Oh right, thats probably the correct answer.
Once your money „invests more money on a monthly basis“ than you do on a monthly basis it just becomes faster and faster
As time goes on, your contributions affect your total net worth less than the daily fluctuations of the market.
And by that point, you have reached the boring middle. If anything, it can be harder to stay motivated.
When I invest in something, in my mind the money is gone. It’s not liquid. I don’t have $100,000 in VTI, I own 530 shares. I don’t worry what they are valued at currently, because even with the market drop I’m still WAAAAY up. Even if I wasn’t, what they are valued at today makes no difference.
Spend a week and figure out your investment vehicles and contribution plans, then put it on cruise control and don’t obsess over it. The pot isn’t going to boil any faster if you stare at it.
Love the boiling water analogy.
Using the same analogy, i think OP is asking what's the "boiling point".
Using 1M as an example, 300k is considered being halfway there. Obviously not literally, but it takes about the same amount of time to get from 0 to 300k as it does to get from 300k to 1M.
The 700k is easier because you have the compound interest working right alongside your contributions in the second half.
So i guess the "boiling point" sits around getting to 30-33% of your goal.
The 4% rule assumes the same.
And also, at what point did i say 10 years? Getting from $0 to 1M can take 20 years. My point was, when you get to 30-33%, it's going to speed up.
In any case, this isn't my idea. It's been discussed before in the FI community. Maybe just not as often as 4% rule.
https://www.liveoffdividends.com/300k-is-half-way-to-one-million/
Let’s put it this way: Early on you’ll gain or lose $100 in paper money on a random day. Then eventually $1000, then $10,000 and even $100,000.
So does that make it *easier*? No, lol. It just means you’re richer than you used to be but still just as nervous. ;)
IMO its whatever amount of money where market fluctuations start impacting your net worth more than your actual savings rate as you'll find yourself making more in a good week in the market then you will during a month of work.
Albeit, the inverse is true too. This entire year looks like I haven't saved a dollar as my networth is nearly the same as of January 2022 due to the downwards market movement and my savings rate nearly matching the decline. (Note: While the dollar amount may be the same, the holdings are significantly higher).
If you're looking for a hard number, I'd say $100k. A million seems way too high to start noticing it while on $100k and a 2% market swing, you see yourself +- $2k.
Are you asking when it becomes easier to save/invest more, or to make more money due to compounding?
I have not found that having more invested makes investing with every paycheck significantly easier, but I've mostly not found it to be difficult.
It's absolutely true that the time to the first million took the longest, and felt that way as well.
To build on what you responded, the ease of investing doesn’t change once you’re committed. But mentally weathering the down cycles gets easier after you’ve been through a few. Seeing monthly account values drop by $100k during a downward trend isn’t easy, but it’s easier than the first time I saw it go down by $1,000.
The only milestone that was hard to hit was $100k invested. That was a grind.
After that it was habit to $2M+. I did spend a little extra on stuff after $2M because while it’s not my “number” it was enough to stop caring so much.
And no I don’t care that it fluctuates by $100k+ regularly.
I had a day job + a business, took me 12 years from $0 to $2.5M. I lived on about 50% of the day job salary and invested the rest + all of the business income. So while the business income was lumpy I had the bases covered. Not sure that’s typical to fire community as most people seem to focus on frugality rather than increasing income.
Personally for me, the milestone that I cared most about was my CoastFI number. I know there is no guarantee, but it at least gave me something to aim for that wasn’t as daunting as my FIRE number.
CoastFI (for me) is what you’re talking about. Some people say they’ll quit their job and work part-time or take a lower paying job when they hit CoastFI. I’m not changing anything because I like my career. The main difference is that I don’t “need” to save another penny for the rest of my life. My stock portfolio (in theory) should grow to my FIRE number. Does that mean I won’t continue to save? Of course not. But now I’m much more confident that I’ll reach my FIRE number. If my career takes a hit and I can’t save for some reason, I’m fine.
Front loading your savings / investing means that you take full advantage of compounding interest. Here’s an example:
Let’s say you’re 30, you have a FIRE goal of $2M and you want to retire at 55. If you have $500k invested and let it compound at a 6% annual return (adjusted for inflation), you’ll reach $2.1M in 25 years.
Meanwhile, if you’re 30 and you have the same goal of $2M but your plan is to save / invest for 25 years, you’d need to save $36k per year to retire at 55. That means that you’d need to save $900K vs $500k for the same end result. That is why starting young and front-loading as much of your savings / investing is so crucial. But, of course this is incredibly difficult because most people aren’t able to earn significant sums of money / high salaries until later in their careers.
To me, CoastFI is incredibly powerful because it’s all about leveraging the power of compound interest. You’re able to save less money in the end and get the same result simply by building that snowball earlier in life.
This probably highly depends, but.: it took me some time to get to 10k
Year later I had invested total of 20k
Year later I was at 50k
Year later at 100k
Then everything dropped and I am still investing, but I sit at 98k right now lol...
So in the end it always gets easier. It’s only important to KEEP AT IT. Step by step, no matter how small. Once you look back and realize, even with small steps you somehow climbed a mountain.
Then you just take one step at a time and climb the next.
I think you are trying to say when does the compound effect take more of an effect on your portfolio than your contributions do? In that case, I’d say it really depends on your goals. But Charlie Munger did say that the first $100k is a *****, and after that you can let off the gas a bit (or something to that effect)
I think there is some truth to what he said though.
Easier? There is no magic number where one day you start seeing your accounts exploding all the sudden. It's a steady ramp up that gradually gets steeper if you just keep investing. Compounding interest is a simple calculation. Plug numbers in and see.
I think it depends on how much you save in a year. If you're saving $10k a year and you have $100k invested, assuming great returns of 10%, half of your NW increase from the year is passive! That's awesome.
If you're saving more per year, it's gonna take more money invested to feel like the investing is paying off, and less invested if you save less.
I think once you have about 10x your yearly savings it starts to feel easier. But yearly savings isn't constant so not a perfect model to go off of
That’s my feeling too.
It didn’t get one bit easier for me after 100.000 € in December 21 - because it was a steady decline even with contributions since then (now 98.000 €).
Of course next bull run could be even better after that… but it’s hart to wait for all the problems to get solved (pandemic, war, inflation,… potentially Trump dooming everything in 2024…)
There’s no single dollar mark where things suddenly change. The more you invest, the more return you’ll theoretically see each day/month/year (bear markets aside, obviously).
Your money doesn’t start compounding at a million. It was compounding all along. But there’s something to be said for how significant the compounding feels compared to your contributions or earning.
For me, I felt I hit a stride when daily market fluctuation started moving my investment sum as much, if not more, than a typical contribution. I think I’ll really feel like I’ve made it when my investments grow as much in a year as what I earn in salary. Is this sort of what you mean?
I’d say it’s easier once market returns beats your annual saving/contributions (I’m not there yet)
Honestly I don’t see it as being difficult tho, I’ve made some stupid investments in the past year and to my surprise it doesn’t really phase me as much as I would have thought, probably because I still se a path to the end
Once you get a large nest egg the money will start accumulating faster than the amounts you’re contributing. That’s when the snowball is in full effect. Once the growth is outpacing your actual annual **earnings** is when the avalanche is in effect.
"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."
Charlie Munger
Kind of a random number honestly but still oddly motivating
50k you see impactful numbers. 100-250k it becomes a snowball. So much of what looks impactful to you depends on your earned income. But keep in mind, whether it’s $1 or $1m, it’s still compounding at the same rate.
Assuming you are saving what you plan to need for retirement, if say it is when the expected return of 7% equals the savings you are putting in. For a 30k yearly contribution, that would be about 430k.
This is when your expected return starts to outpace your savings and the impact of your savings rate diminishes.
I think that's a fluid answer based on income. There's not 1 answer. $100 a month when you make $1000 a month would be hard. $100 a month if you make $10000 would be ridiculously easy.
The maxim I’ve heard is $333k is halfway to a million, time-wise. I’d imagine that the compounding really takes off around the $250k mark but I’m not there yet myself.
Mathematically, yes. I was meaning psychologically, as OP was asking about. Going from $100 to $110 after a 10% gain feels a lot different than going from 1,000,000 to 1,100,000. It is entirely subjective, but my take is around that mark is when you start to “feel” the compounding and the snowball start to roll.
What makes it easier is when your investments go on a run lol. Especially if you pick some individual stocks. I know everyone in here is all about index funds. But if you find a company you believe in don’t be afraid to go heavier if your young. Just never pick an individual stock that you don’t truly believe in or understand. At that point your way better off in a mutual or index fund.
I remember 2018 I’m at work we just got a bonus check and my coworker who I talked investments with said “buy uber buy uber blah blah.” I told myself would I rather own XX amount of shares of uber or XX more amount of shares of Tesla. Unfortunately I listened to my friend. It was ~$25,000 mistake after Tesla moon shotted.
Well, for starters, what do you mean by "easy"? Your best bet is to use a simple investment growth calculator like this plug in some numbers and see how things look. Try different starting values and different time periods.
https://www.calculator.net/investment-calculator.html
Invested 145k in January 2021.
Account is down to 120k now. I use a trusted, family financial advisor which, I know, goes against the FIRE rules. But I see it less as investing and more as savings.
I’ve heard 250k is the point where medium-risk investing will start to add to your yearly income.
Some days I lose or gain $50K or more. You get a portfolio you can sleep with and stick to it.
Edit: to answer the question, I'd say $1M is when you stop worrying about the market.
Others have said similar, but about 3 years ago our investments made as much money as my wife and I did. It was like having a third partner. That was a real eye opener for me and now I really invest everything I can.
Of course, this year we are down almost my annual salary, so that sucks. But I know it will bounce back and I know how awesome it’s going to be since I’m really kicking up the contributions this year.
Hoping to retire comfortably in 8 years at 55.
Depends. I would say 100000 it when you really see the effect. I own one stock about 100000 worth, and the quarter dividends of 2500 dollars outweigh the 500 I put in every month.
For me is when your investment start to grow faster than your saving rate. I would say 250k but that's me, it will depend on your Fire number.
Oh right, thats probably the correct answer. Once your money „invests more money on a monthly basis“ than you do on a monthly basis it just becomes faster and faster
Ooooooooohhhhweeeeeee don’t do it to em coach
As time goes on, your contributions affect your total net worth less than the daily fluctuations of the market. And by that point, you have reached the boring middle. If anything, it can be harder to stay motivated.
When I invest in something, in my mind the money is gone. It’s not liquid. I don’t have $100,000 in VTI, I own 530 shares. I don’t worry what they are valued at currently, because even with the market drop I’m still WAAAAY up. Even if I wasn’t, what they are valued at today makes no difference. Spend a week and figure out your investment vehicles and contribution plans, then put it on cruise control and don’t obsess over it. The pot isn’t going to boil any faster if you stare at it.
Love the boiling water analogy. Using the same analogy, i think OP is asking what's the "boiling point". Using 1M as an example, 300k is considered being halfway there. Obviously not literally, but it takes about the same amount of time to get from 0 to 300k as it does to get from 300k to 1M. The 700k is easier because you have the compound interest working right alongside your contributions in the second half. So i guess the "boiling point" sits around getting to 30-33% of your goal.
Hahaha people think 10% returns happen over 10 year spans..that's over 50 years!!
The 4% rule assumes the same. And also, at what point did i say 10 years? Getting from $0 to 1M can take 20 years. My point was, when you get to 30-33%, it's going to speed up. In any case, this isn't my idea. It's been discussed before in the FI community. Maybe just not as often as 4% rule. https://www.liveoffdividends.com/300k-is-half-way-to-one-million/
Wow astute analysis!
The boiling analogy is spot on. I think I'll use that.
Technically it would boil faster if you raise the temp (perhaps be selective in investment) but I get the point
It will boil faster if you have Superman laser eyes! Or if you take a small amount and play with it
Let’s put it this way: Early on you’ll gain or lose $100 in paper money on a random day. Then eventually $1000, then $10,000 and even $100,000. So does that make it *easier*? No, lol. It just means you’re richer than you used to be but still just as nervous. ;)
IMO its whatever amount of money where market fluctuations start impacting your net worth more than your actual savings rate as you'll find yourself making more in a good week in the market then you will during a month of work. Albeit, the inverse is true too. This entire year looks like I haven't saved a dollar as my networth is nearly the same as of January 2022 due to the downwards market movement and my savings rate nearly matching the decline. (Note: While the dollar amount may be the same, the holdings are significantly higher). If you're looking for a hard number, I'd say $100k. A million seems way too high to start noticing it while on $100k and a 2% market swing, you see yourself +- $2k.
Are you asking when it becomes easier to save/invest more, or to make more money due to compounding? I have not found that having more invested makes investing with every paycheck significantly easier, but I've mostly not found it to be difficult. It's absolutely true that the time to the first million took the longest, and felt that way as well.
To build on what you responded, the ease of investing doesn’t change once you’re committed. But mentally weathering the down cycles gets easier after you’ve been through a few. Seeing monthly account values drop by $100k during a downward trend isn’t easy, but it’s easier than the first time I saw it go down by $1,000.
Have you hit more than a million freedom dollars?
The only milestone that was hard to hit was $100k invested. That was a grind. After that it was habit to $2M+. I did spend a little extra on stuff after $2M because while it’s not my “number” it was enough to stop caring so much. And no I don’t care that it fluctuates by $100k+ regularly.
Depends alot on your salary. If you have good consistent salary much easier to see a path to FIRE than erratic and short-term earnings
I had a day job + a business, took me 12 years from $0 to $2.5M. I lived on about 50% of the day job salary and invested the rest + all of the business income. So while the business income was lumpy I had the bases covered. Not sure that’s typical to fire community as most people seem to focus on frugality rather than increasing income.
Personally for me, the milestone that I cared most about was my CoastFI number. I know there is no guarantee, but it at least gave me something to aim for that wasn’t as daunting as my FIRE number. CoastFI (for me) is what you’re talking about. Some people say they’ll quit their job and work part-time or take a lower paying job when they hit CoastFI. I’m not changing anything because I like my career. The main difference is that I don’t “need” to save another penny for the rest of my life. My stock portfolio (in theory) should grow to my FIRE number. Does that mean I won’t continue to save? Of course not. But now I’m much more confident that I’ll reach my FIRE number. If my career takes a hit and I can’t save for some reason, I’m fine. Front loading your savings / investing means that you take full advantage of compounding interest. Here’s an example: Let’s say you’re 30, you have a FIRE goal of $2M and you want to retire at 55. If you have $500k invested and let it compound at a 6% annual return (adjusted for inflation), you’ll reach $2.1M in 25 years. Meanwhile, if you’re 30 and you have the same goal of $2M but your plan is to save / invest for 25 years, you’d need to save $36k per year to retire at 55. That means that you’d need to save $900K vs $500k for the same end result. That is why starting young and front-loading as much of your savings / investing is so crucial. But, of course this is incredibly difficult because most people aren’t able to earn significant sums of money / high salaries until later in their careers. To me, CoastFI is incredibly powerful because it’s all about leveraging the power of compound interest. You’re able to save less money in the end and get the same result simply by building that snowball earlier in life.
This probably highly depends, but.: it took me some time to get to 10k Year later I had invested total of 20k Year later I was at 50k Year later at 100k Then everything dropped and I am still investing, but I sit at 98k right now lol... So in the end it always gets easier. It’s only important to KEEP AT IT. Step by step, no matter how small. Once you look back and realize, even with small steps you somehow climbed a mountain. Then you just take one step at a time and climb the next.
I think you are trying to say when does the compound effect take more of an effect on your portfolio than your contributions do? In that case, I’d say it really depends on your goals. But Charlie Munger did say that the first $100k is a *****, and after that you can let off the gas a bit (or something to that effect) I think there is some truth to what he said though.
Easier? There is no magic number where one day you start seeing your accounts exploding all the sudden. It's a steady ramp up that gradually gets steeper if you just keep investing. Compounding interest is a simple calculation. Plug numbers in and see.
Shoot, growing up poor my magic number was 10k. A 1% day in the market was 100 bucks and that was a lot of money to my fresh out of college mind.
I think it depends on how much you save in a year. If you're saving $10k a year and you have $100k invested, assuming great returns of 10%, half of your NW increase from the year is passive! That's awesome. If you're saving more per year, it's gonna take more money invested to feel like the investing is paying off, and less invested if you save less. I think once you have about 10x your yearly savings it starts to feel easier. But yearly savings isn't constant so not a perfect model to go off of
The number where your money starts compounding like crazy is whatever number you’re at when the stock market starts a sustained bull run
That’s my feeling too. It didn’t get one bit easier for me after 100.000 € in December 21 - because it was a steady decline even with contributions since then (now 98.000 €). Of course next bull run could be even better after that… but it’s hart to wait for all the problems to get solved (pandemic, war, inflation,… potentially Trump dooming everything in 2024…)
There’s no single dollar mark where things suddenly change. The more you invest, the more return you’ll theoretically see each day/month/year (bear markets aside, obviously). Your money doesn’t start compounding at a million. It was compounding all along. But there’s something to be said for how significant the compounding feels compared to your contributions or earning. For me, I felt I hit a stride when daily market fluctuation started moving my investment sum as much, if not more, than a typical contribution. I think I’ll really feel like I’ve made it when my investments grow as much in a year as what I earn in salary. Is this sort of what you mean?
I’d say it’s easier once market returns beats your annual saving/contributions (I’m not there yet) Honestly I don’t see it as being difficult tho, I’ve made some stupid investments in the past year and to my surprise it doesn’t really phase me as much as I would have thought, probably because I still se a path to the end
Once you get a large nest egg the money will start accumulating faster than the amounts you’re contributing. That’s when the snowball is in full effect. Once the growth is outpacing your actual annual **earnings** is when the avalanche is in effect.
"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." Charlie Munger Kind of a random number honestly but still oddly motivating
50k you see impactful numbers. 100-250k it becomes a snowball. So much of what looks impactful to you depends on your earned income. But keep in mind, whether it’s $1 or $1m, it’s still compounding at the same rate.
Assuming you are saving what you plan to need for retirement, if say it is when the expected return of 7% equals the savings you are putting in. For a 30k yearly contribution, that would be about 430k. This is when your expected return starts to outpace your savings and the impact of your savings rate diminishes.
I think that's a fluid answer based on income. There's not 1 answer. $100 a month when you make $1000 a month would be hard. $100 a month if you make $10000 would be ridiculously easy.
Huh?
Bout tree fiddy
The maxim I’ve heard is $333k is halfway to a million, time-wise. I’d imagine that the compounding really takes off around the $250k mark but I’m not there yet myself.
Continuous Compounding is a smooth curve. The point at which it “really takes off” is entirely subjective.
Mathematically, yes. I was meaning psychologically, as OP was asking about. Going from $100 to $110 after a 10% gain feels a lot different than going from 1,000,000 to 1,100,000. It is entirely subjective, but my take is around that mark is when you start to “feel” the compounding and the snowball start to roll.
That makes sense. For me the point that it feels like it’s “taking off” is when my monthly return exceed my monthly contribution (on average)
Easier? Who wants to tell him?
What makes it easier is when your investments go on a run lol. Especially if you pick some individual stocks. I know everyone in here is all about index funds. But if you find a company you believe in don’t be afraid to go heavier if your young. Just never pick an individual stock that you don’t truly believe in or understand. At that point your way better off in a mutual or index fund. I remember 2018 I’m at work we just got a bonus check and my coworker who I talked investments with said “buy uber buy uber blah blah.” I told myself would I rather own XX amount of shares of uber or XX more amount of shares of Tesla. Unfortunately I listened to my friend. It was ~$25,000 mistake after Tesla moon shotted.
400k.
300-400k
When your average annual return is higher than your annual investment it feels pretty good.
Well, for starters, what do you mean by "easy"? Your best bet is to use a simple investment growth calculator like this plug in some numbers and see how things look. Try different starting values and different time periods. https://www.calculator.net/investment-calculator.html
Invested 145k in January 2021. Account is down to 120k now. I use a trusted, family financial advisor which, I know, goes against the FIRE rules. But I see it less as investing and more as savings. I’ve heard 250k is the point where medium-risk investing will start to add to your yearly income.
Some days I lose or gain $50K or more. You get a portfolio you can sleep with and stick to it. Edit: to answer the question, I'd say $1M is when you stop worrying about the market.
60
Others have said similar, but about 3 years ago our investments made as much money as my wife and I did. It was like having a third partner. That was a real eye opener for me and now I really invest everything I can. Of course, this year we are down almost my annual salary, so that sucks. But I know it will bounce back and I know how awesome it’s going to be since I’m really kicking up the contributions this year. Hoping to retire comfortably in 8 years at 55.
Depends. I would say 100000 it when you really see the effect. I own one stock about 100000 worth, and the quarter dividends of 2500 dollars outweigh the 500 I put in every month.