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A tough money milestone

Hitting that $100,000 milestone is tough for young Americans today — especially when you consider post-pandemic inflation, elevated interest rates and sky-high home prices due to a nationwide inventory shortage.

A 2023 Deloitte survey found that Gen Z has 86% less purchasing power than baby boomers did when they were in their 20s. They also have more student debt than millennials and half of Gen Z respondents reported living paycheck to paycheck.

Short of earning power, it is difficult to invest in a meaningful way, such that you can reap the rewards of compound interest.

“Think of your money like a snowball,” Tilbury said. “You roll it down a hill by investing money, and as it rolls, it picks up more snow, which is your compound interest. The bigger your snowball gets, the more snow it collects and, therefore, the more compound interest you make.”

He gave the example of investing $10,000 annually into a low-cost index fund, like the S&P 500, with a 7% average yearly return. Growing your money from $0 to $100,000 would take 7.84 years, per Tilbury’s calculations. But getting from $100,000 to $200,000 will only take 5.1 years, which is 35% faster. And the trend continues.

After you hit $100,000 “compound interest stops being lame,” according to Tilbury. “Getting that chunk of money as fast as possible is the key. [...] Once you get to this point, it’s almost inevitable that you’ll be wealthy if you just invest in a low-cost index fund.”

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How do you make your first $100K?

Tilbury suggests people follow what he calls the GROWTH method:

  • G: Gain control of your finances.
  • R: Root your investments.
  • O: Optimize your tax management.
  • W: Weed out your debts.
  • T: Tap into additional income streams.
  • H: Heightened self-discipline.

There’s only one way to gain control of your finances, according to Tilbury — budgeting.

“Budgeting isn't a rule book designed to stop you having fun,” he said. “It's more like a guide which navigates you towards more informed choices. I'm not saying you have to be super frugal with your money, but you do need to understand the difference between your needs and your wants.”

As for rooting your investments, Tilbury is all for investing a fixed sum of money each month — say, $250 — into an index fund like the S&P 500 and then leaving your money to grow through the power of compounding.

Once you get your money working for you, it is time to optimize your tax management by doing things like claiming all available tax credits and deductions, maximizing your tax-advantaged retirement accounts and tax-deferred savings accounts, or even starting a business and making the most of write-offs.

“It's as simple as this: avoid paying tax,” Tilbury said. “Let me make something very clear. Tax avoidance is completely fine and something that smart people do. Tax evasion, on the other hand, is illegal and not what I'm talking about,” he stressed.

To secure your spot in the realm of the high net worth, you have to pay down any debts you’re shackled to. Tilbury suggests paying down your debts using the debt avalanche method, where you tackle your loans with the highest interest rates first.

The personal finance Youtuber’s final two steps are to diversify and grow your income by starting a side hustle and to “find your inner discipline” to put all these steps into practice.

He stated: “Discipline is the currency of success. The more you mint, the wealthier your future will become.”

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Bethan Moorcraft is a reporter for Moneywise with experience in news editing and business reporting across international markets.

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