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Friends, this is Charlie Mung, Warren Buffett's partner, who is considered one of the most intelligent investors in the world. He said a line which may sound a bit strange , but it can completely change anyone's life. He said The First $1000 Is a Bitch But You Have Got to Do It. Its meaning is clear.
The hardest money in life is the money you earn in the beginning. Making the first 5 to 10 lakhs is really hard as hell. But Mangal says, even if you have to walk, use coupons, cut down expenses, first deposit Rs 10 lakh under all circumstances. Now the question is what is the magic in this first milestone ?
Why 90% of people are not able to move beyond saving ₹5 to ₹1 lakh in their entire life and their dream of becoming rich gets shattered into pieces. Today, we will understand with the help of Maths and Psychology why the biggest battle of your financial life is between 0 to 10 lakhs and how, as soon as you cross this line, money starts working for you and starts making money.
To explain this, Charlie Munger gives us an example. They say a plane burns 80% of its fuel just on takeoff. But once in the air, it travels long distances in cruise mode with very little fuel. Wealth creation is exactly the same. When your savings are zero, you are like a closed plane standing at the airport.
Your expenses, inflation, low salary all together pull you down. And the biggest problem is that compounding does not support you in the beginning. That means you don't have any cruise control. Suppose you saved ₹1 lakh with great hard work and the market gave 20% return which is very high, then in a year you will get ₹00.
Now only ₹2000 does not bring any big change in your life and this is where people break down. They feel that they made so many sacrifices, did not go out, did not buy anything new and all they got was just ₹00. This is the point where people give up. They feel that there is no benefit in saving. They start spending back.
They don't understand that right now they are on the runway like an airplane. The flight has not yet started. But now comes the real magic. Magic worth ₹1 lakh. When you have ₹1 lakh in your account, a 20% return from there changes the game for you. Now imagine when you have ₹1 lakh and the market gives 20% return then you get ₹1 lakh annually.
This Rs 2 lakh is equal to 4 to 5 months salary of many people. This means that you earned half a year's salary without going to office and without doing overtime, just with your own money. This is where the real snowball effect begins. Now understand its math. It takes 5 to 7 years to go from zero to 10 lakhs.
But it takes only 3 years to reach 20 lakh from 10 lakh and it does not take even 1.5 years to reach 30 lakh from 20 lakh. The target is only 10 lakhs every time but the speed keeps increasing because earlier only you were working till 10 lakhs. After that your money also started working with you. That's why Charlie Munger says the first 10 lakhs are the toughest because at that stage you are fighting alone.
Now the question is how to climb this mountain? Charlie Manger's answer is very direct and brutal. He says, I don't care if you have to walk to work. I don't care if you have to use coupons. Just Find A Way To Get The First Chuck Of Capital. And this is where our generation makes a mistake. As soon as their first income starts , they buy an iPhone or a car on EMI.
Go on luxury trips. We become so busy in showing ourselves rich that we are not even able to start the process of becoming rich. If you really want financial freedom, you will have to deliberately live a simple and cheap life for 3 to 5 years of your life. No matter how good your salary is, it sounds bad but math says that you cannot afford luxury until your investment reaches 10 to 15 lakhs.
There is no EMI for success, its first down payment has to be made and the name of that down payment is sacrifice. The day you cross your first ₹10 to ₹15 lakhs, you have a different level of confidence and your money starts increasing so fast that you can never earn that much money by doing a job. Your investment returns become more than your salary.
That moment is called financial freedom. So friends, how did you like today's short video? If you learned something new from this video, then do let us know by writing in the comment box and if you want to always stay connected with us like this , then subscribe to our channel The Yogi. See you soon in the next video.
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