For so many people, a six-figure salary embodies the American dream. You go to college, get a good job, buy a house and provide for your family with your hard-earned salary.
But what can a six-figure salary really do for you in this day and age?
Do all those zeros on your paychecks still symbolize wealth and prosperity?
Or do you need to temper your expectations regarding what you can accomplish with six figures?
Let’s crunch the numbers and find out.
What Is a Six-Figure Salary?
The term “six figures” refers to the number of digits — or dollars — in your yearly salary. When you cross the $100,000 threshold, you officially become a six-figure earner.
You keep that title until you earn over $999,999. Once you hit $1,000,000, your salary changes from six to seven figures, so you lose your claim to a six-figure salary… but you become a millionaire, so it’s a fair trade-off!
Now, there’s obviously a huge difference between $100,000 and $999,999, making the term “six-figure salary” too broad to be useful as-is.
That’s why most people use “six-figure salary” to refer to any salary between $100,000 and $199,999. Anything above that is typically referred to as “multiple six figures.”
The Truth About a 6-Figure Income (Video)
Six Figures Across the Country
The type of lifestyle that a six-figure salary affords you depends highly on where you live. Let’s take a look at a few example scenarios.
Six Figures in a High Cost of Living Area
You’re a new college graduate who’s landed a job as a software developer for a big tech company. Your starting salary is in the low six figures — $110,000 — and you get to pick from three different corporate campuses: New York City, San Francisco, and Stockholm.
Unfortunately, although that salary sounds dreamy and big-city life sounds fun, your paychecks will be stretched a lot thinner thanks to the higher cost of living you’ll be dealing with.
Suppose you pick New York City, where the average one-bedroom apartment costs $2,649 a month. You make $9,166 a month, so your rent will eat up nearly 29% of your salary — a total of over $31,000 a year.
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And if your rent doesn’t include utilities (which is typical for New York City), you’ll pay around $200 a month — $2,400 a year — for electricity, gas, and internet.
Around 25% of your salary ($25,700) will be going to taxes based on your income bracket. Between that, rent, and utilities, you’re left with $49,100 — less than half of your original six figures.
But the expenses aren’t done yet. Health insurance will run you around $5,472 a year ($456 a month on average).
Then you need to factor in student loans (with an average monthly payment of $393), food (around $471 a month for a single person), and transportation ($127 a month if you exclusively use public transport). These three expenses add up to $11,892.
After all of these monthly expenses, you’ll end up with $31,736 to put towards entertainment, travel, dining out, and, of course, your savings. Should you decide to follow the common recommendation of saving 20% of your salary, that leaves just $9,736 for discretionary spending — and in the Big Apple, that won’t last long.
Six Figures in a Low Cost of Living Area
But what if you decided to work remotely from a less-expensive city? How far would that $110,000 salary get you then?
After researching cities that are inexpensive yet still enjoyable to live in, you settle on Memphis, Tennessee. Your one-bedroom apartment in the center of the city rents for around $1,000 a month, with utilities coming in at around $200 a month.
Even assuming that all of your other expenses stay the same, the savings are immediately obvious. After rent, utilities and taxes, you’ll be left with $69,900 — $20,000 more than you’d have in NYC.
But there are even more savings to be found in lower cost of living areas.
Groceries in Memphis, for instance, are around 7% cheaper than the national average of $375 a month, so you can expect to pay around $350 a month. Living in the center of the city lets you use public transportation at a cost of $50 monthly.
All told, after paying all your bills and contributing to your savings, you’ll end up with $32,912 in discretionary funds. Now that’s a lot more money you have to play with — enough to make you feel like you really do earn six figures!
Other Factors That Impact Your Six-Figure Salary
It’s clear that your area’s cost of living is the deciding factor between feeling rich and feeling broke, even if you’re earning six figures.
But there are other hidden factors that help determine just how far six figures will get you.
If all you’re doing with your six-figure salary is paying bills, filling your savings account, and going out on the town, you may feel rich. But you’re not building wealth, and should the paychecks stop coming in, those rich feelings will vanish fast.
Investments are the key to making a six-figure salary go as far as it can. Whether you’re investing in real estate, bonds, retirement accounts, mutual funds, or even cryptocurrency, you’re building long-term wealth, even if it means having less money at present.
In fact, depending on how much of your paycheck you invest, your six-figure salary could have you living like a millionaire in 40 years.
So when the time comes to choose between using your six-figure salary to fund a lavish lifestyle now, or investing it to become truly wealthy, resist the allure of instant gratification and play the long game.
We already factored student loans into our example six-figure scenarios, but they’re far from the only kind of debt.
And any debt you have is going to eat into your six-figure salary, often to the point that you feel like you’re only making five, or even four figures.
To really see the full potential of your six-figure salary, you need to get out of debt — and stay out as much as you can. The best way to do this is by using the debt snowball method.
With the debt snowball, you pay off your debts from smallest to largest. After paying your bills and adding to your savings, take the remainder of your paycheck and put it towards your smallest debt.
When that debt is paid off, get to work on the next smallest, and so on until you’re all paid up. By starting with the smallest debts, you build momentum and stay motivated to work through the larger ones.
Once you’re done paying off your debts, your six-figure salary will truly belong to you, not to your creditors.
Time and Happiness
Money can buy a lot of things — stability, excitement, innovation — but there are two things it can’t buy: time and happiness. If your six-figure salary is depleting you of these two things, you’ll never feel truly rich.
And that begs the question: is earning six figures really worth it?
If you’re putting in overtime at your job, pulling 60-hour weeks that leave you exhausted all weekend, you won’t have any time or energy to do anything with your money. No amount of zeros on your paycheck will make up for the fact that you’re stressed, tired, and unhappy.
You can’t put a price on your well-being, but science has come surprisingly close. Believe it or not, the best balance between emotional wellbeing and salary occurs at around $70,000 — any more than that and the added stress cancels out the monetary benefits.
That’s not to say that you can’t be happy while making six figures, but it’s something to keep in mind when dreaming of that $100k salary.
Jobs That Offer Six-Figure Salaries
So you’ve thought about it and decided that you want to see for yourself how far a six-figure salary will take you. Now it’s just a matter of finding a job that will let you earn that dough.
But unless you’ve got enough of a passion for these professions to spend many years (and hundreds of thousands of dollars) training for them, you’re probably wondering if there are other options.
And believe it or not, there are many six-figure careers that don’t require advanced degrees — or even any degree at all.
Air traffic controllers, for instance, make an average of $120,000 a year, and you can get started with just an associate’s degree. If you’ve got enough years of relevant work experience, you may not even need a degree at all.
Construction managers are also handsomely paid for their hard work: $113,000 a year on average. Requirements vary, but many positions don’t require any degree as long as you have experience.