How to Amass the First $100,000

Likewise, if you are going to be in debt (which is not exactly ideal), make sure you go for the low-cost, tax-deductible, long-term, fixed-rate kind. Personal credit card interest isn’t tax deductible. Let’s say you have a $15,000 balance and your cards are charging you 23% interest per annum. You are going to have to come up with nearly $3,500 per year just to cover the interest payments – that’s not even paying down the principal! That money is not deductible on your income taxes or for your payroll taxes, meaning that for most Americans earning less than $100,000 per year, you are going to have to make $5,200 pre-tax to cover your interest costs! That’s $200 per pay period if you are paid bi-weekly (26 times per year), or $433 if you are paid monthly. Think about that - $433 per month of your income just to service interest costs, without reducing the principal balance. For someone working 40 hours per week, 52 weeks per year, that’s $2.50 per hour just to maintain their debt load. That’s devestating to someone making $8 or $10 per hour. Now, talk about trying to not only pay down the debt, but put money aside for a better life and it gets to be daunting.

Go After Free Money

If your employer offers 401k matching, take advantage of it. In the above example, if you were to get dollar-for-dollar matching on the first, say, 5% of your contributions and you made $30,000 per year, you would get $1,500 in a bonus match deposited into your account. You already know that you saved $1,250 in taxes, so now, by simply putting $5,000 in your 401k, you have a total of $6,250 capital working for you – or $2,750 more than you would have had if you just took your regular paycheck, paid the taxes, and tried to money into a brokerage account! That’s nearly 79% more money at work for you!