Charlie Munger Said The Trick To Becoming Extremely Rich Is The First $100,000 — But Warns It's A 'Long Struggle For Most People'

Jeannine Mancini
3-min read

The late Charlie Munger, Warren Buffett's right-hand man and long-time partner at Berkshire Hathaway, left a legacy of wisdom that continues to guide investors. Although he passed away in 2023, his words from the 1999 Berkshire Hathaway annual shareholders meeting remain as relevant today as ever.

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During the meeting, a man asked Buffett how to replicate his financial success in today's environment. Buffett discussed the power of compound interest, explaining, "Charlie always says that the big thing about it is we started building this little snowball on top of a very long hill. We started at a very early age in rolling the snowball down. And, of course, the snowball, the nature of compound interest, behaves like a snowball of sticky snow. The trick is to have a very long hill, which means either starting very young or living to be very old." But it was Munger's response that struck a chord with many.

Munger emphasized the critical milestone of accumulating the first $100,000, describing it as the hardest part of the wealth-building journey. He stated, "The hard part of the process for most people is the first hundred thousand dollars. If you have a standing start at zero, getting together a hundred thousand dollars is a long struggle for most people."

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He continued, stating, "I would argue that those who succeed relatively quickly are helped by being passionate about rationality, very eager, opportunistic, and consistently underspending their income significantly."

Adjusted for inflation, $100,000 in 1999 equals approximately $188,127 today. This adjustment reflects an average inflation rate of 2.56% per year over the 25 years. While $100,000 doesn't have the buying power it did back then, experts still agree that accumulating this amount is the toughest challenge. Once you get there, the interest and growth potential can significantly enhance your financial stability.

If you're trying to reach the first $100,000, here are a few tips to help you get there:

  • Maximize your 401(k) match. It’s essentially free money from your employer.

  • Open a Roth IRA and contribute regularly. Tax-free growth is a game-changer.

  • Invest in low-cost index funds. Platforms like Vanguard or Fidelity make it easy.

  • Trim unnecessary expenses. Redirect that money into investments.

  • Develop a side income stream. Freelancing or consulting can boost your earnings.

  • Negotiate your salary. Don’t be afraid to ask for what you’re worth.

  • Upskill yourself. Certifications or courses can lead to better-paying opportunities.

  • Consider real estate investments. REITs or crowdfunding platforms are accessible options.

  • Automate your savings. Set it and forget it to stay consistent.

Charlie Munger's message from the 1999 shareholders meeting continues to inspire and guide new generations of investors. Whether you have reached this milestone or not, consulting a financial advisor can provide personalized guidance to help with your financial journey.

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This article Charlie Munger Said The Trick To Becoming Extremely Rich Is The First $100,000 — But Warns It's A 'Long Struggle For Most People' originally appeared on Benzinga.com

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