What’s up you guys, I was thinking about my first 100K that I made and what steps I took to achieve getting to that point. Making your first 100K is a huge deal. Charlie Munger, and if you don’t know who he is, he is the vice chairman of Berkshire Hathaway and right-hand man to Warren Buffet.
Here’s what he has to say about making your first 100K – ‘It’s a b#tch, but you gotta do it’: Charlie Munger says that your first $100K is the toughest to earn — but most crucial for building wealth.
Table of Contents (Click to expand)
Why is making your first 100K so important?
After trying many businesses, here are some money tips for businesses that have low startup costs that can earn you $10,000 a month. Some business ideas to consider are reselling, YouTube, some forms of real estate, digital products, mobile car detailing, and pressure washing.
- There are certain habits you form on your journey to 100K
- There are skills you will need to develop and grow to get there
- It can also allow you to take on more calculated risks
Making 6 figures in one year can seem impossible at times especially if you’re at the beginning stage. But there are some key steps I personally had to take and some changes that were necessary for me to make not 100K but 420K in my first year trying some years back.
Quick story, growing up my mom was an immigrant from India, my dad passed away when I was 6 years old and we jumped from staying with other family members to apartments and then my childhood home was foreclosed on. So, I didn’t come from money, or have I ever thought making 100K in a year was even possible.
Fast forward to 2018 I was living paycheck to paycheck and had about $1000 in savings, I was a research analyst and only made about 24k a year. My wife was pregnant with our second baby girl and I had to figure out how to make more money asap.
So what steps can you take right now that can get you started on your way to reaching 6 figures in one year.
The First way to get to your 100K a year goal is to:
Know where you are currently.
And by know, I mean really know where you are at, not a generalization or a guess. This may be a bit uncomfortable for some of you, but you will want to know where you are sitting exactly before you know where you want to go. This means diving deep into your finances, your debt, monthly expenses and just truly getting a full understanding of where you sit financially.
A good way to do this is to log into your bank account and export the last year of debit and credit transactions. Sort by name and see what is leaving your account every month. What you spend money on, all your outgoing expenses and then look at what you are bringing in.
This is your come to Jesus moment. This will point out all your bad financial habits, and paint a picture on what you are doing with your money.
Once you know this information, look at all your open lines of high interest debt. Basically, get a detailed picture of how you look from a finance point of view.
Now with this information we can then…
Make changes (Lower expenses and overhead)
This is where you need to take some initiative and work at lowering the expenses every month. Stick with me, these may just sound like finance tips or money saving tips but its more than that. Remember all these micro changes and decisions will make a difference in getting you to the macro results that ultimately get you to the 100K mark. There’s a reason for this. I’ll get to that here in a sec, but for now we need to cut out anything that is a waste of money.
Look at the monthly subscriptions, bills, or what you spend on wants vs needs. Now actively remove items that you can live without.
Making 100K a year isn’t easy. It takes work, anyone who teaches you how to make money while being lazy, is lying and looking for clicks, not for their subscribers’ best interests.
Now that you have determined what you could remove, add that up and find out how much excess capital you’ll have each month.
In just a moment we’re going to take these fundamental steps and pivot them to where you can start working towards your first 100K. Right now, we’re just building the foundation.
With the excess funds that you have identified and have taken action into actively mitigating from your everyday spend, take those funds and apply it to the next step, which is…
Eliminate unnecessary high % Debt!
Now that you have the excess funds from working on your personal finances, take the funds and pay off the highest interest debt first. If you have credit card balances with high interest rates, you are just throwing money away.
So, start with the highest interest rate card, pay that off and move to the next highest interest rate debt. This is important because we want to remove anything that will restrict excess capital, and our goal is to use our money that we have and leverage it to make more money and get rich, not make other people or companies rich off your demise.
So pay those debts off and take the excess capital from that and everything we did before and apply to our next step which is..
Invest
Ok listen up, this is the step that will take you to 100K. After applying all the steps that we just went over, we now need to figure out how to increase our ability to earn more.
This in conjunction with all the steps we already mentioned will get you to your first 100K in a single year.
So then how do you increase your ability to earn more? Well, this depends on what investment vehicle you decide to get there.
When I made my first 6 figures, I started by selling stuff I had around the house and took the money, which was about $800 and went out and bought some speakers. I took those 4 speakers and turned the $800 into $1600.
Once I saw how I could make money I was hooked and just went all in. Out of sheer hustle I reinvested all my profits to buy more stuff to sell. I did that all year and ended up grossing 420K in one year.
You may invest in a different way; you could use your excess capital to buy education to grow your knowledge and skills in a particular field and then take those skills and use it to make more money and increase your earning capacity. That can also get you to 6 figures. Skills like marketing for example. Could be used to drive traffic and sales to a product you created.
Or certain certification that gives you a specialization in an area that allows you to ask for more money can get you there.
You can re-invest and buy items for less and sell them for more. Side hustles like coach flipping, reselling watches, cars, collectibles or clothing.
You could invest in real estate and start flipping houses. Or like Charlie Munger, invest and grow your stock portfolio overtime.
The one thing that all these ways have in common is that you are using money to make money. This is what got me to my first 6 figures.
And when you get there, making more money becomes less and less difficult. So making 100K once is hard enough but after you reach that milestone, you need it to remain consistent or continue to grow.
So, the next tip would be to
Build Credit and become lendable
At this point you want to make sure you look great on paper. This means you have excellent credit; your tax returns show a healthy inflow of money so that lenders will want to lend money to you at favorable interest rates.
Once you learn how to leverage other people’s money, you can use it to make even more money. But before you do this, I would recommend that you have control over all the other tips we mentioned before this.
When I was flipping things, I eventually ran out of cash and all my money was tied into my active inventory. I went out and got a 48,500 loan and invested that all into more inventory to buy.
This accelerated my growth drastically, and I was able to pay the loan off within a years’ time.
This brings me to our next tip which is…
Grow (increase revenue)
Growing, for me personally, 100K isn’t enough. I’m currently working on trying to have a 7-figure year. I haven’t had that yet.
To get there I would need to have everything we stated already and turn the dial to where we are operating at scale and making sure we hit our quarterly milestones.
So, for example, if you are flipping houses and make 50K average profit per flip, and you are currently doing 2 flips a year. Then you will need to grow to 20 flips a year, or 5 flips quarterly to reach a 7 figure year.
So now look at your business or whatever vehicle you are using to get there and back in to your desired results by reverse engineering your end goal.
Next you will forever need to..
Re-Invest
For this money tip, I would say always re-invest. Take a portion of your profits and diversify them into multiple assets class types. Like real estate, stocks, and gold.
Safeguard your hard work and investments and set yourself up for the long term.
Still manage and apply the tips we mentioned earlier and continue to make smart financial decisions, not only for yourself but for the future of your family.
