About this video

• Video Title: Why getting to $100k is SO HARD & How to do it! | Networth & Chill with Your Rich BFF
• Channel: Your Rich BFF
• Speakers: Vivian Tu (Your Rich BFF)
• Duration: 27:40

Overview

This video explains why reaching the first $100,000 in savings and investments is often the most challenging financial milestone. The host, Vivian Tu, shares strategies to achieve this goal, focusing on increasing income, decreasing spending, and smart investing, all while emphasizing the power of compound interest and avoiding common financial pitfalls like lifestyle inflation.

Key takeaways

• The First $100,000 is the Hardest: The initial savings are the most difficult to accumulate due to the smaller base for compound interest and a greater reliance on labor income.
• Compound Interest is Key: Once $100,000 is saved and invested, compound interest accelerates wealth growth significantly.
• Strategies for Reaching $100k:
  • Increase Income: Pursue side hustles like gig work or assisting seniors.
  • Maximize Savings: Open high-yield savings accounts and automate savings transfers.
  • Decrease Spending: Avoid lifestyle inflation and practice value-based spending by calculating the hours required to afford a purchase.
  • Invest Wisely: Utilize tax-advantaged accounts like IRAs and 401ks, and consider diversified index funds or robo-advisors.
• Debt Management: Not all debt is detrimental. Low-interest debt (like some student loans or mortgages) can be managed while prioritizing savings and investments, but high-interest debt (like credit cards) should be paid off first.
• Balancing Life and Savings: A 50/30/20 budgeting strategy (needs/wants/savings) is recommended to ensure a balance between preparing for the future and enjoying life in the present.

The two main facts are:

1. Labor vs. Investment Income: Early in your financial journey, a larger portion of your income comes from labor (your direct work). Later on, as you accumulate more wealth, a greater percentage of your total income is derived from investment returns.
2. Compounding Returns: Even the money earned from your investments will continue to earn money over time, leading to exponential growth rather than linear returns.

The two recommended side hustles mentioned are:

1. Reflex: On-demand retail work that allows you to get paid within 24 hours, work as a W2 employee, choose retailers, and potentially get employee discounts.
2. Papa Pal: A service that connects you with seniors who need help with everyday tasks like doctor's appointments or grocery shopping. This does not require healthcare professional qualifications.

The "Your Rich BFF um is it worth it equation" helps in making spending decisions by encouraging a value-based approach. It prompts you to calculate how many hours you would need to work (based on your after-tax hourly take-home pay) to afford a desired good or service. This calculation helps you determine if the purchase is truly worth the time and effort invested, allowing you to prioritize spending on items that bring genuine value and potentially skip non-essential purchases.

The three steps involved in starting to invest are:

1. Pick a brokerage: This is where you will actually conduct your investments.
2. Pick an account: This refers to the type of account that will hold your investments (e.g., a retirement account).
3. Pick investments: This is the actual selection of what assets to invest in.