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Make Six Figures: But is it The Best Way to Financial Freedom?

Updated: May 4

What Qualifies as Six Figures Income?

Six-figure income typically refers to any form of employment that earns a person $100,000 a year or more. This income could come in the form of a salary or through means of self-employment.

It is important to point out that earning's very greatly by state and city across the US. It's common to see some cities with a much higher percentage of people with jobs that pay six figures salaries.

Another factor to consider when analyzing gross annual income is to check if annual income or household income is being reported. Combining the income of one or more workers that share the same household is an easy way to make higher earnings appear more common.

What Is a Six-Figure Salary?

In technical terms, a six-figure salary means income earned through employment as a W2 employee.

However, as earners work their way up the corporate ladder they could see their six-figure salary take on various forms such as stock options, employment benefits, and bonuses. So not all salaries are exclusive to take-home pay.

What is the Monthly Income of a Six-Figure Salary?

In a perfect world, the monthly income for someone with an annual salary of six figures or more would be that salary number divided by twelve.

For example, $100,000 divided by twelve would be a monthly income of $8,333.33.

However, there are multiple factors that impact the actual take-home pay or monthly salary for anyone earning six, seven, or even an eight-figure salary.

Many of the same factors impact everyone earning less than six figures too. We discuss factors that reduce income streams later in this article.

Is Six Figures a Lot of Money?

Determining whether or not six figures is a lot of money is entirely relative. In small-town America, six figures can go a long way but in the land of the rich and famous, like LA, one might find themself barely getting by or living paycheck-to-paycheck on their annual salary of six figures.

How Many People Make a Six-Figure Salary in the US?

The U.S. Bureau of Labor Statistics reports that there is no official information on the number of individuals making six-figure wages. They do, however, offer information on the full-time wage and salary workers' median weekly wages, which can offer some insight into pay trends.

If we assume that income is evenly distributed above and below the median weekly salary of $989 we can estimate how many full-time American workers earn more than six figures or $1924 per week.

As of April 2021, approximately 151 million people were employed in the U.s. according to the U.S. Bureau of Labor Statistics. Based on estimations from the median salary data mentioned above we can calculate that nearly 25% of the U.S. workforce earns six figures or more.

When compared to career expert Zippia they estimate 100k earners falling between 18.3% - 33.3% for the 2021 and 2022 reporting periods. Not too far off from our modest estimation.

How common is it to Make Six Figures a Year?

Based on our previous estimations, and figures from Zippia, it could be said that roughly one in four Americans are earning six figures or more in annual salary.

Based on the number of workers reporting full-time employment means nearly 38 million of nearly 332 million Americans are earning six figures.

What Would a Six-Figure Lifestyle Look Like?

From expensive cars and making Mortgage payments on mansions worth a million dollars or more there is a lot that comes to mind when imagining what a six-figure lifestyle might look like.

In reality, that lifestyle may look very different based on each earner's personal situation and their idea of financial security.

Aside from lavish spending habits and exorbitant monthly expenses, we have listed several factors that can drastically reduce a six-figure income in no time.

3 Common Factors That Can Drastically Reduce Six Figures

Just because someone is making a higher salary doesn't mean they're any better at managing their money than the next person.

A Six-Figure Salary After Taxes: How Much is Left?

The tax bracket that a six or seven figures earner falls into is greatly dependent on how their gross income is declared. If they're employed by a company as a traditional employee with little to no pretax deferrals like retirement contributions they could be facing hefty payments come tax season.

However, it is common for a high-income earner to run their own business and benefit from the ability to reduce their income level through business expenses and write-offs.

Student Loan Debt on a Six-Figure Salary

Often the reason many people go on to earn a six-figure, or seven-figure salary revolves around earning a college degree. From a bachelor's degree to a Master's degree, there is a wide range of student debt being collected every month.

In many cases, these high earners are excluded from any student loan forgiveness breaks that have been proposed for lower earners. This is a hotly debated topic by many from various parties.

Cost of Living & Six-Figure Income

The cost of living for workers earning six figures comes in two forms semi-involuntary and voluntary. Nothing in life is truly involuntary because our lives are made up of a culmination of past decisions made for one reason or another.

By this, we mean often in order to earn six or seven figures one has to live in a place capable of meeting that sort of salary requirement. Unfortunately, those places like New York, LA, D.C., and other large metropolitan cities tend to have a much higher cost of living.

Then there are the voluntary aspects that play into the cost of living. Often when you're making a multiple-figure salary there is a sense of obligation to live not just in the city, but a particular part of the city. To drive a particular type of car, wear certain clothes and travel to all the best places. These are the voluntary aspect of the cost of living that is often referred to as quality of living.

Even as grown adults making well above a median salary, it's common to fall victim both to our own desires for the finer things and the pressure to keep up with or maintain a certain image around our colleagues and superiors.

It's so important to point out these natural tendencies because it sheds light on a common challenge people share regardless of their annual income. These are the emotions and expectations that surround our thoughts about money and can take away from our ability to build our net worth and avoid lifestyle creep from quickly diminishing our six figures earning more.

How to Build Wealth Without Making Six-Figures

So while it sounds nice to have an annual salary of six figures or more there are always trade-offs to consider that may mean a lower actual take-home pay in the end. Fortunately, as the old proverb goes, "slow and steady wins the race" and in this case building wealth without a large multi-figure salary is still possible.

A great way to start is to first create financial reports of your monthly income streams and expenses. Then you can begin to analyze any expenses on non-necessities that don't feel as valuable in hindsight. This will help inform your monetary decision-making and hopefully dissuade any frivolous spending habits.

Next, it would be wise to take a look at your bank account and any investment accounts. Are you being charged any fees? If so it would be prudent to move those funds elsewhere.

Another avenue for building wealth would be to look for any ways you could earn passive income while working at your current job. This might include an enjoyable hobby that also produces a product that you could sell like honey from beekeeping or jewelry from well, jewelry making, or wooden products if you enjoy woodworking.

Granted all these hobbies have some costs incurred as well so it is important to take all of this into consideration. But which is better, developing a skill doing something you enjoy or spending your money on things that may or may not make you happy and give you little to show for at the end of the day?

In Conclusion

No matter what figure salary you currently earn there is a way to manage your finances and live a happy and fulfilling life. It's a matter of really looking at how much time and money has to be invested and what the return on that investment looks like in the end.

Though there are many ways to 'have it all' make sure you're setting yourself up for success when in pursuit of your six-figure salary. Keep an eye on the cost of living and expenses that come with that income are truly worth it to you.

In the end no matter your college degree or figure salary there is always a way to build wealth with a good foundation in financial literacy and a money mindset that does not succumb to emotional spending. Focus on your long-term goals and all the immediate spending temptations seem to become much less enticing.

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