The First Six Figure Salary, and How to Not Fuck It Up

If you earn $100,000 in a year, your hourly rate is a little over $48 an hour, or $8,333 a month (assuming you work full time). Making $50 an hour plants you at a $104k salary, or almost seven times the federal minimum wage. This is also more than triple the proposed minimum wage of $15 an hour. So basically, anyone making a six figure salary is freaking rolling in it.

2021 is now officially my first six figure year. As of my second-to-last paycheck from the 17^th, I have, for the first time ever, reached six figure salary compensation. The below Instagram post is from my company HR portal, showing the year-to-date earnings for proof:

https://www.instagram.com/p/CYAdUqBr-Kr/

Longtime readers may recall I’m making roughly $93k. Breaking the $100k ceiling was not because of a recent raise, but a bonus. In February I was the recipient of an extra $13,000 through my work, the biggest I’ve ever seen. It’s a little surreal I have hit $100,000 in earnings in one year without even considering my bank account bonuses or extra side income. I think one of the more exciting things about this is knowing I’m now eligible for Chief Mom Officer’s Breadwinning Six Figure Women series. Liz, I’m available!

That’s not all, either, folks!

There is more than one reason it’s a “six figure year” beyond my income.

This is ALSO is the first year where my net worth has gone up by 6 figures. On January 1^st my net worth was $183k; as of December 28^th it’s $290k. Turns out, you can see your net worth go up significantly after a big purchase like a car, as long as you do it in a year when the stock markets are up.

I’m bringing up this milestone so, yes, I can tell someone else about this. It’s also so I can take a look at what worked for me and what didn’t in the last year, as far as money matters go. If you’re aiming for a six figure salary, too, here are some things to keep in mind after that AWESOME accomplishment:

Fill EVERY. SINGLE. TAX-ADVANTAGED BUCKET, FOR THE LOVE OF GOD.

Each tax-advantaged account has a limit, subject to change every year in Congress. Currently, here are the accounts I have access to and what the limits are for 2022:

• 401(k): $20,500
• Traditional/Roth IRA: $6,000
• HSA: $3,650

Altogether that’s over $30,000 you can use for special tax advantages. Four years ago that would’ve been impossible for me to swing. But with this six figure salary year, it’s more than doable. If you’re not there yet, fill up as much as you can to help you reach it. Only have an IRA available? Fill ‘er up! Investing with these will very much help you out in the long run, especially by reducing the income the IRS will tax you on.

This made a significant difference in reaching six figures because I was able to invest with pre-tax dollars. I not only saved several thousands, but also made several thousand more than I otherwise would have.

Here’s the math to explain, using the $19,500 limit for a 401(k) and $3,550 limit for an HSA (as they were in 2021). If I had elected to NOT put that money towards a 401(k), then it would have been taxed instead. My overall tax bracket is in the 24% range, meaning that the $23,050 from both accounts would have had roughly $5,532 taken out of it. This would leave me with $17,518 instead. Boo!

Here’s some more to consider: I invest in S&P 500 index funds, which saw returns of 23% this year. That means my pre-tax dollars, completely invested, would have raked in an additional $4,485. In other words, thanks to using up these buckets I’ve earned at least five figures more than I would have otherwise in this year alone. Since I’ve been contributing to both accounts since taking this job in 2019, I’ve been able to take advantage of all the gains. Woo!

Do NOT Give in to Lifestyle Creep

Keep in mind it’s only possible to fill every bucket if you don’t have

1. extenuating circumstances (like an expensive illness, several dependents, or heaps of debt to pay off) and/or
2. a bloated lifestyle to fund.

There is a serious difference between lifestyle creep and improving your life. Don’t get the two twisted; only one of them will bring sustainable, long-term joy and it ain’t the one with “creep” in the descriptor.

Once I hit a $300k net worth I want to celebrate with a road trip to upstate New York. The most I’ve seen of it has been through my last job, which meant I mostly saw the Buffalo airport and a teeny factory town near Pennsylvania. Followed by (burying the lede here) a trip overseas as well. I had wanted to go to Europe for two weeks to celebrate hitting $200k, but at the time I wasn’t comfortable doing that because COVID.

I had to be honest with myself about whether taking these trips would be part of lifestyle creep or not. Other considerations were the privilege of travel in the first place, and how ethical it is to travel during the second year in pandemic times. Is this lifestyle creep, even malicious disregard for others’ safety? The answer is “no” for a road trip, since it’s much easier to maintain social distancing on that vacation. I’m not sure what the answer is for an international trip, which is why I’ve put it off for so long.

Yeah, yeah, YOLO and whatever. I know too many put off doing what they want already out of arbitrary “maybe someday” inaction. In this case I’m following the tenets of thinking things through, which I need to keep doing if I want to earn a six figure salary in another year.

Shut Up About It

This includes me too, blog notwithstanding.

Thanks to living in a capitalist society there is a massive emphasis on money. As a result, people have complicated thoughts and feelings around it. How you should earn it, how you should spend it, what you should do with the money you don’t spend, how much of a failure you are if you do. It’s why so many novice finance writers tend to approach the task with the same banal, vague advice over and over and over; they’re too afraid of getting it wrong and alienating their potential audience.

It’s not just finance writers that temper their money talk, either. After all, those same reasons are why folks in general tend to avoid talk about money with all their might, even if it may be to their own detriment. There are definitely times when conversations about money are needed and good. Pay transparency with coworkers to ensure fair wages? Good. Discussing money expectations with your significant other once things are getting serious? Good, and also necessary, you shysters. It’s good any time money chats are done with the goal of making everyone involved have a clearer picture of their financials, once they’ve consented to the discussion. Aiming for improvement, and earning consent, are key.

This is why it’s bad if you’re telling everyone around you about this little-known investment opportunity they just have to try before it’s too late. They didn’t tell you they wanted to hear about it, or even if they have the money to participate in the first place. That’s why it’s bad to be honest about your pay with casual friends or struggling loved ones if you’re raking it in.

Use your best judgment.

There’s nothing that says you can’t help out loved ones; I send grocery money to a family friend as an aid, and will start sending money to another family member starting next month. I’m saying don’t be specific about the numbers. Relationships get very thorny when you introduce wealth disparity to the mix. People get opinions on what your budget should/shouldn’t include, what you should invest in, and why you should spot them for a loan or handout. You might find a lot more resentment (“What have THEY done to deserve a six figure salary that I did not!”) or narrow critique on everything you do (“They make that much money and only spent $20 on that gift/wine bottle/restaurant meal, they clearly don’t care about sharing the wealth”). It’s a lot easier to sow jealousy and envy, whether intentionally or not.

Let them know you’re successful! That you’ve got the high pay you’ve been working towards! How grateful you are for their help or support to get you there! But not the specifics. Seriously consider if that’s the right move or not. If you want to talk about your financial success with someone, get money friends at places like EconoMe or the ChooseFI meetups. Then you can chat your heart out! Go nuts! Dance to the song of your people! But for the love of all that is holy, don’t do it with someone else unless you’ve both confirmed it’s of interest.

Be open, not braggy.

I practice what I preach here in regular life. I’ve told my closest friends I have a finance blog and like talking about that stuff. Some of them have listen to the FI song. A couple have read some posts. But they all know I’m around to chat about this stuff at a future date, and that I won’t bring up specific stuff until and unless they’re comfortable with it. And since finance can get so nuanced, the conversation can go in many different ways.

Recently I had a long conversation with a friend about the intersection between financial health and mental health. Specific numbers didn’t come up once during that visit, which wasn’t needed. She got what she wanted out of the conversation and we were even closer for having it, but only because I didn’t jump all over her asking whether she’s investing in her 401(k) or whether she’s heard about the gospel of index funds. Good friends are hard to find. Don’t push them away because you don’t know how money talks should work.

Keep Chugging Along, But Take No Shit

Work sucks by nature. Do your best to stick with making that six figure salary so you can invest your way to a lovely little nest egg and never need to work again. If you’re being paid this much, you likely have more respect at work than you think. Knowing that means knowing you can tweak your working arrangements to better align with what you need.

For me, I know I can push back on my company’s requiring all employees to come into the office a majority of the week. For you, this could shake out to being taken off a hated project, or joining a project that really interests you, or – well – whatever you want within reason. Take stock of something simple to grant you that makes your work life that much smoother. It doesn’t have to be something easy, mind you, just simple. Step into your power at work. You’re likely not using it to its full extent.

Anyhoo! Remember to also continue earning more, spending less, and investing the difference. That’s all I have to say to anyone on any social level 😉