough ways to counterbalance this.
Nice! Now you can buy an SSL certificate for your website 🙂
The first $100k is always the hardest. Once you build some scale it becomes easier to keep on building wealth.
Love the analogy. I thought you were going another way when I read the headline – I guess it works in 2 ways.
I’ve heard turbulence is like a plane suspended in jello when the jello jiggles around a bit (source: the Orville). It’s shocking because you move around, but ultimately you’re still suspended in the jello, which is going to bounce back, so you don’t need to worry that you’re falling out of the sky.
I’ve always thought this is also a good analogy for stock market fluctuations. It’s possible that stocks will jiggle up and down from time to time, but they will always bounce right back like jello.
Really interesting take! Thanks for sharing.
Great article and chart which I have shared with my 15 year old son. It took me longer to get from 0-$100,000 than it did to go from $500K to 1 Million. The key is to start saving young and stay with it and you will be rewarded.
I’ve had a bumpy ride career and income wise and made plenty of mistakes in my spending but saving about 20% of my income over 25 years got it done.
You’re absolutely right. It took me 11 years and 2 months to get to 600K. However, it took me just 1 year and 10 months to get from 600K to 1 Million. This of course was a combination of investment returns and higher earnings, but your point remains correct, and I still can’t believe this is true.
Stick in there folks and things will take off like Money Wizard says.