Key Takeaways
- The initial accumulation of $100,000 is the hardest and most important step in building wealth, Munger says.
- Frugality, discipline, and patience are essential to getting to that threshold.
- Once you reach that critical threshold, compounding accelerates wealth growth.
As Warren Buffett’s legendary right-hand man at Berkshire Hathaway, Charlie Munger spent decades building a $2.6 billion fortune.1 Munger’s advice on how to start building wealth was blunt and honest. It’s also a stark contrast to the get-rich-quick promises that are so common today.
Munger, who passed away in 2023, said the hardest part of getting rich is putting together that elusive first $100,000.2 Below, we’ll discuss his advice on how to do it.
The Hardest Step: Building Your First $100,000
Charlie Munger never sugarcoated the reality of starting to build wealth. He famously said:
- “The hard part of the process for most people is the first $100,000. If you have a standing start at zero, getting together $100,000 is a long struggle for most people. And I would argue that the people who get there relatively quickly are helped if they’re passionate about being rational, very eager and opportunistic, and steadily underspend their income grossly. I think those three factors are very helpful.” 2
Walking the Talk: Lessons From Munger’s Early Life
Munger had been there. He once told The Wall Street Journal that in his first 13 years as a lawyer, his total income from practicing law was $300,000. At the end of those 13 years, he had $300,000 in liquid assets, plus a house and two cars.
“Everyone else’d have spent that slender income, not invested it shrewdly, and so forth,” he said.
“I just think it was, to me, it was as natural as breathing, and of course I knew how compound interest worked! I knew when I saved $10 I was really saving $100 or $1,000 [because of the future growth of the $10], and it just took a little wait.”3
Compounding and Momentum
Waiting and the power of compounding were key elements of Munger’s investment philosophy. And those still apply to wealth accumulation, with the payoff coming after years of struggle.
Once you’ve reached that elusive first $100,000, compounding turns your savings into a snowball running downhill that grows larger with every rotation, provided you give it enough time. Munger often emphasized that after the hard work of saving your initial capital, “the big money is not in the buying or selling, but in the waiting.”4
For example, if you’re starting out on a $60,000 annual salary and manage to save $10,000 each year, then invest that $10,000 into an S&P 500 index fund at the end of each year, it could take roughly eight years of disciplined saving to reach $100,000.
After you reach $100,000, though, you can start to really gain momentum. Consider that the average annual return for the S&P 500 is 10%—your $100,000 could now be earning you as much as you struggled to save from your salary all those years.
How to Get Started
Let’s break down the second part of Munger’s comment about saving the first $100,000:
- Be passionately rational: Be passionate about making even the smallest spending decisions based on long-term goals.
- Be eager and opportunistic: Stay focused on your financial goals to help motivate you, and look for any opportunity to save or make a shrewd investment.
- Grossly underspend: Munger didn’t save his entire earned income over 13 years by indulging. He did it by being frugal (and investing his savings).
Bottom Line
Though demanding real commitment, Charlie Munger’s approach to getting rich was simple. The most difficult step is the first one: accumulating your first $100,000. Hitting this milestone requires sacrifice and relentless discipline. Once you’ve achieved this, the power of compounding and steady investing makes wealth building much more achievable over time. Munger’s advice was clear: there are no shortcuts to lasting financial success.
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uilding wealth is not merely about earning a high income—it is about cultivating intelligent financial habits that compound over time. To get rich, one must practice disciplined saving, strategic budgeting, and prudent investing. Developing these habits early provides a strong foundation for long-term financial independence and stability.
The first pillar of wealth creation is saving consistently. This may sound simple, yet many people underestimate its power. Setting aside a portion of your income each month, no matter how small, can gradually lead to substantial capital accumulation. Automating savings through direct deposits or investment apps helps eliminate the temptation to overspend. Over time, even modest amounts benefit from the power of compound interest, transforming modest savings into impressive sums.
Budgeting, the second cornerstone, demands a deliberate awareness of one’s income and expenditures. A well-structured budget creates clarity and direction, ensuring that your financial behaviors align with your long-term goals. Advanced tools and software make this process seamless by categorizing expenses, tracking cash flow, and providing insights into consumption patterns. A disciplined budget fosters accountability, preventing financial chaos and promoting mindful spending.
Equally important is investing in income-generating assets. Unlike mere savings—which can lose value through inflation—investments such as stocks, real estate, or mutual funds can appreciate and yield dividends over time. Diversification is crucial; a balanced portfolio not only mitigates risk but also amplifies growth potential. Understanding the fundamentals of the market, or consulting with a certified financial advisor, can guide you toward opportunities that align with your risk tolerance and objectives.
However, true wealth often transcends the conventional 9‑to‑5 structure. Building multiple income streams is a hallmark of financial ingenuity. Launching an entrepreneurial venture, freelancing, or creating digital content—such as blogs, courses, or online videos—can generate passive or supplementary income. In today’s digital economy, the potential for monetization is vast; those who capitalize on innovation and digital leverage often accelerate their financial success.
Yet, wealth creation is not exclusively about money—it is equally about self‑development. Continuously upgrading one’s professional skills, pursuing higher education or certifications, and nurturing a growth mindset are all pathways to career advancement and salary elevation. The more valuable you become in the marketplace, the more opportunities arise to command higher income and influence.
Finally, cultivating emotional intelligence and financial literacy safeguards you from impulsive decisions driven by greed or fear. Maintaining patience, discipline, and a long-term perspective are timeless principles of sustained prosperity. As you align your daily actions with your financial aspirations, wealth becomes not a distant dream but an inevitable outcome of deliberate, intelligent living.