The $100K Mark

In our modern society, money is always seen as a contributing factor to happiness. When individuals lack financial resources, their well-being can be significantly impacted.

Specifically, research has indicated that this relationship is particularly prominent for those earning below $100K.

Studies have demonstrated that earning less than this amount, can generally and to a certain extent, limits one's ability to lead a fulfilling life. Limited access to quality education, healthcare, and secure housing can all contribute to this.

Relative Happiness

Above the $100 mark however, additional income doesn't necessarily lead to greater happiness, a concept known as the "Easterlin Paradox".

I tend to interpret this information as being above water is all you need to be relatively happy, especially from a biological perspective and if the lack of money is the sole reason for one's unhappiness.

I think much of life's problem becomes more fluid and relative when we have the basic necessities covered, food on the table and roof over our head, a sense of financial security.

Without that, everything is mostly seen from a narrow and concrete perspective with money as the central concern.

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Of course, even without pursuing happiness as a primary goal, having money can provide a safety net to protect oneself and loved ones from life's uncertainties.

This consideration alone can be a powerful motivator to accumulate wealth (and invest wisely).

But then we also have to keep in mind that there's more to life than money and many of us have come across individuals who are quite wealthy yet live unhappy lives.

Six Figure Investment

In investing, there's a common knowledge point about the suggestion to only start investing once an individual has $100K to invest.

In my view, it's a perspective that mainly stems from the notion that investing requires a certain level of financial stability to absorb potential losses and manage investments effectively.

But I think another relevant notion is investing anything less than that may not yield substantially returns and one is better off using that money to actively earn more money than dabbling in passive income.

The latter is more nuanced to unravel and seems more relative in our modern era.

For one, when you look at it from a TradFi lens, it makes a lot of sense to start investing when you have that amount of money.

What TradFi investment will give significant returns on a small investment? Probably very few or none.

And knowing that a core purpose of investing is to generate enough passive income to cover one's living cost, it becomes clear why $100K might be seen as a meaningful threshold for serious investing.

A Difficult Choice

Would you rather take one big swing with a substantial investment or take many small swings, each with a smaller investment? Both of which may or may not yield significant returns?

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One could argue that with the latter one increases their chances of having at least some returns compared to the former, where a single failed investment could result in significant losses.

In a modern context, the risk/reward ratio is skewed towards making smaller swings, a more calculated yet diverse approach.

Ultimately, I think it mostly boils down to personal preference and available investment options, the latter can be quite varied nowadays.


Thanks for reading!! Share your thoughts below on the comments.