$300k is halfway to $1m

[roomtempmayo]

The other day I heard the phrase "$300k is halfway to $1m," and it quickly made sense.  Within the normal rates of equity returns, at a constant saving rate it takes about the same amount of time to go from $0 to $300k as it does to go from $300k to $1m.  Compound interest does a lot of work in the second half.

There's an explanation with several graphs here: https://fourpillarfreedom.com/the-math-behind-why-net-worth-goes-crazy-after-the-first-100k/

At 7%, $475k is about halfway to $2m.

I'm sure this isn't really a shock to people here, but hopefully it's encouraging to people just getting started saving.  It gets a lot easier as you get momentum.

[Dicey]

People just cannot imagine how well compound interest works! It's why I'm a DPOYM fan while you're in your early accumulation years. Get those soldiers working for you, then pay off the mortgage with devalued dollars. It can shave years off your obligation to work for a paycheck, but it's really hard to visualize.
The expression "Pay yourself first" includes the mortgage, but it's really hard to wrap your head around when your mortgage payment is your largest monthly bill.

Kudos to you for realizing the absolute might of compound interest early. It will absolutely make a difference.

Related: Keep your investment fees low, your assets diversified, and learn to embrace market lows as buying opportunities, not reason for panic. Advanced - consider your mortgage as part of your bond allocation.

[Baguettestache]

@Dicey what does DPOYM mean?

[joemandadman189]

Don't pay off your Mortgage

[Dicey]

@Dicey what does DPOYM mean?

Thanks, Joe.

Here's a link. I can't remember how to do it the cool way.

https://forum.mrmoneymustache.com/throw-down-the-gauntlet/dont-payoff-your-mortgage-club/

All are welcome!

[halfling]

People just cannot imagine how well compound interest works! It's why I'm a DPOYM fan while you're in your early accumulation years. Get those soldiers working for you, then pay off the mortgage with devalued dollars. It can shave years off your obligation to work for a paycheck, but it's really hard to visualize.
The expression "Pay yourself first" includes the mortgage, but it's really hard to wrap your head around when your mortgage payment is your largest monthly bill.

Kudos to you for realizing the absolute might of compound interest early. It will absolutely make a difference.

Related: Keep your investment fees low, your assets diversified, and learn to embrace market lows as buying opportunities, not reason for panic. Advanced - consider your mortgage as part of your bond allocation.

For the new crop of early accumulators the 7% mortgage rates sort of make the point moot. The math in favor versus against is a little… dicey

[Dicey]

People just cannot imagine how well compound interest works! It's why I'm a DPOYM fan while you're in your early accumulation years. Get those soldiers working for you, then pay off the mortgage with devalued dollars. It can shave years off your obligation to work for a paycheck, but it's really hard to visualize.
The expression "Pay yourself first" includes the mortgage, but it's really hard to wrap your head around when your mortgage payment is your largest monthly bill.

Kudos to you for realizing the absolute might of compound interest early. It will absolutely make a difference.

Related: Keep your investment fees low, your assets diversified, and learn to embrace market lows as buying opportunities, not reason for panic. Advanced - consider your mortgage as part of your bond allocation.

For the new crop of early accumulators the 7% mortgage rates sort of make the point moot. The math in favor versus against is a little… dicey

Hahaha, I remember being thrilled to get a 7% mortgage in 1996. The math still works. My comments are mainly directed to the Americans with cheap-ass fixed mortgages who are hell-bent on killing them at the expense of other savings. Since rates only jumped in the last two years, most people here are paying much less than that.

[joemandadman189]

i was playing around with this concept today just for fun, i like to prove things true just for my brain to internalize the idea.

Things obviously move even faster if you increase your savings

One interesting thing i found, for our case, is that the difference in saving an extra $12k a year roughly equates to shaving off a year of work, say increasing your annual savings from $65k to $77k. However as the annual savings amounts keep growing, like in the $100k range, saving that extra $12k has less and less impact

[Dicey]

i was playing around with this concept today just for fun, i like to prove things true just for my brain to internalize the idea.

Things obviously move even faster if you increase your savings

One interesting thing i found, for our case, is that the difference in saving an extra $12k a year roughly equates to shaving off a year of work, say increasing your annual savings from $65k to $77k. However as the annual savings amounts keep growing, like in the $100k range, saving that extra $12k has less and less impact

Okay, but as your army of green soldiers grows, they do more and more of the lifting. Pretty soon, al you have to do is watch them while you do whatever your heart desires.

[ChpBstrd]

The flipside of this math is my dilemma:

Just over $1M invested in 93% stocks.
$60k spend rate.
Spouse had to leave their job 4 years ago, and has only been able to work little gigs occasionally since then causing our savings rate to fall to zero (or below).

Option A: Become a careerist and chase the possibility of earning another $30k per year by working 20 more hours per week getting certifications, job hopping, and aggressive ladder climbing. Miss out on kid's childhood, reading books, doing things with friends, spontaneous weekends, hobbies, etc.

Option B: Just coast in my cushy, recession-proof job for 4-5 years and let compounding take care of getting me to my $1.5M FIRE number.

By my math, 4 years of workaholism and stress might make a year of difference to my FIRE date. What would you choose? So far I'm choosing option B and holding out hope the spouse may someday be able to earn more or stocks experience a great sequence of returns.

[Telecaster]

Hahaha, I remember being thrilled to get a 7% mortgage in 1996. The math still works. My comments are mainly directed to the Americans with cheap-ass fixed mortgages who are hell-bent on killing them at the expense of other savings. Since rates only jumped in the last two years, most people here are paying much less than that.

I got my first mortgage around that time for 7¼%   Because decimals had not yet been invented, apparently.   Thrilled that a mortgage could be so unbelievably cheap.   If someone has a 4% mortgage, the bank is paying you to borrow money.   

[joemandadman189]

i was playing around with this concept today just for fun, i like to prove things true just for my brain to internalize the idea.

Things obviously move even faster if you increase your savings

One interesting thing i found, for our case, is that the difference in saving an extra $12k a year roughly equates to shaving off a year of work, say increasing your annual savings from $65k to $77k. However as the annual savings amounts keep growing, like in the $100k range, saving that extra $12k has less and less impact

Okay, but as your army of green soldiers grows, they do more and more of the lifting. Pretty soon, al you have to do is watch them while you do whatever your heart desires.

This is kinda where we are at - we can 401k and Chill (i am going to trademark that phrase) or push and retire 1-3 years earlier - maybe i will do a case study

[joemandadman189]

The flipside of this math is my dilemma:

Just over $1M invested in 93% stocks.
$60k spend rate.
Spouse had to leave their job 4 years ago, and has only been able to work little gigs occasionally since then causing our savings rate to fall to zero (or below).

Option A: Become a careerist and chase the possibility of earning another $30k per year by working 20 more hours per week getting certifications, job hopping, and aggressive ladder climbing. Miss out on kid's childhood, reading books, doing things with friends, spontaneous weekends, hobbies, etc.

Option B: Just coast in my cushy, recession-proof job for 4-5 years and let compounding take care of getting me to my $1.5M FIRE number.

By my math, 4 years of workaholism and stress might make a year of difference to my FIRE date. What would you choose? So far I'm choosing option B and holding out hope the spouse may someday be able to earn more or stocks experience a great sequence of returns.

Option B - especially if you have kids

[Dicey]

i was playing around with this concept today just for fun, i like to prove things true just for my brain to internalize the idea.

Things obviously move even faster if you increase your savings

One interesting thing i found, for our case, is that the difference in saving an extra $12k a year roughly equates to shaving off a year of work, say increasing your annual savings from $65k to $77k. However as the annual savings amounts keep growing, like in the $100k range, saving that extra $12k has less and less impact

Do both.
Okay, but as your army of green soldiers grows, they do more and more of the lifting. Pretty soon, al you have to do is watch them while you do whatever your heart desires.

This is kinda where we are at - we can 401k and Chill (i am going to trademark that phrase) or push and retire 1-3 years earlier - maybe i will do a case study

[StarBright]

This tracks in a very general way! I would say our household is closer to to the average American family than many folks on this board, so this is kind of neat to see.

Took me a decade of full time work to hit 300k for the household (but some years had zero or negative savings due to low pay, medical emergencies, etc). Took us 8 years to go from 300k to 1mil.

[nereo]

Hahaha, I remember being thrilled to get a 7% mortgage in 1996. The math still works. My comments are mainly directed to the Americans with cheap-ass fixed mortgages who are hell-bent on killing them at the expense of other savings. Since rates only jumped in the last two years, most people here are paying much less than that.

I got my first mortgage around that time for 7¼%   Because decimals had not yet been invented, apparently.   Thrilled that a mortgage could be so unbelievably cheap.   If someone has a 4% mortgage, the bank is paying you to borrow money.

First thing I thought when I read your post was: "holy crap, I've never seen anyone on this forum use subscript fractions in a post ("7¼%")

Second thought was: "holy crap, we are only paying 2.7% for our mortgage.... which means the bank's been paying us a few thousand $ each year for the 'honor' of loaning us money"

[roomtempmayo]

Option A:[/u] Become a careerist and chase the possibility of earning another $30k per year by working 20 more hours per week getting certifications, job hopping, and aggressive ladder climbing. Miss out on kid's childhood, reading books, doing things with friends, spontaneous weekends, hobbies, etc.

Option B: Just coast in my cushy, recession-proof job for 4-5 years and let compounding take care of getting me to my $1.5M FIRE number.

By my math, 4 years of workaholism and stress might make a year of difference to my FIRE date. What would you choose? So far I'm choosing option B and holding out hope the spouse may someday be able to earn more or stocks experience a great sequence of returns.

Option B - especially if you have kids

Option B, no question at all.

[getsorted]

Very encouraging thought for those of us who have hit midlife with significantly less than $300k!

[Em-Dog]

This made me happy, thank you for sharing!

[glacio09]

This is very reassuring to hear. Right now I have about 800k and my husband and I like our jobs well enough but are longingly looking to the light at the end of the tunnel. Our potential exit plans are at 1mil we can make some big work choices (full salaries but more expensive location or one of us can take a lower income position). At 1.5mil we can cut back to working to cover our expenses, either one income or two part time incomes. At 2mil we can stop working for an income altogether.

All of this is based on the idea that the firehose of money won't be as beneficial as the market increases.

[theninthwall]

Momentum certainly helps make up for the 'boring middle'. It's nice to actually see things powering ahead (although the markets have been very kind these past six months).

[Dave1442397]

Now that I read this again, I remember seeing this chart years ago, but we didn't have much saved at the time.

Based on the numbers below, we should hit $2MM in six years.

[2sk22]

By my math, 4 years of workaholism and stress might make a year of difference to my FIRE date. What would you choose? So far I'm choosing option B and holding out hope the spouse may someday be able to earn more or stocks experience a great sequence of returns.

As long as your current job is stable (which is no small matter) your approach is probably what I would take as well. There is a Charlie Munger quote:

The first rule of compounding: never interrupt it unnecessarily

[TyGuy]

I may be reaching the 300k mark within the next year so this is very refreshing to see!

[cincystache]

Took us over 10 years to hit 300k. Just hit 600k less than four years after that. Never made over 100k gross household until last year. Compounding is awesome. Bring on the the double comma!

[J.P. MoreGains]

I'm sure this isn't really a shock to people here, but hopefully it's encouraging to people just getting started saving.  It gets a lot easier as you get momentum.

This is news to me but makes sense now. This makes me feel good about things.

[NorthernIkigai]

This is very reassuring to hear. Right now I have about 800k and my husband and I like our jobs well enough but are longingly looking to the light at the end of the tunnel. Our potential exit plans are at 1mil we can make some big work choices (full salaries but more expensive location or one of us can take a lower income position). At 1.5mil we can cut back to working to cover our expenses, either one income or two part time incomes. At 2mil we can stop working for an income altogether.

All of this is based on the idea that the firehose of money won't be as beneficial as the market increases.

We're pretty much where you are, and would need about the same to both stop working. So technically quite far away, but as we see from this thread, really not that far. But we also enjoy our stable jobs at the moment, and just FEEL SO RICH. We're in a tricky situation with our housing at the moment, as we've moved earlier this year and won't be able to sell the old place for a while (it's complicated). But it doesn't matter, we can handle it. Christmas is coming up, and we buy ourselves and our loved ones WHATEVER WE WANT (which admittedly isn't that much, but the point is, it doesn't matter financially, and we of course also give to charity). It's a strange feeling. It's almost as if the still long road ahead to FI doesn't matter.

[joemandadman189]

This is very reassuring to hear. Right now I have about 800k and my husband and I like our jobs well enough but are longingly looking to the light at the end of the tunnel. Our potential exit plans are at 1mil we can make some big work choices (full salaries but more expensive location or one of us can take a lower income position). At 1.5mil we can cut back to working to cover our expenses, either one income or two part time incomes. At 2mil we can stop working for an income altogether.

All of this is based on the idea that the firehose of money won't be as beneficial as the market increases.

We're pretty much where you are, and would need about the same to both stop working. So technically quite far away, but as we see from this thread, really not that far. But we also enjoy our stable jobs at the moment, and just FEEL SO RICH. We're in a tricky situation with our housing at the moment, as we've moved earlier this year and won't be able to sell the old place for a while (it's complicated). But it doesn't matter, we can handle it. Christmas is coming up, and we buy ourselves and our loved ones WHATEVER WE WANT (which admittedly isn't that much, but the point is, it doesn't matter financially, and we of course also give to charity). It's a strange feeling. It's almost as if the still long road ahead to FI doesn't matter.

The bolded above really resonated with me along with your whole post. I have looked at many different savings scenarios, status quo, coast, bare minimum savings and all options have us retiring with a great stashe at varying ages, which gives us lots of options to enjoy the ride. Knowing we can do basically what every we want is a strange-freeing feeling.

[41_swish]

With the power of compounding and all that, is the general rule of thumb 100k is 1/3 of the way and 300k is 1/2?

[JimDogRock]

With the power of compounding and all that, is the general rule of thumb 100k is 1/3 of the way and 300k is 1/2?

It is for the numbers in this example which are investing $10,000 per year and getting a steady 7% return. If you get paid every 2 weeks, then that is $384.62 invested out of every paycheck. And this takes right at about 30 years.
When you increase the weekly investment, it will obviously lower the total time it takes to get to $1,000,000. Perhaps counterintuitively, doing this would increase the dollar value where you reach the halfway point.

I played with the calculator here for a few minutes to get some numbers - https://www.savingscalculator.org/biweekly/

If the investment is doubled to $20,000/year or $769.23 per paycheck, then it takes about 22 years and the halfway point is about $320,000.
If the investment is doubled again to $40,000/year or $1538.46 per paycheck, then it takes about 15 years and the halfway point is about $375,000.

[dandarc]

Option A:[/u] Become a careerist and chase the possibility of earning another $30k per year by working 20 more hours per week getting certifications, job hopping, and aggressive ladder climbing. Miss out on kid's childhood, reading books, doing things with friends, spontaneous weekends, hobbies, etc.

Option B: Just coast in my cushy, recession-proof job for 4-5 years and let compounding take care of getting me to my $1.5M FIRE number.

By my math, 4 years of workaholism and stress might make a year of difference to my FIRE date. What would you choose? So far I'm choosing option B and holding out hope the spouse may someday be able to earn more or stocks experience a great sequence of returns.

Option B - especially if you have kids

Option B, no question at all.

Thirded - Option B. See downsizing thread.

[J.P. MoreGains]

A very mustachian thing to be outside of this table...

I'm closing in on 300k (likely within 3 months or so) and last year I saved 75k not including market gains, just straight savings.

With market gains I was plus 110k in 2024.

So in a strong market I can expect to gain 100k a year.

Just saw someone in the 500 - 1 mil thread gain 200k in a year. So at a certain point compounding really does take over.

But 300k doesn't really feel halfway to a mil... hope I'm wrong! I just still feel really far away.

[J.P. MoreGains]

Option A:[/u] Become a careerist and chase the possibility of earning another $30k per year by working 20 more hours per week getting certifications, job hopping, and aggressive ladder climbing. Miss out on kid's childhood, reading books, doing things with friends, spontaneous weekends, hobbies, etc.

Option B: Just coast in my cushy, recession-proof job for 4-5 years and let compounding take care of getting me to my $1.5M FIRE number.

By my math, 4 years of workaholism and stress might make a year of difference to my FIRE date. What would you choose? So far I'm choosing option B and holding out hope the spouse may someday be able to earn more or stocks experience a great sequence of returns.

Yeah with the kids Option B seems the way to go. Having my parents have time for me as a kid was the best thing ever.

I have a cushy job also... but I want to work a second job and frontload everything to get to 500k ASAP. After that who knows, maybe time to slow down and coast some.

[Tasse]

Just saw someone in the 500 - 1 mil thread gain 200k in a year. So at a certain point compounding really does take over.

It absolutely does. This summer will be 8 years since I discovered MMM and started investing seriously; my partner had a smidge of a head start. We're closing in on the point that half of our NW is gains (currently 46.7%). It's kind of mind-boggling. As I've seen @Dicey say around these parts multiple times before, "This stuff works, it really works!"

[Dicey]

Just saw someone in the 500 - 1 mil thread gain 200k in a year. So at a certain point compounding really does take over.

It absolutely does. This summer will be 8 years since I discovered MMM and started investing seriously; my partner had a smidge of a head start. We're closing in on the point that half of our NW is gains (currently 46.7%). It's kind of mind-boggling. As I've seen @Dicey say around these parts multiple times before, "This stuff works, it really works!"

Hehe, that's not quite how I say it...

[Tasse]

Forgive the paraphrase. ;)