Why Investing Your First $100k Isn’t as Daunting as It Sounds

Investing your first $100k is your most important financial goal on your way to financial independence. Because of compound interest, once you reach $100k your wealth starts to skyrocket. Investing your first $100k may seem daunting if you earn a low income, but this goal is actually much more achievable than it initially sounds due to the power of compound interest.

If you have a lower income, you actually have compound interest working massively in your favor to help you reach this $100k goal. Let’s see why this is.

Reaching your $100k investing goal doesn’t mean saving $100k of your own money.

If you feel overwhelmed by the idea of reaching $100k, you might be thinking that the path to $100k looks something like this:

$100K ÷ 1 year = $100k per year
$100k ÷ 2 years = $50k per year
$100k ÷ 3 years = $33,333 per year
$100k ÷ 4 years = $25k per year
$100k ÷ 5 years = 20k per year
$100k ÷ 6 years = $16,666 per year
$100k ÷ 7 years = $14,285 per year
$100 ÷ 8 years = $12,500 per year
$100k ÷ 9 years = $11,111 per year
$100k ÷ 10 years = $10,000 per year

However, thankfully, this is not the reality of what it takes to get to $100k. Reaching your first $100k doesn’t mean saving $100k of your own money. Instead, because of the power of compound interest, you could potentially need to invest much less than you would have thought.

This chart shows you just how much compound interest could help make this investing goal more achievable for you if you get an 8%, 10%, or 12% rate of return:

FIREfornormalpeople.com
Chart title: The Path Toward $100k: Myth vs. Reality
Column headers: Time to $100k What you think
you need to invest
each month to
reach $100k: No compound interest. What you actually need to invest each month to reach $100k: 8% rate of return 10% rate of return 12% rate of return
5 years $1,667 $1,361 $1,292 $1,225
6 years $1,389 $1,087 $1,020 $956
7 years $1,191 $892 $827 $766
8 years $1,042 $748 $685 $626
9 years $926 $636 $575 $519
10 years $834 $547 $489 $435
11 years $758 $475 $419 $368
12 years $695 $416 $362 $314
13 years $642 $367 $315 $269
14 years $596 $325 $275 $232
15 years $556 $289 $242 $201

If you earn a lower income, investing your first $100k takes longer—but compound interest helps you reach your goal.

If you don’t have a lot to invest, the good news is that compound interest could work massively in your favor to help you reach $100k.

Although it would take you longer to reach $100k, you potentially would have to invest much less overall than a high-income earner to reach your first $100k because your money has had more time to generate compound interest.

To see why this is, let’s take a look at a few scenarios:

Investing $100k in 2 years: Compound interest helps you reach about 4% of your goal.

If you want to reach your $100k investing goal in 2 years and get a somewhat conservative 8% rate of return, you would have to contribute about $3,857 per month to meet this goal. After 2 years, about $96,015 of that $100k would be money that you contributed—invested—toward this goal.

In other words, your own money makes up about 96% of that $100k, and only about 4% of that 100k would be compound interest:

A line graph shows that if you get an 8% rate of return and you invest about $3,857 per month for 2 years, then at the end of those 2 years, you will have contributed $96,015, and you could potentially earn $3985 in compound interest, meaning that compound interest would help you reach about 4% of your $100k investing goal in this scenario.

Investing $100k in 5 years: Compound interest helps you reach about 15% of your goal.

If you want to reach $100k in 5 years and you get an 8% rate of return, you would have to invest about $1,361 per month. When you reach that $100k investing goal in 5 years, you would have invested $82,720 of your own money, and about $15,280 would be compound interest.

So compound interest would have helped you reach about 15% of your $100k investing goal:

A line graph shows that if you get an 8% rate of return and you invest about $1,361 per month for 5 years, then at the end of those 5 years, you will have contributed $82,720, and you could potentially earn $15,280 in compound interest, meaning that compound interest would help you reach about 15% of your $100k investing goal in this scenario.

Investing $100k in 10 years: Compound interest helps you reach about 31% of your goal.

If you want to invest $100k in 10 years and you get an 8% rate of return, you would have to contribute $547 per month. After 10 years, you would have contributed about $68,052 out of that $100k, and about $31,948 of that $100k would be compound interest.

In other words, you only have to meet about 68% of that original goal, and compound interest is responsible for the other 31%:

A line graph shows that if you get an 8% rate of return and you invest about $547 per month for 10 years, then at the end of those 10 years, you will have contributed $68,052, and you could potentially earn $31,948 in compound interest, meaning that compound interest would help you reach about 31% of your $100k investing goal in this scenario.

Investing $100k in 15 years: Compound interest helps you reach about 45% of your goal.

If you want to invest $100k in 15 years and you get a somewhat conservative 8% rate of return, you would have to invest about $289 per month. At the end of those 15 years, you would have contributed about $53,967, and about $46,033 of that $100k would be compound interest.

That means that compound interest would have helped you reach about 46% of your $100k investing goal:

How much compound interest you get varies slightly depending on your rate of return, market conditions, and how long your money is able to grow. Depending on your rate of return and the amount of time that your money is invested, compound interest could help you reach 30%, 40%, 50%, or even 60% of your $100k investing goal!

The following three charts give a fuller picture of just how much compound interest could help you reach your $100k investing goal in 5–15 years if you get an 8%, 10%, or 12% rate of return.

FIREforNormalPeople.com
Chart title: The Path Toward $100k: How Compound Interest Helps You Reach Your $100k Investing Goal
(8% rate of return)
Column titles: Time to $100k How much
you have to
contribute How much
compound
interest
accrues Compound interest as a percentage of $100k
Chart data: 5 years $84,720 $15,280 15%
6 years $81,172 $18,828 18%
7 years $77,733 $22,267 22%
8 years $74,400 $25,600 25%
9 years $71,174 $28,826 28%
10 years $68,052 $31,948 31%
11 years $65,032 $34,966 34%
12 years $62,118 $37,882 37%
13 years $59,302 $40,698 40%
14 years $56,586 $43,414 43%
15 years $53,967 $46,033 46%

If you get a 10% rate of return and it takes you 10–15 years to reach $100k, compound interest could help you meet 38–54% of your $100k investing goal:

FIREfornormalpeople.com
Chart title: The Path Toward $100k: How Compound Interest Helps You Reach Your $100k Investing Goal
(10% rate of return)
Column headers: Time to $100k How much you have to contribute How much compound interest accrues Compound interest as a percentage of $100k
Chart data: 5 years $81,866 $18,866 18%
6 years $76,844 $23,156 23%
7 years $72,723 $27,277 27%
8 years $68,767 $31,233 31%
9 years $64,974 $35,026 35%
10 years $61,341 $38,659 38%
11 years $57,866 $42,134 42%
12 years $54,546 $45,454 45%
13 years $51,376 $48,624 48%
14 years $48,354 $51,646 51%
15 years $45,475 $54,525 54%

And if you get a 12% rate of return and plan on investing $100k in 10–15 years, compound interest could help you reach 44–61% of your investing goal:

FIREfornormalpeople.com

Chart title: The Path Toward $100k: How Compound Interest Helps You Reach Your $100k Investing Goal

(12% rate of return)
Column headers: Time to $100k How much
you have to
contribute How much
compound
interest
accrues Compound interest as a percentage of $100k
Chart data: 5 years $77,645 $22,355 22%
6 years $72,672 $27,328 27%
7 years $67,939 $32,061 32%
8 years $63,441 $36,559 36%
9 years $59,174 $40,826 40%
10 years $55,132 $44,868 44%
11 years $51,309 $48,691 48%
12 years $47,699 $52,301 52%
13 years $44,295 $55,795 55%
14 years $41,091 $58,909 58%
15 years $38,079 $61,921 61%

Don’t delay reaching $100k!

Even though you benefit more from the power of compound interest on your way to $100k if you earn a lower income, it’s extremely important to reach your $100k investing goal as soon as possible.

Reaching $100k as soon as possible is your most important financial goal on your way to financial indepedence because the compound interest from that $100k helps skyrocket your wealth. The sooner you can reach $100k, the sooner you can reach $200k, $300k, $400k, $500k, and beyond.

Because of compound interest, each $100k milestone is much easier to reach than the previous one. Even if you keep investing the same amount, it takes less and less time to reach the each subsequent $100k milestone because your wealth starts to grow exponentially due to the compound interest you accumulate.

If you have a lower income, you should be excited about just how much compound interest could help you reach your $100k investing goal. Investing your first $100k hopefully feels a lot more approachable because compound interest could potentially help you get a significant part of the way there. Compoud interest could potentially help you get 30%, 40%, 50%, or even 60% of the way to growing your first $100k.