ACCOUNTANT EXPLAINS_ Why Everything Changes After $20K

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00:00You've probably heard people say money goes to money or the more you have, the more you make.

00:04These aren't just cliches. There's a real reason why once you've got about 20,000 saved,

00:10everything changes. If you're new here, hi, I'm Nisha. I'm a chartered accountant and a

00:15former investment banker. And in this video, I want to take you behind the scenes to explain

00:19why phrases like this exist, why your first 20,000 changes everything, and give you tips

00:26on what to do if you don't have 20,000 saved up just yet. Let's start with why it changes

00:31everything. Number one, it makes the biggest difference in financial wellbeing. Before you

00:36have any money saved, you're living from a place of scarcity. You take the first job offer that comes

00:42your way, even if it's not really what you want. You stay in situations you absolutely hate because

00:47you can't afford to leave. You say yes to things that you don't want to do because you need the

00:53money. You're constantly making decisions based on fear, fear of running out, fear of not having

00:58enough, fear of what happens if something goes wrong. And when you're in survival mode like this,

01:04your brain literally can't think about growth. You're not thinking about investments. You're not

01:10thinking about building wealth or starting that side business. You can't. You're thinking about

01:14making it to the next paycheck. But there's some really interesting research done by Vanguard

01:19that shows that just having $2,000 or equivalent in emergency savings has a 21% increase in financial

01:27wellbeing. $2,000 and suddenly you feel 21% better about your entire financial situation. And if you

01:34can push that to three to six months of living expenses saved, depending on your situation, that

01:39adds another 13% of a boost to your financial wellbeing. And that's why for a lot of people that

01:4420,000 is the first mental barrier to overcome. It's where you start feeling like you're just getting

01:49by and you start feeling like you actually have money. It's a psychological shift that's hard to

01:55explain until you experience it yourself. Once you have that emergency money saved up, whatever that

02:00amount is, you can now have money to compound. It's the momentum you need to get you to the next

02:06milestone and the milestone over that. That brings me to the second point as to why it changes

02:10everything. And that is momentum. There's a reason why compound interest is one of the most powerful

02:16forces in finance. And once you hit 20K, you'll see exactly what it means. Your money doesn't just

02:22sit there anymore. It starts earning returns. And then those returns start earning their own returns.

02:27It's like planting a tree that grows even more trees for you. So let's use a number to break this

02:32down. Say you're putting away 1,000 every month and getting an 8% return. Getting to your first

02:3720,000 takes about 19 months of grinding and saving. But here's where things get interesting.

02:43Your second 20,000 doesn't take another 19 months. It only takes around 17 months. Why? Because now

02:50you've got that first 20,000 working alongside your monthly savings, generating its own returns.

02:55By the time you're going for your third 20K, the timeline shrinks even more. Your money is doing more

03:00of the heavy lifting whilst you're doing the same amount of work. And when you get to the bigger numbers,

03:05the time shrinks even more. Once you hit 400,000 in your portfolio, you can make your next 20K

03:10in just five months. The same amount that took you nearly two years to save initially is now happening

03:15through your investments. That first milestone is hard, but then every single 20,000 milestone after

03:21that gets easier and easier. Which brings me to number three, the maths gets better as you go.

03:27People always assume there's some hidden investment world that unlocks once you reach certain wealth

03:32levels. Like you get access to these secret hedge funds or exclusive opportunities that regular

03:37people can't touch. But that's not really what's happening. The truth is so much simpler. It's just

03:43basic maths working in your favor. So think about it this way. You put 1,000 into an investment that

03:49grows 10% in a year. Now take that exact same 10% growth and apply it to 10,000. Suddenly you're looking

03:55at 1,000 in profit from the same investment, same timeframe, same level of risk. This is why hitting

04:0220,000 feels like such a turning point. Up until that point, your returns fall almost insignificant

04:07because you're working with smaller amounts. But once you've accumulated some real money,

04:12those percentage gains start translating into amounts that actually matter. When you've got 20,000

04:17sitting in investments earning 8% annually, that's 1,600 flowing into your account over the course of a

04:23year that you can then reinvest. Money you didn't have to earn through your job. Money that showed

04:28up because your existing money was also working on your behalf. The investment strategy isn't any more

04:34sophisticated than someone with 1,000 can use. The only difference is the scale. And that scale is

04:38what transforms small percentage wins into real financial progress. And number four, you've built the

04:44most important habit. This is arguably the most important point out of the four when it comes to why

04:50hitting that first 20,000 is the most important. And it's something that most people just overlook

04:55or completely miss. When you save 20,000, you've actually done something way more important than just

05:00putting money in the bank. You've built discipline to get there. And that discipline is going to change

05:05your relationship with money forever. If you've never done it before, you probably had to take some

05:10sacrifices, put in some discipline and really track where your money was going. You had to say no to things

05:15that you wanted so that you could set money aside instead. And as a result, you became the type of

05:20person, you have the identity of the kind of person who can actually save 20,000. You've basically proven

05:28to yourself that you control your money, not the other way around, and that you can delay gratification

05:33when it really matters. If you're watching this and you're thinking, I haven't even got close to the

05:38first 20,000, here are three practical ways to accelerate your timeline in getting there. First, understand

05:44what your financial position is right now. You can't hit 20,000 if you don't know where you're

05:49starting from. Most people have no clue how much they're actually spending each month or what they

05:53could realistically save. Those are the first things that you want to know. And I put together a

05:58financial wellbeing toolkit that walks you through this step-by-step, figuring out how much money you

06:03have to work with, understanding your money personality and how that affects your saving style,

06:08and getting started with investing based on what works for you. If you want to fast track your way to

06:13that first 20,000 and stop guessing about what you need to get there, check out the link in the

06:18description for more information. Second, use technology to automate your progress. There are

06:23loads of apps now that can analyze your spending, figure out what you can afford to save, and automatically

06:28move that money aside for you every few days. They even have special features like rounding up every

06:34purchase to the nearest dollar and save the extra change without you even noticing. The key is to pick a

06:40tool that works with your habits so you're building wealth without constantly thinking about it. One

06:44of the tools that I've mentioned in previous videos is Plum. They're really good for this. Again, link in

06:48the description if you want to check out anything that I'm mentioning in this video. And third, don't

06:52underestimate the power of earning more. Sometimes a job switch or even just asking for a raise can boost

06:58your income more than years of small saving tweaks. If you love your current job and you're happy to

07:04trade some of your financial goals in return for security and happiness if your job doesn't pay that

07:08well, that's great. But just know that your financial goals might take a bit longer. But if you are someone

07:13who is working in your job for the money, for the paycheck, don't be afraid to push for more. And if you're

07:20not getting it, look elsewhere. Earning more is often the biggest lever you can pull to speed up your savings

07:25because you can only save up to how much you earn. So that is it. Why your first 20k changes everything and what you

07:32need to do to get there. If you want to check out anything I mentioned in the video, it's all linked in the

07:36description below. And if you liked this video, you will also enjoy this video right here. See you there.

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