Why A Six-Figure Salary No Longer Means You’re Rich

in Investing by

I was born in 1980, and I still remember the days when “bringing in six figures” was a sign of extreme wealth and success. It was more than enough to buy the perfect house with a white picket fence, after all, and achieving that sort of income implied a certain level of status that nearly everyone aspired to. You could even say that a six-figure salary was seen as the real “American dream,” simply because earning that much money meant that you had “made it,” at least in financial terms. As a child, I distinctly remember dreaming of a six-figure income myself, and fantasizing about all of the amazing things I could do with so much money.

Times have changed since then, but the public’s perception of a six-figure salary hasn’t necessarily changed with it. With the median household income stuck at around $53,093 in 2014, an annual salary of nearly twice that still seems like more than enough money to succeed and thrive in any economy, no matter the circumstances. However, a convergence of factors have fundamentally changed what it means to rake in a “six-figure salary” in America, and many families who look rich on paper are merely struggling to get ahead along with everyone else.

Why Six Figures Isn’t What it Used to Be

Earning a six-figure salary is still a sign of status and success, but it no longer guarantees a lifetime of wealth like it once did, especially in certain parts of the country. A recent analysis by USA Today goes even further to say that the average price of living the American dream has now risen to $130,000 per year due the rising costs of nearly everything. The authors of the study claim that the American dream is about “finding and pursuing a rewarding career, leading a healthy and personally fulfilling life, and being able to retire in comfort,” adding that only 1 in 8 households in the U.S. currently earn enough to achieve those goals. But, what exactly has changed?

According to the experts, a whole lot.  A wide range of sources blame the wholesale death of the American dream on many factors, including these:

Inflation

The Bureau of Labor Statistics offers all kinds of nifty data on inflation rates over the years, including this Consumer Price Index inflation calculator. Play around with it and you’ll see that a $100,000 salary in 1980 would go as far as $288,713.59 does today.  In other words, today’s family would need to earn $288,713.59 to achieve the same kind of lifestyle as someone making $100,000 in 1980.

This chart shows exactly how the value of the median household income has decayed over the last decade:

median income chart*Economic Noise, 2014

The median income has risen slowly in terms of dollar amount, but any gains made have simply been chipped away by inflation.  With the rising prices of everything from energy to food, families- even those with high incomes- are forced to spend a larger percentage of their earnings on necessities. A few examples:

costoflivingxpenses-7-1-14*Economic Noise, 2014

Geography

A six-figure income may still go quite far in the Midwest, but the same cannot be said for large cities and coastal areas where the price of real estate has escalated dramatically over the last few decades. For example, the median price of a home was around $282,000 nationally in May 0f 2014. However, the median home price in San Francisco, for instance, topped $1 million just last year.

And in Manhattan? The median home price in one of NYC’s trendiest neighborhoods reportedly topped $855,000 during the last three months of 2013. Imagine trying to live in a high-cost area like the ones I’ve mentioned while simultaneously hearing how a six-figure salary is the key to financial success. Because of the price of real estate in some areas, six-figures is barely enough to get by.

Kids

According to a recent analysis by the U.S. Department of Agriculture, the cost of raising one child for a middle class couple has grown to a staggering $241,080. This figure includes nearly everything it takes to raise a child- including shelter, education, food, and even daycare. While a six-figure salary is nothing to sneeze at, these costs often fall hard on affluent families since they do not qualify for the kind of help and assistance families with lower incomes often have access to.

Help in the form of aid for college and subsidized daycare, for instance, is often not an option for those who bring in six-figures, making it harder for those families to absorb the costs and still pull ahead. Throw more than a few kids into the mix and it’s easy to see why a six-figure salary doesn’t go nearly as far as it used to. It’s also important to note that, according to IRS.gov, the child tax credit begins phasing out once a family reaches an annual income of $110,000 per year. Although this may make little difference to a family’s bottom line, it does add to the overall theme that, once you reach six-figures, you are on your own.

Healthcare

Nothing has the potential to erode the value of a six-figure salary (or any salary) like the growing costs of health insurance and healthcare in the United States. According to the Bureau of Labor Statistics, in 59 out of the last 73 years leading up to 2008, the inflation rate for medical care increased more than any other item. Furthermore, as the BLS noted, the percentage of household income spent on healthcare has had to rise accordingly, albeit to the detriment of the family budget.

The passage of the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare, also underscored the general idea that families in the six-figure range should be able to afford to pay for the entirety of their family’s healthcare, whatever the cost, by capping subsidies off at 400 percent of the Federal Poverty Limit, or around $94,000 for a family of four. (For more, check out ObamaCare: The Good, the Bad, and the Ugly) The following graph also illustrates how much more Americans pay for healthcare per capita than other countries as of 2008:

health spending per capita EDITThe Henry J. Kaiser Family Foundation, Health Costs, 2011

How to Stretch a Six-Figure Salary Even Further

It’s important to note that, while a six-figure salary doesn’t go as far as it used to, it’s still nearly twice the median salary in the U.S. and far more money than many people will ever see. I’m certainly not suggesting that we should have a pity party for those who earn six-figures, nor am I implying that their lives are harder than they should be. I only hope to highlight that, while the perception of what a six-figure income means has not changed much, the reality of what that money is worth has changed immeasurably.

However, some people seem to have a knack to stretch their income to the max, even when living in a high-cost area or having higher expenses than most. Here’s how they do it:

  • They live a frugal lifestyle- Earning a six-figure salary often means that you can save a large percentage of your income for the future, invest more than most, and use your earnings to fund your future goals. And, no matter who you are or where you live, living a frugal lifestyle is what will get you there. There are a lot of ways to be frugal, but you can start with driving older (paid-off) cars and tracking your expenses to ensure that your family spending aligns with your values and goals.
  • They invest…a lot- Investing in tax-advantaged accounts is one way to lower your tax liability and accomplish a plethora of goals in one fell swoop. For example, those who max out their employer-sponsored retirement plans and make the most of applicable tax deductions will be far better off when it comes to tax time than someone who does not. Self-employed individuals, specifically, can shelter much of their income from high taxes by harnessing a retirement vehicle created specifically for the self-employed, such as the SEP IRA or Solo 401K. Maximizing your future retirement funds while simultaneously reducing your tax bill is an all-around good idea, especially for higher-earners who stand to benefit more than most. (Need help with your investments?  Personal Capital can help.)
  • They don’t keep up with the Joneses- A six-figure salary will never be enough if you try too hard to keep up with the lifestyles of those around you who, in many cases, cannot afford it either. Instead of keeping up with the Joneses, learn to live with less. Set a goal to save a certain percentage of your income and find creative ways to make your money stretch.  When you don’t keep up with the Joneses, you’ll have more money in your pocket to spend on the things that matter most.

And that’s not all you can do to ensure your six-figure income actually helps you get ahead.  Don’t feel like your earnings are enough?  Consider getting a second job, consulting on the side, or coming up with a money-making endeavor you can work on in your spare time.  Struggling to get by in a high-cost area?  Consider whether it makes sense to move your family to a lower cost area where your dollar will stretch much further.

The bottom line is this: A six-figure salary is no longer a guarantee of financial success.  And, with the cost of living rising every year, it’s inevitable that it will be worth even less in the future.  Fortunately, there are a plethora of ways to stretch your dollar further and continue “living the dream.”  A six-figure salary may not mean you’re rich, but it doesn’t mean you’re helpless either.

Do you think that a six-figure salary is still rich?  Why or why not?

Photo credit: Robert Lz

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Holly Johnson

Holly Johnson is a financial expert and award-winning writer whose obsession with frugality, budgeting, and travel plays a central role in her work. In addition to serving as Contributing Editor for The Simple Dollar, Holly writes for inspiring publications such as U.S. News and World Report Travel, Personal Capital, Lending Tree, and Frugal Travel Guy. Holly also owns two websites of her own - Club Thrifty and Travel Blue Book. You can follow her on Twitter or Pinterest @ClubThrifty.

127 comments

  1. SavvyFinancialLatina

    I do feel like the our paycheck does not go as far I thought it would. I thought once we graduated and hay stable jobs, we would have a lot of discretionary income to spend on whatever we want. While we are not super sticklers on expenses and do enjoy lots of food, I cannot go on clothes shopping sprees every month. There are a lot more bills as an adult you have to take care of! It’s crazy. We earn a pretty ok living. It’s hard to correlate with how much my parents earn (which is significantly less), so I can’t complain.

    Reply
    • Holly@ClubThrifty

      I agree! Money certainly doesn’t go as far as I dreamed it would when I didn’t have any. Now that we work hard and earn as much as we can, I realize that being rich and feeling rich are two entirely different things.

      Reply
    • JohnB

      The best thing to do is find other ways to make income. More specifically, we should aim to make passive income; where you aren’t working for the extra money and can still have time to actually appreciate what you’ve earned. This post stated a lot of ways, which includes investing, but one step further would be to start a FT business. Of course, you will have to put in work for the first couple of years, but if you implement a system that allows your business to run itself, or at least have a team handle the day-to-day tasks, you can earn 7 figures instead of 6 with a lot of time to do the things you want. Just a suggestion though.

      Reply
      • Anonymous

        I like it.

        Reply
    • WEREWOLF 1

      I make just over 100K a year and have for the last 3 years. I live alone. I have a nice little home in a relatively expensive part of town. I hate to go against your story here but when one is single living alone a 100K per year salary is all you need to lead the good life. I live in a walkable upscale community. Where I live is safe relatively speaking. We have nice upscale stores in one of the few remaining large regional malls in the area.

      I honestly think if you can’t live on 100K a year as a single person then you must be really sick. I take great vacations. I have almost no bills besides the mortgage. No credit cards. Yes if you have like 2 babies and a stay at home wife yeah life gets less awesome. However a single man living alone on 100K is pure awesome.

      Also it also depends where you live. I live in stupid super liberal Maryland where taxes are totally insanely high. I also lived in Texas where the cost of living was wonderful. You could get a nice house that is dirt cheap but awesome by killer high Maryland Standards. $100K in Maryland is survival money if you have a wife and family. $100K a year in Maryland as a single guy is still on living on the extreme outer cupst of rich.

      Reply
      • Fernando

        “Yes if you have like 2 babies and a stay at home wife yeah life gets less awesome. However a single man living alone on 100K is pure awesome.” You have it backwards. Perhaps one day you’ll learn that. As for Texas, most of the homes that are built there suck. Horrible craftsmanship. At least you acknowledge that $100K is OK for one person and doesn’t go very far for a family with some children.

        Reply
      • Curtis

        I make just over $100k/yr as well, I’m in my late 20’s. When I was 19-21 I was averaging just above $200k/yr in real estate financing, as a young single man that kind of money was simply play money… frugal?? Yeah right, tell that to my 19yr old self, I was pretty out of control, but that’s over 100k/yr more than the dollar figure within this article..

        Now to my point; I currently make just over $100k/yr, it’s great, but as a single father of 1 child, it’s much harder on my financially than I would’ve initially thought. $1750/mo + Utils for a 3br house in a really really nice suburb of Chicago, I’m actually very lucky (working on purchasing the house I’m renting). If I were single I would either be renting a badass pad downtown Chicago with roomates, or just get my own studio, either way I’d probably be paying $900/mo for a bedroom in a REALLY nice place if rooming with others, or $1300/mo for a nice studio or 1br downtown. This is a pretty large difference in price. Next, I wouldn’t have had to pay $14,400 last year ($1200/mo) for my sons full-time pre-k (childcare), then you have clothes/shoes/attorneys fee’s (if you ever have to go into a custody battle). Right now my son has just started kindergarten which has decreased my monthly childcare cost by $600, so that’s nice, but somehow I still seem to find myself running through far more money than I should be every month, and it’s not like I splurge… I have a 2005 truck @ $400/mo, a 99 gsx (fun modded car) that’s paid off, and now a 98 Honda Dx with 200k miles that gets 38mpg, a relative gave it to me. This shit is hard, I need to find a way to bump back up to $200k+/yr range again to feel comfortable.

        Reply
      • Anonymous

        “Yes if you have like 2 babies and a stay at home wife yeah life gets less awesome”

        lol you sound like a young kid who happens to make a lot of money, is single and isn’t thinking long term retirement and family health. Your Healthcare is a fraction of a families cost (think 8 times less). You aren’t saving for cards and college tuition for your kids, you don’t have to pay for the $400/week daycare of dance lessons.

        The author is talking about older adults with families, not a young rich single person.

        Reply
    • JackSpade

      The American Dream?……. really, this flight of fantastical marketing philosophy is still being used. Thats laughable…. because it only ever was in the true sense of the word, a ” dream”. People who work underneath all major players in the world and US economy who make less then $500,000 / year will never get wealthy in their own lifetime. Your still in the group of the “little people” who work for everyone else, who don’t get paid shit…. even if you make $300,000 / year… yeah you have a “nice lifestyle” but you cant afford to not work everyday… unless your born rich. Being rich and wealthy means that you do not work for your own money at all…you are on the other side making people do your work for you, like the actual really rich and wealthy people. Corporate lawyers, medical surgeons, politicians, captains of industry…. these people are involved in the world economy at high levels and will not relinquish their powerful positions to you ever. They will keep you thinking that you are living the “American Dream” and control the economy and you based upon your slightly higher than poverty lifestyle with your middle-america salary. $100,000 / year…. psh, that’s like a slight bump up from simply surviving.

      Reply
      • Anonymous

        I think you’re confusing the American Dream with “college utopia” lol. The American Dream isn’t to “play all day and not have to work”. The American Dream was to work hard all day and come home to a beautiful home, educated children and be able to vacation regularly and eat/sleep/live well.

        That’s the American Dream. Some a generation of young people are trying to change the meaning of the “American Dream” to be something it isn’t. And it isn’t life without super hard work. Life without super hard work is not sustainable for any culture or society and is only for the lucky and the rich, which is NOT what we are discussing here.

        Reply
        • Anonymous

          What? And get decapitated by the drug lords? no thanks!

          Reply
    • Anonymous

      take ur million and go 2 mexico, cheap there, with million highroller life style

      Reply
  2. Financial Samurai

    I remember in college, my goal was to make six figures by the time I retired 40 years from the time I graduated. My barometer was my father, and I looked up to him as a US foreign service officer.

    Once I started work, I realized, WOW…. there is a lot of money out there for the taking. You just have to go out and get it.

    But I think in the most expensive cities…. around $200,000 a year per person or per couple makes me feel rich. Make any more and it does nothing for happiness and well being. So perhaps $200,000 is = $70,000 in no coastal cities.

    Six figures is still a great goal for everyone to have.

    Reply
    • Holly@ClubThrifty

      I agree that six-figures is a great number to shoot for, regardless if it isn’t what it was at one time. It can also stretch much farther if used wisely! That makes a big difference.

      Reply
      • gilstrac

        I have in been in this category for over 20 years. I worked hard enough and was lucky enough to get into this category as a young man. I have managed my expenses closely over the years. Growing up in a frugal environment, I run my household this way with the help of my best friend and wife. The basic expenses have steadily increased over time. It is very depressing. I feel inflation and taxes(I am not just referring to income tax here it is death by thousand cuts) are out of my control. I can control costs but I cant control what basic needs cost. I chosen over the years to keep costs under control and focus most my energy on increasing my income. This is the advice I give to young people who will listen. Control the outs, practice delayed gratification, and focus energy on increasing your ins. But one thing I know for sure is the costs for basic needs have gone up considerably in 20+ years and continue to climb while income will hit a glass ceiling and the glass ceiling slowly rises if at all at a certain point.

        Reply
      • Anonymous

        Interesting to know how the evolution of people’s habits and money being paper, coin or rocks has impacted our overall perspective of what means the most. Most people have become overly sensitive to what is perceived as real and need to dig deep into true reality so we can verify where we really stand in the world to impact what is most important in life. We should do our best to understand that the only thing we can truly control is our own actions. I hope we are all thinking positive at all times!.Who is to say a $50k job compared to a $150k gives a more satisfying life. People who make more will spend more……this is what makes the world go round….we do become a product of our environment and need to continuously adapt with change.

        We cannot become comfortable with mediocrity and we as people are the ultimate changing force of the world we need to strive for the best of the best for ourselves, our families and each other.

        Cheers!!!

        Reply
      • Jtaylor

        Wow you young people and your theoretical goals. Why not have a goal of living comfortably, frugally, and with respect for the money you are earning? Saving money for a rainy day is a good start. It shouldn’t be about a “numbers” game.

        Reply
  3. frederick

    Only 5% of American individuals make $100,000 and only 16% of households. That’s in the richest nation in the world. A country that basically has double the gdp of the next closest country. No offense, but my gosh are we spoiled.

    Reply
    • Anonymous

      We are not the richest country, Norway is. Look it up.
      Did you catch the stats on healthcare? More than 2k more than any other country. That is the cost of having insurance companies in the loop. They must get paid too! What a waste of money.

      Reply
    • Vicky

      We are not the richest country in the world. That would be Norway. Look it up.
      We needed a jobs bill. The house was too busy trying to repeal
      Obamacare!

      Reply
    • Aesadai

      America is not the richest country in the world. Several countries have higher per capita income. Also spoiled refers to those receiving what they have not earned. Someone in this country who earns 100,000 has really earned between 130,000 and 140,000 since an employer has to calculate employee cost at 1.3 or 1.4 times what is paid to the employee (mostly due to soviet style labor laws). In addition the employer doesnt hire employees to cover their own cost but for profit so the total value this employee needs to bring to the company is going to be around 170,000 to leave enough for employer profit, draconian labor programs, benefits, and enough to make the 100k. Then out of the 100k, 30k goes to federal income tax… Down to 70k it drops further if you are in a slave state that charges state income tax. Then of course anything you do with your money pays additional tax. I would not refer to someone in this situation as “spoiled” but as extremely productive. Now this assumes the money is being earned in the semi-free market and not in one of the artificially created markets that Uncle Sam has brought into existence at the expense of the productive economy.

      Reply
      • Anonymous

        BOOOOOO!!! Calm down.

        Reply
    • JohnB

      Yes, we are spoiled, but even more apparent is that we are financially uneducated as well. So, while we can make a lot of money, most of us don’t know how to consistently make more or even sustain our current amounts. This is why more and more people are in debt each day and why you see posts like this that highlight the gap between financial literacy and the current financial mindset of the majority of the country. Once that gap closes, we will be in better shape as a whole.

      Reply
    • Anonymous

      Thats bs. Most people make close to 6 figure income. Even construction workers. Dont measure everyone by walmart slave employees. All that statistics they put out there is fake.

      Reply
      • reality

        “Most people make close to a 6 figure income.”

        LOL no. Most people are lucky to make 40k each year. You’ll learn that once you get out of high school.

        Reply
    • Anonymous

      Rich is a relative term. We also have the highest education and Healthcare costs in the world. Do we have a lot of rich people? Yes! Do we have a larger group of poor than most countries? Undoubtedly. So ponder on that for a moment

      Reply
      • Javen Graves

        I look at it as if you have a job you are not poor u just don’t have the money right this moment I don’t believe in the word poor I don’t like it

        Reply
  4. Tricia

    Great post, Holly. This is so true! I know I certainly used to think that if I could just make it to six figures, everything would be perfect! Well, not so much, if you’re making that six figures in one of the expensive coastal metro areas. Of course, the expensive coastal metro areas tend to be the places where one can actually *make* six figures, so you’re kinda stuck in the hard-to-get-ahead rut. The trick is to get a job that makes six figures someplace with a low cost of living. THEN you’re set!

    Excellent point about continuing to live frugally, that’s critical. Also excellent point about those making six figures being “too rich” to get all kinds of assistance. If you’re in the low sixes, you’re really not rich, you’re just doing ok, and possibly struggling to tread water. So optimizing your tax strategy is also critical in this cohort.

    Great stuff!

    Reply
    • Holly Johnson

      I agree. The best option is to earn as much as you can in an expensive area. Then you are really set!

      Reply
  5. gilstrac

    A stealth tax I often complain about is the social security maximum increases over time. It keeps creeping up and is rarely mentioned. Today you have to make over a 100k to max it out. Back in the early 90’s it was in the 50’s. In the 80’s, it was even lower. It should be included.

    Reply
    • Holly Johnson

      Good point. All of those small things matter and take away from the bottom line.

      Reply
    • rocketkoala@gmail.com

      The Social Security tax- adjusted for wages- is actually lower now than it was in 1937. It’s true, though, that fewer people make more than the tax max (only about 6% of people today). Raising the cap would actually be more equitable. While people making $100,000 may be struggling ;), those making a million probably wouldn’t feel the squeeze from the additional tax.

      Reply
      • gilstrac

        It doesn’t comfort me to know I may be in the minority. I worked hard to reach the glass ceiling in my chosen industry. Every year I give more to the government while all the time being told how taxes are being lowered or not rising. It is simply is not true if you make more than the social security maximum. You get taxed more every year and take home less.

        Reply
      • K M

        I think “progressive” is the word you are looking for rather than “equitable”. People making $100k are already paying way more into the social security system than they will ever receive back. Making it more equitable would be to eliminate the cap on payments made to retirees and to base those repayments on actual dollars deposited into the system rather than giving low-wage earners a boost and penalizing the high-wage earners as is currently the case.

        Reply
        • Scott

          KM’s comment is not true. Actually, you will recoup your SS contributions (not including your employers matching contributions) in about 5-years assuming you start social security after reaching full retirement age. If you include you employer’s matching contribution and then it hits 10-years. Because the median life span is now out into the low 80’s, that means most folks will take out more than they put into social security; hence the depletion of the social security trust fund built up because of our baby boomers population bubble. Personally, I think there should be no income cap on social security taxes. The maximum payout calculations should not change, so someone making 7-figures and paying into social security only gets that same max payout as someone who made only a low 6-figure salary at the end of their careers.

          Reply
          • Josh

            My wife and I are currently in our late 20s making 130+k/yr. While I certainly don’t feel rich, I have many friends (with children) that squeak by making a quarter of that. I do feel that I am going to be very well set when I reach retirment age. Maxing out 401k contributions for 30-40 years will have that effect.

            I think that people in that situation shouldn’t even take the SS benifit after retirment. The system isn’t even solvent; why are you going to tax it further by taking money that you don’t actually need? – call that socialist if you want, but I look at it as “paying it forward”.

            I sometimes work 70-80 hour weeks. I’ll get called out to the plant at 2am sometimes and maybe work a 20 hour shift. I know that I work hard; I simply have to think that the majority of people also work hard for far less pay.

  6. Lisa

    I agree in every way possible with this article, especially the “Kids” section.

    How is $110,000 the new “rich” of America? Especially when you are paying $20,000-$30,000 a year for childcare (we pay just over $20,000 a year and of course qualify for no assistance).
    We are phased out of the child tax credit and can’t even write off all of our student loan interest. But guess what? WE ARE STILL PUTTING TONS OF MONEY TOWARDS OUR STUDENT LOANS!

    We make six figures combined, but I would say we are just getting by. We live in a tiny townhouse with no yard. We drive extremely two cheap cars. We never go out to eat. We never ever go on vacation. We can’t invest as much as we would like. I am extremely frugal and buy ABSOLUTELY NOTHING besides groceries and gas for my car. Nothing. No hair cuts. No new clothes (okay, so I have to buy clothes for the kids but they are 100% used). No new toys. Nothing. And still, saving and investing are hard with such huge childcare payments, large payments towards student loans (we are trying to pay $1,000 to kill them once and for all), and trying to save for college (which of course we won’t get any help for, but there is no way we will ever ever be able to save enough for our kids to go). Also, my teacher pension, which is mandatory to contribute a large percentage to (7.5%) will be worth nothing at all by the time I retire.

    How much can the government keep the middle class down? A lot apparently.

    Reply
    • Gilstrac

      It isn’t but being one of the 16% of households making over 100k odds are against us.

      Reply
    • Holly@ClubThrifty

      I can relate! It does appear that we live in a lower cost of living area than you do so our problems aren’t quite as severe. I know like we make a very comfortable living, but worry that the high costs of everything including college for our kids will continue to “chip away” at the lead we’ve managed to get thus far.

      Reply
    • Jason

      Lisa’s comment makes an awesome point that I’ve questioned for years. I am in my 30s with multiple grad degrees. I make six-figs and live a “comfortable” lifestyle (YMMV!), we drive two used cars (I’ll never buy a new one, ever), have a small starter home, I love cooking so we don’t dine out often, etc. But the kicker is I also have $1600+/mo in student loan payments. Like Lisa, I make enough that there is zero income tax deduction. My wife calls it our home we don’t get to live in. I am proof of someone who moved away from the expensive area (NYC Tri-state) to a place where my money goes further (Portland, OR).

      But here’s the thing I’ve never understood: companies have forever (100 years) been able to write off the interest they pay on any debt issuance, the reason being that it is seen as a spur to economic growth because the loans they take are invested in new machinery, workforces, products, etc. By one estimate, the tax shield from 2000-2010 was $8.5 TRILLION dollars.

      Why then, as the politicians – and this President, in particular – speak out of both sides of their mouth about the importance and necessity of education, skills development and college degrees are those of us who make the same investment in ourselves seen differently than a corporate body? A corporation is considered a “person” in the law, why should the double standard remain?

      Reply
    • Lisa H.

      I am VERY proud of you for your financial discipline. Hang in there. You are being responsible and doing the right things. And I believe you are richly blessed. Through the first couple decades of my working life, my husband and I were only able to build a relatively small savings. However, as childcare and education loan expenses went down, we have been able to build it up significantly. Now as I approach retirement, I can’t help wondering whether all this money we’ve saved shouldn’t be spent helping to save starving people in this world from dying rather than worrying so much about my comfortable retirement.

      Reply
    • Money Mama

      Lisa,

      I can SO relate to you. We were in your exact situation last year. We actually ended up owing the government in taxes because we made “too much,” and didn’t qualify for any credits. We learned that we had to pay in quarterly taxes for the next year too. This year, my husband got a dream job, but it required him to leave for 7 months at a time. (We have two young kids and I work full time). We were thrilled. He went from making $65,000 to earning over $165,000. I stayed at my usual $90,000. So, we now earned over $250,000. Great, right!? Not really. We just had a session with our accountant and we will owe an additional $60,000 in taxes–which means we will also have to pay $15,000 each quarter on top of that $60,000 next year. This means, we will have to pay more in taxes next year (to pay off 2015 and the estimated quarterly) than my gross earnings for the whole year, and I make six figures alone. So stupid. I will literally just sign away every cent over the IRS in 2016. I was going to finally pay off every cent of my student loan debt and be totally debt free outside of our mortgage. Now, we will be swamped in IRS debt–and still owe on our loans and get zero deductions for paying on them. We are seriously considering the fact that one of us will have to quit their six figure career. We’d then qualify for interest credits on our student loans and mortgage, we don’t get childcare credits anymore, so we might as well stop paying $440 per child per week to that. We are sort of giving up on the US tax system. Zero incentive these days!

      Reply
  7. Tommy

    The President says you need to get some “skin” in the game. Stop complaining you crybabies. The President is only on his 5th vacation this year! You guys better stop complaining and be lucky that you have such a great leader. Now get back to work,we have 40,000 kids coming across the border every week that you have to educate and feed!

    Reply
    • Vicky

      Obama has taken far less vacation days then your buddy Bush did! Don’t be so stupid!

      Reply
  8. What America

    Tommy, Hard to argue. They made their beds. now they hav eto lie in them. But they think bitchin without geting onvolved will do the trick. Involve you rlif ein politics or poitics will get involved with your life. Just how it works. and has for 1,000’s of years.

    Reply
  9. Dan VanWinkle

    I am shocked that I didn’t see anything about student loan debt in this article. Our household income is over $90k, but we have friends making $55k who have more money that they are able to save because they do not have any student loan debt. We graduated college (undergrad only) with 6-figure student loan debt (from a public school) and pay more a month on that than we do for our mortgage and utilities combined.

    Such a large amount of unsecured debt on college educated adults is killing the American Dream more than anything else. You basically have to find your way to a 6-figure salary without student loans to be able to live the American Dream, even in the Midwest. Considering the value employers put on a degree, it is nearly impossible to make 6-figures without one.

    Reply
    • Nate

      How did you amass a six figure student loan debt from a state school?

      Reply
      • Katie

        Easily – if tuition is $8000 per semester and two people go 4 years (2 semesters each year), that’s $128,000 in tuition. If he had an engineering degree, that would require 5 years and increase the tuition more.

        Reply
        • K M

          And that is assuming in-state tuition. Some state schools have out of state tuition in the range of $30k-$40k per year. It adds up quick. I went to school for 8 years. Managed to get through the first 4 at an in-state institution working full-time and so graduated without debt. The next four years of grad school, however, did not have in-state rates. So I ended up with about $160k in debt. I landed a good job after graduation, but $1,800 in student loan payments a month will make anyone feel less than “rich” and many of my classmates were less fortunate. Even on extended repayment plans, they are paying between $700 and $1,100 a month. That is before housing, before car payments, before food. My friends at dental and medical school have it even worse. They are graduating with $400k in debt, even making $180k out the door, they have $40k a year in loan service payments. That is incredible to think these people are being put in the same boat as super-wealthy families who inherit their money and make $100k with no debt. Income does not equal wealth, so please keep that in mind when raising taxes on the high income poor.

          Reply
          • Anonymous

            Keep the people poor and dependent on government handouts if they don’t go to college, and keep them heavily in debt if they do. How to control a population, capitalist style.

  10. Ricky

    Everything is relative, of course, $100k in NYC doesn’t do as much as $100k in Dallas or Houston.

    Also, not everyone is as frugal as the next. Some could save 50% of that and others never would save a dime.

    Reply
  11. John O

    “Six figures” is not even wealthy by any means anymore.

    I make $80k+ a year, have no rent or mortgage payment, do not drive a fancy car or do or own anything lavish, have no kids, no wife, no dependents. and I’m practically BROKE.

    Part of that is that I am aggressively paying off student loans(I pay more than 4 times the minimum payment) and part is that I live in NYC.

    But still, I am not far from six figures and I could not afford to live in a cheap apartment or house paying full rent.

    Reply
    • SF Resident

      It’s amazing that you are destroying the student loan. How long until you pay it off and can redeploy that money to retirement/investment? When I was aggressively paying down my debt, I had an exact month-year that I would send in that last payment and threw myself a cupcake party when I made it. It was great motivation. And once accomplished, my investment accounts grew in leaps and bounds since I diverted all that loan money over.

      Reply
  12. Russ

    Great article, but I think you forgot one monstrous category that cuts into discretionary earnings: student loans. Although student loans are technically optional, the truth is that earning power is significantly reduced without a degree, and college costs are rising far faster than inflation. As a real life example, my wife and I have a combined six figure income, but we spend 40% of our after-tax income on paying back student loans. That’s before any other living expenses. So the basis of the article is absolutely correct: we have to be frugal simply to lead a financially stable life, and it will be decades before we can consider ourselves “rich” by any definition, if at all.

    Reply
  13. Brad J.

    Very well written article. I’ve read many pieces about this topic, but this one does a nice job hitting a number of the influencing elements. Chipping away at past sins (debt) is a great way to help stretch your dollar. For example, I tell people to add up all of the interest they pay each year. If they pay off their debt, they will get a permanent raise, after tax of that amount, no matter where they work. It is amazing how much of a motivator that can be for someone to work hard at reducing their debt load.

    Thanks for the food for thought!

    Reply
  14. FrugalTechie

    Our gross income for last yr was just above “100,000 salary in 1980s money” but we still very closely watch our expenses because we always live with the thought that we are always 1 layoff away from things turning around 360 degress.

    My wife always has this prodding observation-cum-question as to why her assistants eat out everyday as well as owning the latest gadgets and I tell her that people’s tendency is for “instant gratification” even if their fiscal situation doesn’t allow for it.

    We’re so pissed off with the taxation laws that seem’s to preach the mantra that its better to live of govt subsidy then trying to get ahead in life by working hard (& smart). And, when we think of how the taxes that we’ve paid end up getting used (think subsidies that help to keep the poor “perma-poor” & enslaved to the govt, wars for oil fought on behalf of the corp’s & ofcourse for the illegal’s) instead of real development our blood pressure is off the charts.

    So, unless one’s/family liquid net worth is big enough that just the interest earnings from the money market savings account can sustain your lifestyle, IMHO everybody else is struggling to just get by.

    Reply
  15. acb550

    Let’s not forget debt. My wife is a doctor (MD). With our child, I became a stay-at-home dad. We just finished residency and are finally “making money”. By the time her student loan debt is paid off, her loans alone (forget mine) will be paid back to the tune of close to $900,000. And because “we are rich” we lose all tax breaks. We cannot deduct student loan interest. Last year we paid $30,000 in interest and could only deduct $300. This year the deduction will be $0.

    I stopped working in 2012. But the last paycheck was in 2013. I had all of $45 contributed to the retirement plan. Because of that, I could not contribute to a tax-deferred IRA because I had retirement plan checked on my W-2. We can not get other higher education cost credits because of her salary. The government doesn’t take what it costs to get to the 6-figure mark into consideration. If we were born into it, then we’d have an easier time. But we weren’t. We worked hard and took out loans. In 15 years we’ll be sitting pretty. But my wife had 8 years of schooling plus residency before she starts to see the income. Then it will be another 15 years before she can enjoy it.

    Reply
    • K M

      I want to like this comment. It is so spot on.

      Reply
    • Tamara

      You and your wife have my sympathy! Usually expensive degrees are a requirement for a 6-figure salary (for some unfortunate people, the expensive additional degrees don’t even pay off in terms of salary!) If you are paying for your education yourself, not only do you have debt but you also have years of lost potential income. And of course, if you want a high-paying job, more likely than not you have to live in an expensive city.

      My husband and I are fortunate to have no debt but we live in an expensive neighborhood for work reasons. Taxes, health insurance, SS witholdings really bite off a huge chunk of income (yes we live in CA) but it is what it is. We live comfortably (gratefully so) but are by no means “rich” (but it’s all relative). We live as frugally as possible (old car, rent instead of buy, low recurring expenditures) without going overboard. I’m also vigilant against lifestyle inflation. Truth be told, my instinct is to be even more frugal than we are now (because we certainly can cut back more on multiple categories). I can’t possibly imagine adding kids and a house to the mix; not that I even want a house (poor investment IMO) and kids right now (though social pressures for both are pretty high) . Since it is just the two of us, we are saving and investing as much as possible. My goal is to achieve financial freedom while we are still young enough to really enjoy it.

      Reply
    • Overtaxed

      You should consider getting a divorce for financial reasons. When you have one very high income partner and the other is a stay at home Dad or Mom, in many cases, a divorce can greatly increase your family income. You’d be able to qualify for many types of assistance and still get the benefit of your wife’s income.

      Reply
  16. Nikola

    Top three items on the living expense list are causing price increase for all others.

    Reply
  17. Eduardo

    I live on a family with 2 children and wife. We have no student loans, we own two homes, one we rent it out and the other one we live in.
    We have a decent life with no luxury but we are saving heavily, mainly with an accelerated mortgage. We pay health insurance out of pocket with no employer support because it sucks.
    We are short, we are short, we are short. This is unbelievable!

    Reply
  18. Serge

    Your advice of using tax-advantaged accounts may sound good but it may not be the best way to invest in the long run. There was a recent study by T.Rowe Price proving that most people are better off with Roth 401K (or Roth IRA). See http://time.com/money/3082721/roth-401k-retirement-account/

    Reply
  19. GEORGE MJ

    what can I do for money

    Reply
  20. Steve

    I like the article. I think it needs to emphasize even more the need to, reduce, reuse, recycle. In other words, “downsize” to live well within your means.

    Too many people are interested in buying things they want but don’t need. The newest game consoles, TVs, phones, ipads, expensive cars, and other gadgets. Why in the world a 4+ year old “needs” their own ipad is way beyond my understanding. The simple answer is: they don’t. Save the $500 instead.

    We live with older phones a compromise on a plan, basic cable which we really don’t watch, and try to live debt free. I have a car note and we have a mortgage (no credit card debt). We also try to live frugally (we don’t buy new gadgets and widgets). There is something to be said for working to live and not “living to work”. If we were struggling financially, we would do away with cable, get rid of our iphone 4s, and find other ways to reduce our expenses. At the extreme that would include buying a smaller house, buying less expensive cars, relocating to a lower cost of living area, or living in an apartment.

    My wife saved a lot of money before we ever even met when she used to live on a $35,000 per year salary. It can be done. She does not not finance cars, has not credit card debt, and we just refinanced our house with a 10 year mortgage. We are making extra payments to pay it off in 9 or less. We save as much as we can…

    Reply
  21. Maureen

    My husband and I reached the $100K mark this year, and so much of this article rings true. We’re on the older end of the Millennials. He is a schoolteacher in Chicago, where they actually pay teachers a decent salary, and I work for a not-for-profit. We live a very frugal lifestyle, and that’s the key. We put away about $30,000 a year in our 403(B) accounts and save another 30-35% of our take-home pay for our goals, like owning a home, adopting and raising a child, and growing our emergency fund. Last year, we eliminated my student loans and now have no debt. We try to make good choices and not “keep up with the Joneses.” That temptation is there, for sure, but it helps to be very strict about our monthly budget, which keeps us frugal.

    We are very grateful for this income–I grew up in poverty and know what a blessing it is to have good food, access to quality medical care, choices about where we live, and no stress about making ends meet. We try to live within our means in a sustainable, responsible way. But neither one of us feels like we’re “living large” and can go out and blow tons of money or buy a fancy car. Our biggest splurge is travel because our family lives in four different regions of the country, but we budget for that expense. If there’s no money in the budget, we don’t go! We really feel that living frugally is a good choice and will help us when we start a family and our budget gets squeezed. And self-discipline, economy, responsibility, and conscientiousness are values we want to pass along to our kids. Not to mention gratitude for our blessings and loving compassion for others.

    Reply
  22. MikeDire

    I agree! My wife and I make over 230k per year and living in the Bay Area. While we are considered high earners, I feel like we are barely getting by. We cannot afford the homes in the area we like (homes we like are well over $1.3M-$2M), going out once a week is probably all we can afford in order to save money for the dream house. However, we are able to save a lot of money in our 401K (we max) with great company contributions (7%). We also have a Cash Balance Pension plan (7% of pay), and we do not have to pay for medical (PPO)! Since my wife and I finished college seven years ago, we are able to save over $600k. Living in high cost area gives you the ability to save more while accumulating wealth faster than lower cost area. Hope to retire with $10M in the bank!

    Reply
    • Anonymous

      If you have over $600K saved you’re not “barely getting by”.

      Reply
      • Chris A

        $600K in savings does not get you very far. My dad’s a CPA, and his rule of thumb in saving for retirement is 5% lifetime return. So $1M saved is $50K a year once you’ve retired. $600K is not enough.

        OTOH to the initial comment – if you can’t afford a “home you like”, then buy one that’s less expensive and put sweat equity into it. Also, why go out at all?

        My wife & I are in the North Bay – she’s a high school teacher, I work for a non-profit, and together we’re grossing right around $100K annually . With a 3 year old daughter, there’s not a lot of high living for us at all. Once daughter in is public school in a couple of years, we can start using the money we’ve been spending on preschool & nanny to get a decent (less than decade-old) car… that’s how we roll.

        Reply
    • Overtaxed

      You need to get out of the Bay area. I was once offered a job with a very large tech firm out there that was about 2X my current salary. However, I’d have to move to the Sunnyvale/PA area for that job. We ran the numbers and, even with the massive bump in salary, it wasn’t worth it. Our home in FL would be about 5X the price in PA, putting it way out of reach even with the salary jump. 100K in that area is like 30K in Florida, Texas, or any other reasonable cost of living area.

      I’ll never forget going to my first “Google friend’s” house. He was making huge money, had great cars, no kids and a wife with a good job. They were “struggling” to pay for this house, so I was really curious to see it. Well, let’s put it this way, I shouldn’t have been. That house might fit in my garage. And it was a wreck, needed all kinds of work (some of it really expensive).

      Reply
  23. Marcus Olsson

    Great post!

    Just wonder if your numbers aren’t a bit skewed. While the inflation sure has had an impact, and the median income has had a negative trend the past decade – but doesn’t you use a different timescale on those?

    Now, perhaps it’s just a “perspective” thing (or the fact that I live in a European country) – but isn’t it true that the disposable income actually is much higher now (on average, of course) than it was in the 80s?

    I might be terribly wrong here, but isn’t the real threat to the American dream all “distractions” and unnecessary things around us that we spend way to much money on? I’m no American, but I do think your parents in the 80s didn’t have to think about mobile phone contract, unnecessary fast food, the daily coffee etc.

    I think it’s easier than ever to reach a six figure income, with money to spare just as long as you are carefully and use your money wisely.

    Reply
  24. Wes

    This article is right. As a California native who currently lives in the Midwest, a six-figure salary goes a long way here. My fiancé is a pediatrician and I’m an HR Business Partner. We make out pretty nice. A six-figure salary in California is not enough.

    Reply
  25. Denis

    You’re rich because your life, and indeed existence itself, is the most absurdly improbable thing imaginable. Moreover you were born with a human mind, which as far as anyone can prove, is the most complicated and expensive device the universe has ever produced. Lucky you!

    You’re also unfathomably poor. You will one day die having lost everything and everyone you’ve ever cared deeply for. Your death, combined with all those like yours is a tragedy and incalculable waste of the greatest wealth ever known to exist. You deserve nothing less than the deepest compassion.

    And nothing more.

    Reply
    • Wow

      The universe is amazing: to craft us so wonderfully and to show us patience as we stare at our navels all day. Sometimes just that simple thought makes me feel that someone deeply compassionate is looking down on us and smiling.

      Oh and anyone worried about their money should move to a lower cost location. Competition for limited resources is silly when there is so much room. Spread out.

      Reply
  26. Bob

    I have lived, preached and done everything mentioned from relocating to investing

    I retired thirteen years ago and my wife and I are now barely into the low six figures. We certainly aren’t rich by any stretch. But we do live the American dream. I don’t know how people in coastal & big metro areas who don’t have big six figure incomes manage the stress and expense.

    We are still able to save and invest because of following the advice in the article for many years. Even with a paltry liw six figure income. We have friends who scrape by with double our income. But they live in metro- coastal CA and So Cal.

    Reply
  27. SF resident

    I find the $130k number hard to believe . My immigrant parents lived the American dream- house and business of their own. Our version of the American dream was three kids in one bedroom, no vacations and special occasions for beef/meat on the dinner table. Never had a birthday party or gifts. We used the laundry basket as the bassinet for my younger siblings. My family has an AMAZING life. Due to where my “baseline” was set, I felt rich even as a grad student. I live that life to this day and I appreciate being “thrown into the deep end of the pool” without any safety net by my parents.
    I would agree with Holly that the feeling rich is entirely different from your paycheck.

    Reply
  28. vivek

    The changes / expenses not included in 2000 vs 2014 comparison SMART PHONE cost. it is almost must have in today’s life

    Reply
    • ML

      I’m in the upper middle class income bracket and just use a freedompop phone. As basic as that sounds, it gets the job done and I don’t have to deal with any phone bills. Cutting off my phone bill and cable save me a ton of money and I hardly miss either.

      Reply
  29. Anonymous

    You failed to mention TAXES, six figures is well into the 25% bracket but still subject to SS @6.2 and medicare. Plus on the coast state tax burdens can be 6 to 8% or more. The marginal tax rate for a additional dollar of income around 100K is easily 40% approcahing 50% in a state like California

    Reply
  30. Anonymous

    You failed to bring TAXES into the discussion. Six-figure income, even if filling jointly is well into the 25% federal tax bracket. Add SS (6.2%), Medicare and State Income Tax and the marginal rate is approximately 40% and closer to +45% in highly taxed coastal states (CA,NY, etc). So a six-figure earner that gets a 3k (3%) raise only pockets about $1600 of it.

    Reply
    • Tamara

      Yep….you got that right……

      And if you are lucky enough to get a bonus, you’ll never see close to 40%+ of that amount…..

      High income doesn’t always equal “wealthy” for the very reason that income gets taxed a lot. But high income can certainly go towards the accumulation of wealth if you live below your means.

      Reply
  31. Conan

    I think a lot of people deep down realize this. Admitting and accepting it is another story. I have the philosophy that there is only so much one can do to increase income. I am self-employed and have been slowly netting higher profits each year, but I do not feel that has been enough. As it has been mentioned here, I have used the strategy of controlling my expenses. I find it easier to reduce expenses than increase my income.

    The easiest savings was reducing my home energy use. Lower the temperature in the winter and put on heavier clothes. In the summer, I keep it warmer and rely on fans. I have an incredible low (refinanced) mortgage rate thanks to the recession. Also thanks to the recession, I invested heavily at that time. Those investments are up over 35%. I am preparing now for the next recession and I will repeat.

    I could go on and on. I find it easy to save hundreds a month by combining many small changes. Just because you start making more money does not mean you have to spend more carelessly.

    Reply
  32. Nate

    Sorry, this article made me roll my eyes a little bit. Households making more than six figures that can barely get by are doing it to themselves. There is something going on with the country where all other factors besides ourselves are being blamed for scraping by, but the real cause – our obsession with debt and hyper consuming – is never addressed.

    Stop buying depreciating assets on credit!

    Stop taking out installment loans for basically anything thats not an income producing or appreciating asset (even houses – if you can only afford to put down a 3.5% down payment on an FHA payment on a house you really can’t afford it no matter what the banks tell you.)

    Stop taking out student loans WAY in excess of tuition and fees. All of these students living in luxury apartments, eating out every night, complaining that if they worked while in school it would hurt their grades (but binge drinking and partying apparently does not), only to come out of school with massive student loan debt is ridiculous.

    Stop blaming the government, stop blaming the banks, the taxes, etc etc. Look at the no money down luxury vehicles in the driveway that cost 60-70% of your net income. Look at the way too big house that was perfectly fine but you pulled an equity loan out to renovate the kitchen because you are addicted to HGTV. Stop watching cable that costs you 150 dollars a month and feeds into the obsession with spending. Don’t carry credit card balances … EVER.

    What we need is better financial education at the grade school level and to not teach our children that every time you get a raise you get to waste more.

    Reply
    • K M

      I think the biggest issue is the transition that has to be made from a credit-to-cash basis lifestyle. When you are in college, you have a monthly phone contract, car loan, credit card debt, student loans, etc. Once you graduate and start making six figures, you shift from a credit basis to a cash basis. This makes you extremely poor for the first few years as you pay off all credit cards, pay down student loans, get off of cell phone contracts, pay off your car, and start paying cash for everything.

      Although in a few years, the feeling of being cash-strapped goes away, at first it is extremely difficult, especially when all tax breaks and deductions are already phased out and you are in one of the country’s highest tax brackets…

      Reply
  33. greg

    “Do you think that a six-figure salary is still rich?”

    Why is a place that focuses on capital and investments conflating cash flow with wealth? o_O

    Reply
    • Financial Samurai

      You can be wealthy and have little income to avoid the tax man, or have income and little wealth and pay lots of taxes. Income is a large part of wealth accumulation. It’s likely our number 1 money generator.

      Reply
      • K M

        Precisely. The question is why do we insist on such large taxes for people with such little wealth? Why not take age into account when measuring capital gains taxes? If you are under 55, why give someone a break on capital gains in any case? These are likely trust fund babies that are living off of dividends and stock growth that their parents and grand parents have left them. Most working folk are paying huge amounts of income tax and others are rolling along at 15%, even where their incomes are much higher.

        Reply
        • Josh

          I can assure you that I do not have a trust fund. In fact, I’m likely to have my parents living in my spare bedroom after retirment.

          Get off your high horse.

          Reply
  34. Kelley

    Reading some of these comments makes me realize how lucky I am to live where I do. My wife and I are on pace to break $100k this year and I feel like we live like Wall Street fat cats. After the mortgage, daycare, food and utilities we end up with at least $1300-$1700 in discretionary income every month. Most of it goes to our student loan debt but a small percentage goes to lifestyle. Having a small emergency fund makes a huge difference though. Not for the amount but for the peace of mind it provides.

    Reply
    • Financial Samurai

      Good stuff. Make that small emergency fund turn into a large emergency fund and your peace of mind will eventually reach Zen state!

      Reply
  35. John H

    Hmm. How about we come up with a way to stop paying almost 60% of our hard earned income to various taxes fees to bloated government. Then let’s look at the source of the inflation, which is nothing more than a devaluation of the dollar, and a. Hidden tax and eliminate

    Reply
  36. hdatontodo

    Due to high taxes, 401k contribution, pretax medical, etc. My bring home pay is 50% of my gross pay. So let’s talk about living on $50k net per year with kids and a house in the DC/Balto area.

    Reply
  37. Holly

    Too rich to be poor; too poor to be rich. That is the trouble with $100,000/yr where we live.

    Reply
    • Financial Samurai

      That’s a great saying, and you’re right. At $100K or a little higher, you won’t get the grants/tuition assistance for your kids.

      Reply
  38. Ian Allo

    Combined income in my household of 3 is about 180K, and it is just enough to be not living pay-check to pay-check where we live.

    Reply
    • Financial Samurai

      Where do you live Ian?

      Reply
  39. Chris H

    I’ve made well over $100k for the last 8 years. Single parent, bad divorce ($$$), child support, $150k in SL debt ($2200/mo). Every year I file 0 on my withholdings and owe more taxes than are witheld. I continually accumulate bad debt to the IRS. Add to that a highly volatile industry choice in technology where my job is constantly in jeopardy or subjected to abysmal work conditions, and then add in a massive car payment, parking, bridge tolls, and 15-20 hour a week commuting. So – so insurance means doing things like dropping $4k on braces for my daughter, and another $300 in prescription co-pays. Did I mention how much food costs, which is ridiculously expensive.

    My income tax rate is maxed; no deductions to speak of.

    We live check to check, and every month there is someone or some thing that swoops in to take what little money is left over.

    Now tell me that $150k is a fantastic salary. All I’m doing is feeding the machine. That’s the new American dream.

    Reply
    • Financial Samurai

      It’s tough, but at least you are helping fund the country given that a large percentage of Americans do not pay income taxes. So, thanks! I paid a lot for 13 years too… over $150,000 a year in income taxes for 10 years.

      Reply
  40. Ryan Washburn

    As being a 26 year old graduate with a 4 year degree which I am never going to use, it’s all about being smart with your money at a young age so you have a habit. I started my own freight brokerage at 24 and have been busting ass and steadily climbing every month. One thing that has helped me save money is I still live with my parents and work from home. I have a car that’s paid off, my credit card balance is almost nothing, and I’m putting a substantial amount on my student loans every month. I cannot speak for everyone when reading this, but definitely can for the young people coming out of college. Live with your parents as long as you can if you can and pay some debt off. Compared to some of my friends, I have saved over 30,000 in the last three years by living at home (10k a year in saved rent). I plan on getting a house next year and will put close to 40k down on it. It’s all about self discipline for the person.

    Reply
  41. Tim

    Agreed. While what I make seems impressive to my family, I feel like its just enough to have a decent home, save a little, and yes, have some fun, but nothing crazy. Especially on just one income coming into the house. Two would be perfect at the same wage.

    Reply
  42. ChrisInLA

    I read every single comment tonight and I’m glad to hear I’m not alone. If anything, this article validates how I’ve been feeling about my situation. I live in Los Angeles county, near the Pasadena area, with my wife and two kids. We make a combined $250k/year income. We’ve been wanting to add some square footage to our small 1,300 sqft home and possibly a pool. But it’s just way too expensive and I can’t justify adding onto to our expenses which already seem out of control. Our mortgage is our only debt at about $2,500 (including property taxes and insurance), but we have so much other expenses, like private school and day care. Our savings has remained stagnant for quite some time. We contribute the max to our 401ks, and I try to make a little extra money from my companies ESPP, but we just don’t having that sense that we make $250k/annually. I have been driving around a beat up car from the mid 90s, while my wife drives the 2005 modest SUV. I always thought that making this amount of money would mean we would be living in a 2,000+ sqft home, have jet skis, rental properties, 2-3 year cars, shop for clothes when we feel like it, vacation twice a year, etc, etc. But that’s not the case. I do admit, we haven’t exactly been wise spenders either…we like to eat out and take the kids to have fun from time to time, but nothing lavishing (I refuse to get the Disneyland passes). Recently, I decided to get intimately familiar with our spending and put us on a budget. First item on the list, cancel cable! More income would be nice, but I can just keep jumping around from job to job. For now, we just need to control our spending by getting on a budget, work on the emergency fund, and increase our life insurance, and hopefully, start to increase our savings so we can buy things cash, invest and enjoy the fruits of our labor.

    My contribution to this whole conversation would be to get life insurance. So many people mentioned that they have large amounts of debt, especially in the student loan category, not to mention mortgages, living expenses and future plans for their children. I know this is in the added expense category, but think about what the hardships the surviving members of your family will have if that 6 figure income is no longer there. Now that’s a really bad conversation than the one we all just had.

    God bless.

    Reply
  43. Maverick

    I agree with most people on here. I have been extremely fortunate to have graduated college and I consistently earn $150-170k per year for the last 5 years. Most of my earnings are in overtime being in a very demanding engineering field. Earning that much is excellent, when you have no bills. Once I bought my house, for $375K in South Florida, I realized that money just doesn’t go that far. My bills consistently go up, and I do everything in my power to make them go down. Year after year its the same thing, and now my Girlfriend wants to start a family, and I look around saying How am I going to afford this? I can’t imagine how most people do it.

    Reply
  44. jobuck

    All I can say Is what my parents told me60 years ago, a penny saved is a penny earned ,and any way the more you make the more you will look to spend it on.

    Reply
  45. MumsToo

    “While a six-figure salary is nothing to sneeze at, these costs often fall hard on affluent families since they do not qualify for the kind of help and assistance families with lower incomes often have access to.”

    Nor do families who make near the $54,000 median. You *have* to have someone stay at home with the kids at that point. And if you have no close family to help out, well… it’s you that has to stay home.

    My wife and I both worked in public service. Combined, our incomes put us just into six-figures. After all of the budget cuts at the state level–resulting in cuts to our salaries and unpaid furlough days–we reworked our budget. We found that it was fiscally unsustainable for me to work due to car insurance, gas, and two kids in daycare. I wasn’t bringing home any money at that point.

    Reply
    • MumsToo

      Clarification– I wasn’t bringing home any money at that point because the costs of going to work everyday was more than the job paid. And it was a good job.

      Reply
  46. Ben

    My wife and I combined earn just over the median household income (around $60k). We live modestly and work to save as much as we can. I understand that cost of living is lower here (Des Moines, IA), but we also have a significant portion of our income going toward student debt (about 15%). We have a baby on the way, and we projected the daycare costs and/or reduced income from one of us staying home more will reduce our income by about $10k.

    That being said, I fail to see how anyone that has a household income of $100k or more has trouble with any of this. If you do, my first suggestion is to take a good, hard look at your lifestyle because you should first determine whether or not you are living above your means. There’s an OLD Saturday Night Live sketch that sums it up: don’t buy things you can’t pay for.

    Reply
    • Overtaxed

      Ben,

      The thing you’re not taking into account is that your home in Des Moines would cost about 10X as much in a city like San Francisco. So, you make 60K now, to have a proportional housing expense in San Fran, you’d need to make 600K. Now, of course, that number is silly because it assumes that everything costs 10X as much (it doesn’t), but, even if you figure that just 1/3rd of your income (20K) has to go up 10X to afford the same house in San Fran, you’d still need to bring in 240K in San Fran to have the same lifestyle.

      Reply
  47. Passive Income Mavericks

    Nice post Holly! I agree that 6 figures salary does not mean you are rich any longer. The way I look at things is whether you are saving 10% , 25% or 50% or more of your salary. If you make $100,000 and you save 50% of it, you will be a half-millionaire in just 10 yrs but if you save only 10%, it will take 50 yrs to be just there. So, the key to getting rich is frugality and investing the savings for long-haul: let money work for you.

    Even 10 yrs back when I used to get much lower salary as compared to now, I got the feeling I had lot more money in hand; inflation, growing healthcare costs, absence of company pension, etc. has further eroded the worth and savings. Middle American class feels like getting squeezed and running on a treadmill.

    However, I’ve setup a goal to be financially independent in 12 years by earning passive income; from a meager beginning of just only $50; hope it provides some inspiration to hard working folks.

    Best wishes.

    Reply
    • Maverick

      PIM,
      While I applaud your optimism regarding saving certain percentages of your Salary, which I currently do, it still feels like most people aren’t actually gaining any ground. The only place where I see my savings paying off is with my Retirement Savings (Government TSP). Much of that is due to my investing style within the offered funds. I currently top the IRS Maximum for Retirement Savings each year ($17,500 for this year), and I continuously see gains from 15-20%, but the problem with that is I am 28 yrs old and can’t touch that money until retirement (Double Edged Sword). I currently also buy $200 per pay period in Savings Bonds, and continue to do that straight out of my pay checks, and in addition to that I also transfer $300 per pay period to Savings Accounts I barely use and still seem to not really go anywhere. From the outside, most people would say I live a lavish lifestyle, I own 3 cars myself (Show Truck, Daily Driver, and a Work Truck) but 2 of the 3 vehicles are paid off and have been paid off for years, my daily driver will be paid off my next summer, and it is a 2013. I don’t believe in owing people or institutions money (I pay things off as fast as possible) and I don’t keep any credit card debt (pay it every month). Could I sell a vehicle or two? of course, no one absolutely NEEDS 3 cars, but that is my weakness, much like women and buying shoes…. I would say, I am in decent shape, but no where close to being Rich, but then again each person’s view of being Rich and Wealthy is different. Am I financially Stable? Yes, but definitely not Rich…. I guess the best bet is to win the Lotto. lol

      Reply
  48. nick

    I live in Gainesville, Florida. It’s a small college town and six figures will buy you all you could ask for here. Great place to raise a family.

    Reply
  49. LONEWEREWOLF

    I make not too much over $100,000 a year. It is just me. Unfornately I live in Maryland the most expensive state in the union to call home. I live in a smallish one bedroom home that is more than big enough for me and all my stuff. I like where I live because; it is trendy and reasonably safe. Oh I know I am not rich by a long shot BUT,, I never have to worry about paying bills because; the money is always there. I grew up in a working class family and my parents had to budget like fiends to make sure we had a nice life. We had to be mindful of turning off lights and never wasting water heat hot water what have you. We ate well but we ate whatever was on sale and in season. We did splurge from time to time but mostly the budget ruled our lives even if we never suffered.

    No I am NOT rich making not much over $100,000 a year but, I can go out to eat whenever I feel like it. I have a budget but within my budget I can enough myself and still have money to invest and save in 401K plans for retirement. No in Maryland $100K a year does NOT make you rich, those days are gone forever. In Maryland 100K a year makes you comfortable to the point where you can live without worry if you live within your means. I wanted a 75 inch TV so I brought it. I might buy another 75 inch TV for my bedroom too since I like the one in the living room so much. That’s $6,000 for two TV’s but, I won’t likely buy another big ticket item the rest of this year. I’m debt free and my mortgage will be gone the way of the dodo byrd in just three short years from now.

    I’ll retire mortgage free with my 401K savings, my defined benefit retirement plan and Social Security. I don’t have to be rich to be successful. Rich is so overrated just let me be worry free and comfortable. Being rich is too much trouble unless you know how to handle it.

    Reply
  50. Joan White

    I am in my 70th year of life. When I was young, I aimed to get my income up to 25K. I was in sales, and it took a while to “get a following.” It is important to live modestly. It is important to begin saving very young, even if the dollar-amounts of savings seem small to begin with. Praise the Lord for how well-off I am today.

    Reply
  51. Efosa Ighodaro

    To me, anyone earning 6 figures and still broke is not doing something right. Apart from the spiritual sphere of things, what happened to mastering the markets yourselves? 100k a year is about $8,300 a month. If tax takes off even $2,000. You have $6,300. Start with what you have. Stop using the illusion of ”6 figures” to fool yourself. You make just $6,000 a month. Then, remove expenses, now you make just $3,000 a month. After expenses having $3,000 is a great start. Next, learn about trading and investing, check out profit opportunities from around the whole world. Learn to make 10% monthly profit from trading the markets first, then work to manage more, for others of course. OR do something drastic and live so frugally for a year or two. That is live in a studio, get a dirt cheap reliable car, no eating out, no hungry girlfriend, more giving and helping as planned out, and accumulate $100,000 after two years. Then return to modest lifestyle, and start a business with $100,00. Incorporate it, find a value and need and marry them. Build a business. You either save drastically or you build a business and own cars and properties in the business name.

    Reply
    • Josh

      Unless you start a business selling stuff on ebay, 100k isn’t going to get you very far. I’d say you need at least 500k to start a reasonably sized business that will be worth quitting your “day job” and rely on the profit of the business to replace your salary.

      “Passive income” isn’t really a thing. Even real estate is time consuming.

      I’m not saying you can’t start a business for less. But when you are actually making 100k a year, you’re not going to start a business and be satisfied making 30-50k a year.

      Reply
    • Anonymous

      Don’t know how you’re getting to 2k in taxes but it is certainly a good bit more than your figure. We need better tax breaks for the middle class – bottom line. Especially if required to pay state income tax. After fed tax, state tax, and medicare & SS tax, I get to take home a whopping 65 cents on the dollar. Actual net pay is a whole different ballgame.. contributing only 6% to 401k, I take home 60% or less.

      Reply
  52. Jayster

    Lots of focus on earnings (is $100k/year enough), and a few comments on savings. Read anything by the Bogleheads (i.e., Jack Bogle, founder of the Vanguard Group). Income is offense, savings is defense. You need both. With a 6 figure salary, saving 20% per year (in M1 and M2 money), you’ll have $1 Million in 20 years. Living in an expensive city (or region) with high living expenses will undermine anyone’s attempt for financial independence (unless you’re in the $300k plus category). Get a good education (without assuming unreasonable debt), get a good job / career, and save rigorously. Don’t think of your annual salary as a barometer – start thinking in terms of net worth.

    Reply
  53. Aman

    I and my wife both make over $100 K each. We are in our early 40s with 2 kids. We live in a nice upscale neighborhood and live a frugal live, saving as much as we can. I have to say that the biggest issue is that people like to spend a lot (keeping up with the Jones’s), and not saving enough. When people buy a house they go for the max they can afford, and then find that it leaves no room for savings, or worse. Spending extravagant amounts on gifts on holidays and occasions, buying new car every few years, ensures you will also be stretched. People need to learn to spend within their means.

    Reply
  54. John

    I am 32 and made $100k the last 3 years. It just doesn’t go that far WHEN YOU ACTUALLY HAVE TO PAY FOR STUFF. I think most people are comparing apples to oranges when they think of a $100k income. Someone may only make $30k/year but also have their health care, pension, etc paid for by their employer (or subsidized by the government). They think that by making $100k/year, I have 3 times the discretionary income but that just isn’t the case. After paying for health insurance for a family of 4 (SAH mom and 2 kids), a 401k contribution, and taxes there isn’t a ton left. I make $100k/year but my paycheck is usually only about $3,500/mo after everything comes out. I am blessed to have a good income but living is expensive when you actually have to pay for things, which a lot of people have no concept of.

    Reply
    • Jenny

      Exactly!!!

      Reply
  55. Ilja Maslov

    I’m thinking that a mere exemption of $50k per person per tax year should allow lower income families to actually start building a family and the future for US.

    2 parents + 1 kid = $150k before tax. What are the chances for this kid to get a college degree? A little better, don’t you think?

    Reply
  56. Amber Voight

    Agreed, I earn a 7 figure income and dont even consider myself rich, as your income increases so does your lifestyle without much difference

    Reply
  57. Dbohio

    My wife and I made over $350k in 2015. Both turning 30 this year. Sounds great, but with no kids of our own, we are clearly supporting many strangers – our $90k tax says so. We both grew up blue collar and it’s sickening that we are litterally having conversations about purposely making less money since so much goes to taxes. Very frustrating that so few of our fellow Americans are responsible enough to take care of business. As “Fight Club” brilliantly states, too many people “spend money they don’t have on sh*t they don’t need”. Tax time is especially frustrating that we see a $15k bill in mid April and those who are willingly helpless think they hit the lottery with “their” refund. Yet, we’re the villains.

    Reply
  58. ChrisH

    Dbohio – seriously? Boo hoo. You and you wife make a crazy amount of money for your age (both 30’s @ $350k/yr) and you want to complain about your tax liabilities? Get a better tax accountant or spend some mobey – that’s how the system is setup. And didn’t this country provide you the means to make that money?

    I think the key difference in our commentaries here is taxes isn’t the primary issue. Most of us recognize that ‘real wages’ are not what they appear to be due to the way that this country handles its economic markets – housing, banking, education, legal (divorce/custody), and healthcare. I paid $45k in taxes last year, but I have $168k in student loans, I rent my house because I can’t qualify for a mortgage due to my SL debt, I pay vast sums of money to lawyers to protect my parenting rights and enforce my parenting direction, and even more money raising a (now) 15 year old daughter, child support in excess of $7k/yr, and another $10k/yr in healthcare.

    The problem with everything that we do as a country can be summed up in one word:

    Commoditization

    As a country we have commoditized every aspect of our daily living from education to healthcare to utilities. This system only works one way, and that’s to make more money than the system demands of you. For most of us all it takes is colleges debt, children or divorce and that formula changes permanently for 25 years.

    You’re clearing $285k after taxes as a DINK. Pro Tip: it doesn’t get much better unless you are never having children. P.S. – if you have children and/or get divorced, you can kiss all of your prosperity goodbye.

    Reply
  59. Marion

    My wife and I are both in our mid-50’s and I am JUST now hitting the over $100K mark with a MBA and years of experience in business and IT. We live in D/FW, Texas. My wife is an artist and we both are owners of a small business selling her art and wearable accessories. We have been at this endeavor 5 years and I can honestly say, we are just now beginning to see good profits after a lot of sweat equity invested. This is my second marriage, her third. We knew each other in HS and reconnected on FB in 2009 (that is another story). I have two kids, my oldest is 23 and is living on her own and my youngest just turned 18. My wife has two adult kids, both older. One is married, and one is in her 30’s not married but a successful musician with an adopted child. Between us we have 5 grandkids.

    I paid big $$$$ in child support and am just now reaping the rewards of not having to pay CS any longer since my youngest turned 18. By family circumstances, I outright own the house we live in and we drive 2008 model cars, both bought used, so we have no mortgage or car payments since I paid cash for the house and cars. We are very blessed indeed! Where am I going with this? My point is we live frugally and enjoy a very active lifestyle none-the-less. We both love browsing thrift shops and flea markets and buy our books and music at 2nd hand book stores. I still enjoy browsing 2nd hand clothing stores for my everyday wear and have found great bargains and often get compliments on my “cool, vintage” clothing. We don’t have gym memberships; we have a home gym with a treadmill and free weights and dumbbells that we bought new at bargain prices. We eat out once a week and we both love cooking good, healthy food at home. I have my 401K plan and she has her IRA, and we both have other investments that we monitor continuously. We live modestly and frugally and I invest a large chunk of our earnings in retirement savings and investments. Whatever profit we make from our small biz we usually put it right back into the business. The industry I am in is notorious for buying you out once you hit early 60’s, so I want to be ready when that day comes and not have to worry about having enough for retirement. We were both wild and partied as teenagers and young adults, so at least that part is out of our system now and we can relax knowing we have a good life.

    Reply
  60. Glenn Bergum

    This is an old thread, but I just read it and thought I’d leave a comment–a small nit-pick.

    The author uses all manner of graphs, charts and tables to illustrate how little a 6-figure salary gets you today, and then makes the statement “I only hope to highlight that, while the perception of what a six-figure income means has not changed much, the reality of what that money is worth has changed immeasurably.” Immeasurably? She just quantified (and measured) by several means how the cost of living has eroded the value of a 6-figure salary. She obviously chose the wrong word, or simply used it for dramatic effect.

    Reply
  61. Projeksiyon Perdesi

    An example – if gross income including income tax is $150 and spending is $50, the spending rate is 33% / available to save is 66%. However, if income taxes are $10 in the above example, the spending rate becomes 36% / available to save is 64%. The latter seems more precise, at least to my mind.

    Reply

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