“The First CHF 100,000 Is a B!t*h”: Why Reaching This Milestone Changes Everything

Charlie Munger, Warren Buffett's long-time business partner and a legendary investor in his own right, famously said:

“The first CHF 100,000 is a bitch, but you 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 CHF 100,000. After that, you can ease off the gas a little bit.”

Read here: Our Four Lessons from Warren Buffett and Charlie Munger

This quote captures a profound truth about wealth building: the journey to the first CHF 100,000 is hard, but once you reach that milestone, the compounding effect starts to work in your favor, making the journey thereafter easier. But why is the first CHF 100,000 so critical, and how does compound interest transform your savings over time?

The Power of Compound Interest

Compound interest is the process where the interest you earn on your investments is reinvested, earning you even more interest. Over time, this creates a snowball effect where your wealth starts to grow exponentially. Albert Einstein allegedly called compound interest the "eighth wonder of the world," and for good reason—it can turn modest savings into a substantial fortune given enough time.

Let’s break this down with simple examples.

Starting with CHF 10,000

Imagine you start with CHF 10,000 invested in a stock market index fund that returns an average of 7% per year, which is roughly the historical average for the S&P 500.

• After 1 year: You’ll have CHF 10,700.
• After 5 years: You’ll have about CHF 14,025.
• After 10 years: You’ll have about CHF 19,671.
• After 20 years: You’ll have about CHF 38,697.

In 20 years, your CHF 10,000 investment would nearly quadruple to CHF 38,697. That’s the power of compound interest—but it’s still a modest sum compared to the goal of financial independence.

The Magic of CHF 100,000

Now, let’s look at the same scenario, but this time, you start with CHF 100,000 instead of CHF 10,000.

• After 1 year: You’ll have CHF 107,000.
• After 5 years: You’ll have about CHF 140,255.
• After 10 years: You’ll have about CHF 196,715.
• After 20 years: You’ll have about CHF 386,968.

In 20 years, your CHF 100,000 has grown to nearly CHF 400,000—an amount that can provide a significant financial cushion, fund a child's college education, or serve as the foundation for retirement savings.

Why the First CHF 100,000 Matters

But why is the first CHF 100,000 so much more challenging than the subsequent amounts? The answer lies in the nature of compounding.

When you start with a small amount, the absolute gains in the first few years are relatively modest, making it feel like you’re not making much progress. For example, a 7% gain on CHF 10,000 is just CHF 700—not enough to change your lifestyle. But once you reach CHF 100,000, that same 7% gain is CHF 7,000. Now you’re really starting to see the benefits of your discipline and sacrifice.

The first CHF 100,000 requires a lot of effort, frugality, and consistent saving. It’s the period where you’re most likely to become discouraged because the growth seems slow. This is why Munger emphasizes the need to do whatever it takes to reach this milestone—even if it means making significant lifestyle sacrifices.

Saving Aggressively at the Start

To reach CHF 100,000 quickly, it’s important to save as aggressively as possible in the early years. The faster you can accumulate this amount, the sooner you can let compound interest do the heavy lifting. Here’s an example:

Let’s say you can save CHF 1,000 per month. Here’s how long it would take to reach CHF 100,000:

• At 0% interest (savings account): 100 months (8 years and 4 months).
• At 7% interest (investment account): Approximately 6 years and 3 months.

The difference is clear: investing your savings accelerates the process significantly, allowing you to reach CHF 100,000 almost 2 years faster. And once you hit that milestone, you can start to relax a bit because compound interest will begin to work more powerfully in your favor.

The Snowball Effect

Once you’ve reached CHF 100,000, the compounding effect starts to feel like a snowball rolling down a hill, gathering more snow and momentum as it goes. If you continue to save and invest, the next CHF 100,000 will be easier and faster to accumulate.

For instance, if you now save CHF 1,000 per month and already have CHF 100,000 invested:

• After 5 years: Your investment would grow to approximately CHF 212,000.
• After 10 years: You’d have around CHF 370,000.
• After 20 years: You’d be sitting on over CHF 900,000.

As the numbers get larger, the absolute gains from compound interest increase dramatically. This is why wealth building becomes easier after the first CHF 100,000—the snowball effect is in full swing.

arvy's takeaway

Charlie Munger’s advice to reach that first CHF 100,000, no matter what it takes, is more than just a motivational quote—it’s sound financial strategy. The journey to your first CHF 100,000 is tough, requiring discipline, sacrifice, and patience. But once you achieve it, the power of compound interest starts to work in your favor, making the next milestones easier to reach.

By focusing on saving aggressively in the early years, investing wisely, and letting compound interest do its magic, you can set yourself on a path to financial independence. So, take Munger’s advice to heart: get that first CHF 100,000 as quickly as possible, and watch how the financial snowball begins to roll.