The following is a guest post from Marie at FamilyMoneyValues.  Marie wants to help families understand the potential consequences of wealth.  She encourages visitors to take the long view and pull all family generations together to nourish the family legacy and wealth. 

Looking back, from the vantage point of having a successful wealth building run, we found that Charlie Munger from Berkshire Hathaway was very correct when he said   ”The first $100,000 is a b****.”

I hadn’t heard the Charlie Munger quote until I started doing some research for this post, but for us the first $100,000 was by far the hardest level to reach.  Why was that?

Why was it so hard to get to $100,000 in net worth?

We were inexperienced.

We married directly out of college and neither of us had done much in the way of working or hustling for money.  We lacked work experience.

We came from lower middle class families and weren’t exposed to investing concepts.  We lacked financial experience.

We thought we could live at the same standard that our parents had spent their lives reaching.  We lacked life experience.

We didn’t earn much.

We chose majors in college that didn’t translate into real life job opportunities.

Since we were inexperienced and had generic degrees, it was hard for us to find jobs in the early 1970′s recession.  The jobs we did find, paid poorly.  We worked long hours to get that poor pay, and didn’t start any side hustles to get extra money.

Hubby actually joined the Army, which at the time was paying his level a whopping $2000 a year.  I was a retail manager trainee – making about $5000 a year, until I quit to join him on post.

We started a family right away.

Once we started having kids, expenses really mounted.  There were cribs, car seats, high chairs, diapers and lots of clothes to buy each year.  We needed life insurance.  We bought a house (after 6 long years of saving up a down payment).  It needed furniture; storm windows; a new roof; a mortgage; plumbing and furnace repairs; lawn care and on and on.

Our cash flow was neutral.

We were very fortunate to have parents who put us through college, or full ride scholarships that did.  So at least we didn’t start life together with loads of debt as a lot of you probably did.

We learned during the Army years to stay ahead of credit card debt.  During those years we charged gasoline throughout the month and found that his entire paycheck was needed to pay off the credit card bill (which we did, in full, even then).  We ate a lot of noodle dinners back then so we could keep the debt down.

Even after he was honorably discharged from the service and into a civilian job, our cash inflow for many years, pretty much matched our expenses for the year.  We would put money aside each payday (even though we could only save $20 – $50 a month), only to have to spend it on the end of the year bills – like life insurance and Christmas.

So, with all these clicks working against us, how did we manage to eventually walk that road to wealth?

How did we eventually get to $100,000 in net worth?

Slowly, very slowly.

As I mentioned above, we were fortunate to not have college debt and we were at least smart enough to avoid credit card debt.

We saved every penny we could.  We ate generic food; we shopped garage sales and thrift stores; we turned down the thermostat; didn’t run the window air conditioner; hand washed the dishes and cars; and just plain avoided buying things we wanted (and sometimes the things we needed).  We used cloth diapers, freeze drying them in the garage in the winter.  He rode the bus to work; we waited six years before buying a house.  We did most of the frugal things you can now read about on personal finance websites.

We banked every dollar we could spare.  Even if we knew it would go out the door at the end of the year, we kept putting those dollars in savings.  He put every birthday check in the bank, I put in every dollar I earned delivering neighborhood newspapers with a baby on my back.  All work bonus’s went directly into the bank.  When the stagflation and high interest rates hit in the 1970′s we struggled to pull together a large enough sum to buy a CD so we could get that high rate of return.

We used installments to build equity.    We used a VA loan to buy a starter home in a somewhat less than desirable neighborhood – but still put up a down payment.    As we paid down the debt, the equity gradually rose, adding to our net worth. We purchased a 40 acre tract of raw land using an installment loan and again built equity as we paid off that loan.  We paid down the car loans as fast as we could, then started saving an equal amount towards the next car we would need.

After 10 years of marriage, we had a net worth of around $40k.  From then on, we started gaining traction, increasing by $17K in 1982 and by another $30K the following year.

We opted to add a second full time job.  I went back to work as a computer programmer (after re-training to get the needed skills).  BUT, we continued to live off one salary (his) – even after my annual salary amount surpassed his.

This put us over $100,000k by the end of my first year working.

We have often pondered what we should have done differently – so that we could learn from our mistakes to try to give solid guidance to our children.

What can you do differently to get to $100,000 net worth faster?

What would we do differently if we started over and retained the knowledge we now have?  Some of these may work for you, some may not, but here is what we would do differently:

• Work during high school and college – to get some real life experience.
• Get a clue when choosing a college major – find something you love but make sure you can earn a living with it!
• Buy used cars – you save money on the purchase and on the sales tax and on the property tax.
• Wait to get married until you have some work experience – know that you are capable of supporting a spouse and a family before you dive into it.
• Wait to have children until you have some savings and the income needed for their extra expense – there are enough frustrations and stresses that come with kids, you don’t need the financial ones too.
• Buy a house as soon as you can to start building equity – 6 years of rent payments with nothing to show – geez.  We should have bought with a zero or low down payment.
• Never buy an asset (like raw land) that doesn’t produce income AND costs you money to keep.  We eventually sold our 40 acre tract of raw land for about an amount (inflation adjusted) that slightly exceeded the purchase price.  It did force us to save (and made the bank some money) and we did enjoy it.  But we should have been buying a house to live in at that time – instead of paying rent and making loan payments on raw land.
• Take on more risk – start a business.  We lived in a town without a McDonald’s – we should have tried for a franchise!  I had an in-home day care business – before the big chain child care centers were developed – why didn’t I expand it?
• Have liquid assets when interest rates are high and invest when the stock market is low – we lived our cash life backwards.  In the 1970′s when interest rates were in the double digit range, we had no savings and were borrowing at high rates.  In this decade, when interest rates are near zero we have lots of cash and no debt – backwards – just backwards.  Find a way to use compounding returns better!

What net worth level did you struggle to reach?  Was increasing your net worth easier after you hit your level?  How did you pull together the assets to reach your level?

Resources:

Seeking Alpha: The First $100,000 and the Power of Compounding
Go Banking Rates:  Why the First $100,000 is the Hardest to Save

Crystal’s Comments:  Thanks for the tips learned from experience!  The first lump is always the hardest.  Good luck with continued success!