What To Do After Saving $100K (Most People Get This Wrong)

You did it. After years of saying no when everyone around you was saying yes, of quietly moving money across every single month, of watching a number climb so slowly that you sometimes wondered if it was moving at all. After all of that, you hit 100,000 and that is a big milestone and a big deal that is worth celebrating. However, I've worked in finance for over 10 years and the thing that most people don't realize is that hitting six figures is not the finish line. In fact, it's the starting line and what you do in the next 12 months matters more than anything you did to get here. Because this is the exact moment that decides whether that 100,000 grows into 250,000, 500,000, a million and beyond, or whether you're sitting in the same spot five years from now wondering why nothing has changed. So in this video, I'm going to walk you through exactly what to do after your first 100,000, what to do in the right order, and the mistakes that people make the moment that they think the hard part is over. By the way, this Sunday, July 26th, I'm teaching the exact investing system I've used to build my own portfolio to seven figures. It's completely free and you can find out more information through the link in the description. So here's the thing, the hard part is over. Charlie Munger, the investor who helped build Berkshire Hathaway alongside Warren Buffett, was once asked about building wealth. And he said, the hardest part isn't becoming a millionaire. It's actually getting to your first 100K. He said that you have to do it the hard way. And he was right because from experience, that first 100,000 takes a huge amount of discipline. And you're doing it all on your own effort. Your habits are forming, your income still climbing. And the thing that's supposed to help you and do the heavy lifting, which is compounding, it's barely started to take impact. But the mistake people make is that the moment your balance starts to look somewhat good, pretty healthy, something happens in your brain. A little voice shows up and it's a very reasonable little voice. It's very persuasive. And it says, you've earned this. You've driven that old car for long enough. You deserve a nicer flat. Treat yourself. You can afford it now. That voice is lifestyle inflation. And it is the single fastest way to stall everything you've just built. And here's what makes it so dangerous. It doesn't feel like a mistake. In fact, it feels like a reward. When I was climbing the ladder whilst I was in banking, every pay rise, it felt like progress. When I started on £35,000, then £37,500, then £40,000, then to the six figures, my spending crept up right alongside it. Nicer lunches, nicer clothes, nicer dinners. And the thing I didn't notice for years is that whilst I was saving, I was actually saving a smaller percentage of my income than before. Because my salary was going up and my savings rate was going down at the same time. I was measuring by what I earned, not by what I kept. And there's a name that drives this behaviour and this feeling. Researchers call it the illusion of affluence. Spending in a way that makes you look wealthy, that makes you feel wealthy, which is almost always the thing that stops you from becoming wealthy. And a lot of it is status spending that we don't even question. Like if you think about it, when you buy a designer top with a logo slashed in front of it and you buy it purely for the name, you're basically advertising the brand for them, except they didn't pay you, you paid them for the privilege of being their billboard. So the rule at this stage isn't never enjoy your money. It's before any big upgrade, ask yourself one question. Is this buying me the life that I actually want? Or just the life that looks good to other people? You want to enjoy your money intentionally and on purpose. Just don't let that enjoyment eat the engine that is funding everything else later down the line. And I'll explain what I mean in just a moment. But first, let's go on to the order of operations, i.e. what to actually do with the money that you've now saved. You've protected yourself from the trap. You understand what lifestyle inflation is. Now, what do you actually do with that money? So this is where most people get it backwards. They skip straight to the exciting part, investing, picking things, growing your money and watching charts. And they skip the boring bit that has to come first. So let me give you the order, because the order matters more than any single one on a standalone basis. First, kill any high interest rate debt, credit cards, personal loans, anything with a double digit interest rate. You want to kill that. And I know paying off debt is the least exciting sentence in all of personal finance, but there is no point chasing a 10% return in the market while you're sitting on a credit card debt with 20%. Because the maths just is working against you. You're losing money faster than you are growing it. Second thing you want to do is build your emergency fund. Three to six months of essential expenses, sitting somewhere safe and easy to reach. I don't love calling it an emergency fund because emergency sounds like you're bracing for a disaster. And it's not very motivating to know that you're just putting your money to the side for an emergency. I kind of like to think of it as a quick solution fund, where the money whose entire job is to turn an absolute crisis into just an inconvenience. So if there's a car breaks down, you lose your job, the boiler breaks in the coldest months of the year, you solve it with the cash that you saved aside. Only then do you do the third thing, which is invest. And this is where most of the growth from here is going to come. But before I go into that, I did want to add a disclaimer. This is where you put your money to work for the long run. This doesn't replace the effort that you're going to put in today. Because the way I see it, you want to spend most of your time getting really good at what you do right now, working really hard and making more money and maximizing the amount that you're able to make today so that you can then use some of that money to put into investing, to go out there and make more money for you whilst you're also working. This investing part of it shouldn't be the thing that you focus on. It should just be the thing that goes out and helps you whilst you focus on your day to day. So in this video, I'm going to cover the investing part of it. But if you want to know about side hustles, pay rises, negotiating a salary, there's so many other videos where I cover that. Now, when it does come to investing, the mistake I see when someone crosses the six figures is they suddenly decide that they have to be a serious investor now because they have a lot of money. So they need to make things a little bit complicated. And if they're not using words like leverage, options, PE ratio, when it comes to investing, then they're doing something wrong or they're behind. Please don't fall into this trap. Unless this is genuinely your profession, this is one of the fastest ways to lose the hard-earned money that it took you years to save. What you want to do instead is figure out your freedom number, which is the amount that you need invested to never worry about money ever again, and then plan your investing strategy around that. We talk about investing for the sake of investing. We talk about investing because you think that's what you should do. But really, investing is, or the reason why we invest is to build a greater version of your life. And this is exactly what I cover in my workshop happening on Sunday, the 26th of July. Everything from how and what to invest in, right through to accurately calculating your freedom number and living off of it. It's the exact system I follow. It's completely free, nisha.me forward slash invest, or you could click the link in the description. What you want to think about when it comes to investing is that you're optimizing the taxes. It's about making sure more of your money stays with you instead of unnecessarily giving it to the taxman. So first, use the tax-efficient wrappers that are available to you. Every country has its own version of these. In the UK, it's things like ISAs and pensions. In the US, it's the Roth IRA. The investments inside them can be exactly the same as the ones you'd buy in a general, normal investment account. But the tax treatment, it's very different. So think about it this way. Imagine you and your friend both invest 100,000 into exactly the same fund or collection of funds. It earns exactly the same return over the next 20 years. The only difference is that you invested through a tax-efficient account, optimizing the tax-efficient limits that are available to you every single year, and they didn't. At the end, you would be tens of thousands better off, not because you're a better investor, but just because you kept more of what your investments earned. That is one of the easiest wins in personal finance. Same investment, better wrap-up. Second, don't ignore your pension. I know retirement accounts, pensions, they aren't exciting because the money is locked away for decades. But that's exactly why the government gives really generous tax advantages on them, because they want to incentivize you to take care of your future self. And on top of that, if your employer offers to match your pension contributions, take every penny of it. I've seen people opt out of this, and it is like the easiest money you could possibly get. If your employer says for every pound or dollar you contribute, that isn't just a nice workplace perk, that's 100% return on your money before you've invested in anything. You'd be very silly to turn that down. Finally, if your wealth is growing beyond that first 100,000, start asking whether the structure of your money still makes sense. If you're self-employed or running a business, the way you pay yourself might not be the most tax-efficient anymore. If you're building a larger investment portfolio outside tax shelters, you want to understand how capital gains tax and dividends tax work so you aren't paying more than you have to. I'm not saying you need to become a tax expert at all, just understanding the core principles and what's available to you. Even paying for tax advice is actually a very smart thing to do considering the amount of money it can save you later down the line. We actually had a tax advisor come into my Inner Circle community and the amount of members that had an aha moment just because the tax advisor said something that they didn't know that they didn't know. Just spending a few hours this week on understanding the tax strategies available to you will make such an outsized return on that time spent. Number four, think in decades, not in months. When money is tight, we tend to think in weeks, like how do I cover rent this month or how do I stretch the food shop until Friday? And that's survival and it's completely necessary when you're in that situation. But once you've got 100,000 saved up, if you keep planning in weeks, you're ignoring the most powerful thing that you own, which is time. Because going from nothing to your first 100,000, that is slow. That is the hardest stretch of your entire journey. It's a hard part that you've already fought through. But getting from 100,000 to 200,000 now, that's faster than how long it took you to get to the 100,000. And then from 200,000 to 300,000, that's faster again. Not because you suddenly earn more, but because your money, like I spoke about earlier, is working and earning alongside you. This is what Charlie Munger meant right at the start. But after that, compounding is doing more and more of that walking for you. Something that's really important that I do want to say here is that this is often known as a boring middle because it's a long, unglamorous phase where nothing feels like it's happening. The numbers are growing slowly and it's tempting to think that you should do something right now to accelerate your journey. But you shouldn't. Your only job is to not interrupt it. In fact, investing is probably the most counterintuitive thing. It's the only thing where the more effort you put in, the worse results you can expect. With anything else in life, whether it's getting fit, learning a language, achieving something, the more effort you put in, likely the better the results you're going to get. But with investing, it's the opposite. The more you tinker with it, the more you play around with it, the more you try to optimize your returns, chances are the worse you're going to do. So think long-term when it comes to your money. Stop asking, what can I do with my money this year? And start asking, what am I building over the next 5, 10, 20 years? And how can I use my money to get me closer to that life? Because when you reframe the thinking behind why you're just selling it and forgetting it and going through that boring phase, it's a lot easier to get through the next part, which is when the pressure gets louder. The part no one really warns you about and no one really realizes they're in is that you think that the more money you have, the less pressure you feel to spend it. But it is the opposite. The temptation just gets stronger. For instance, you might, say, work with friends who are now talking about sending their kids to private schools. And so you start thinking you should probably do the same. And then you do that and then you become friends with your kids' friends' parents who are also living in a better neighborhood now. And you decide maybe you should do the same. You move to a nicer neighborhood and you find that your neighbors all have nicer cars and they go on nicer holidays. And now this is the circle of people that you are seeing the most. And the pull to keep up has never been stronger than at that exact moment you finally have the money and the means to give into it. This is so, so common. There's nothing wrong with spending money. The question is why you're spending it. Some purchases and spending comes from genuine purpose and enjoyment. Others come from wanting to keep up, wanting to fit in, wanting other people to see you as successful or as one of them. So before a big purchase, ask yourself, what is the opportunity cost of buying this? In other words, what am I giving up by spending my money here instead of somewhere else? If the answer is that it's genuinely worth it to you and you really want that thing and that's the life you want to build, great. Buy it, put money towards it, enjoy it. If not, it's really worth pausing and asking yourself whether that money would bring you more happiness, more value or fulfillment somewhere else. Because once you've hit that 100,000 mark, you now have the ability to make that choice consciously rather than doing it just because it's always been that way. And this is something I'm going to be talking about more in my next video. So don't forget to subscribe if you haven't already and I'll see you next week.