Charlie Munger Said The first $100,000 is the worst, and He’s Right

If you’re someone even remotely interested in earning money in the market, there is a good chance you have heard the saying “your first $100,000 is the hardest.” First spoken by legendary investor and former Berkshire Hathaway Vice Chairman Charlie Munger, this phrase has become an anthem for investing. 

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Well, one Redditor posting in r/Fire is looking to get to the bottom of this saying and wonders if there wouldn’t be a more modern-day equivalent. The Redditor quickly learns who the phrase is from, but there is a definite question around whether or not this is still accurate in today’s investing world. 

The Specific Quote

To be as accurate as possible, Charlie Munger’s quote perfectly aligns with his no-nonsense advice that says, “The first $100,000 is a b****, but you gotta do it.” Munger’s statement is pretty indicative of his belief that if you are really serious about building your own personal wealth, you have to start somewhere. 

The Full Quote: 

“The first $100,000 is a b****, but you’ve 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.” 

Ultimately, once you hit the six-figure mark, compounding interest becomes a lot easier, at least that’s the prevailing line of thinking, still taking after Munger’s quote. To be fair, $100,000 is a great starting point to begin showing real gains. 

Compounding Interest Is Why This Matters

To understand the importance of this quote and why it’s been such a strong belief, take the S&P 500, which has historically delivered around a 10% return annually. With a $100,000 investment, this can be quite a lot of money in 10, 20, or 30 years. In 10 years, it turns into $259,374, while in 20 years it’s $672,749, and in 30 years, it’s a whopping $1,744,940. 

Of course, as comments in this Reddit post point out, there is also a belief that $100,000 is the first big number with multiple zeros behind it. It’s possible this is a mental belief that seeing five zeros is more motivating than seeing four zeros.

What Is The Modern Equivalent? 

If you look solely at the comments in the Reddit post, you’d find anything between $200,000 and $1 million as the new starting point. Between inflation, rising expenses, costs, kids, and so many other factors, it won’t come as any surprise that the $100,000 number is now viewed as less impactful than it was when Charlie Munger made this comment in the late 1990s. 

This said, if you look at inflation and the changing value of money, there is no question that the $100,000 number is too low today. The question is, what number is too high not to feel achievable? You still want a number that feels like it can compound enough to be truly meaningful. 

This leads us directly to approximately $300,000. While this number will ultimately be very personal, depending on your financial and investing needs, the $300,000 number feels attainable. However, if you account for inflation, it’s possible and even likely to suggest that this number could go as high as $500,000 or even $700,000. 

Unfortunately, these two numbers feel far more like a mental block than $100,000 was originally proposed. The $300,000 number is the right choice for a modern-day equivalency. The reason is that in 10 years, using the same S&P 500 10% average return, you have $778,122. In 20 years, you will have $2,018,249, and in 30 years, you will have a more than comfortable retirement of $5,234,820.