If you’re in the job market then you have your eye on the prize; a 6 figure salary! But how much is 6 figures? Is that even enough these days? Let’s find out!
Getting a job with a 6 figure salary seems fantastic; you’ve made it! You are a success, and you know it because you’ve heard your whole life that making a 6 figure salary is the goal.
But how much is 6 figures? What does that mean? Is it even that great? Sure it sounds great, but how great, and at what cost?
Let’s go through what a 6 figure salary means and find out if it’s worth it for you.
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How much is 6 figures?
To put it in a nutshell, it’s a yearly income of $100,000 up to $999,999; It’s a six-digit income.
Now just because you earn six figures doesn’t mean that you’re rich. Sure, having a steady inflow of cash is great. But you may still be spending most of that 6 figure income on stuff. Remember, when you have a lot of “stuff,” all that is saying is that you used to have money, but you don’t anymore. So don’t confuse income with wealth.
What careers earn a six figure salary?
Don’t worry; you’re not tied down to being just a doctor or a lawyer. There are lots of jobs that pay six figures. According to the Balance and the Bureau of Labor stats, those include…
- Actuary – 2020 median pay is $111,030 per year or $53.38 per hour
- Anesthesiologist 2020 median salary of $261,730 a year (source)
- Research scientist – 2020 median pay is $126,830 per year or $60.97 per hour
- Dentist – 2020 median income is $164,010 per year or averages to be $78.85 per hour
- Financial manager – 2020 median pay is $134,180 per year or $64.51 per hour
- Advance practice nurse practitioners – $117,670 per year, or $56.57 per hour
- Physician & Surgeons – 2020 median income is equal to or greater than $208,000 per year or $100.00 per hour.
- Software Developer – 2020 median pay is $110,140 per year or $52.95 per hour
- Pharmacist – 2020 median pay is $128,710 per year or $61.88 per hour
- Petroleum engineer – 2020 median income is $137,330 per year or $66.02
What do 6 figure salary earners take home?
Now, this doesn’t mean that someone takes home their whole six figure salary. They still need to pay taxes, which can take a considerable chunk out of your pay, depending on your tax bracket and state.
- For 2020, the federal individual income tax has seven tax rates ranging from 10 percent to 37 percent. The rates apply to taxable income-adjusted gross income minus either the standard deduction or allowable itemized deductions.
- Tax Foundation derives an average tax rate of 16% for the top 50% of taxpayers, just 4% for the bottom 50%, and an average of 14.6% overall. So play it safe and guesstimate that 14% goes to federal taxes.
- Individual state tax brackets vary widely. According to Investopedia, “As of 2021, our research has found that seven states-Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming-levy no state income tax. Two others, New Hampshire and Tennessee, don’t tax earned wages.” While California has the highest income tax of 13.3%, followed by Hawaii and New Jersey.”
It’s hard to give a good estimation on tax rates, as it’s a progressive structure, which can be very confusing. Make it easy on yourself and use an online tax calculator.
For example, if I made $100,000 as a single filer in California, I would only take home $71K after FICA federal and state taxes. That’s before retirement contributions and medical coverage, which averages to be 8.2%. So let’s say you contribute 5% to a company-sponsored retirement plan. So $71,000 – 5% – 8.2% just under $62,000 take-home pay.
What can I buy with a 6 figure income?
Now we’re getting into the nitty-gritty of what a six figure salary means. Your money is only as good as what it can buy (or grow for investment purposes).
Even though you make six figures, you still have to budget because budgeting is good for everyone! Let’s go ahead and take Dave Ramsey’s recommended budget percentages and see how much you can spend on what.
At $100,000 income – taking home $71,000 a year after taxes, minus retirement contributions and medical coverage
Yearly take-home of $62,000
- Giving: 10% – $6,200
- Saving: 10% – $6,200
- Food: 10-15% – $6,200 – $9,300
- Utilities: 5-10% – $3,100 – $6,200
- Housing: 25% – $15,500
- Transportation: 10% – $6,200
- Health: 5-10% – $3,100 – $6,200
- Insurance: 10-25% – $6,200 – $15,500
- Entertainment: 5-10% – $3,100 – $6,200
- Personal Spending: 5-10% – $3,100 – $6,200
- Miscellaneous: 5-10% – $3,100 – $6,200
Monthly take-home of $5,167
- Giving: 10% – $516
- Saving: 10% – $516
- Food: 10-15% – $516 – $775
- Utilities: 5-10% – $258 – $516
- Housing: 25% – $1,291
- Transportation: 10% – $516
- Health: 5-10% – $258 – $516
- Insurance: 10-25% – $516 – $1,291
- Entertainment: 5-10% – $258 – $516
- Personal Spending: 5-10% – $258 – $516
- Miscellaneous: 5-10% – $258 – $516
On a $250,000 annual income – (single filer in California) has a take-home pay of $159,500. The minus 5% in retirement contributions and 8.2% for medical coverage = $139,100
Yearly take-home of $139100
- Giving: 10% – $13,910
- Saving: 10% – $13,910
- Food: 10-15% – $13,910 – $20,850
- Utilities: 5-10% – $6,955 – $13,910
- Housing: 25% – $34,775
- Transportation: 10% – $13,910
- Health: 5-10% – $6,955 – $13,910
- Insurance: 10-25% – $13,910 – $34,775
- Entertainment: 5-10% – $6,955 – $13,910
- Personal Spending: 5-10% – $6,955 – $13,910
- Miscellaneous: 5-10% – $6,955 – $13,910
Monthly take-home of $11,591
- Giving: 10% – $1,159
- Saving: 10% – $1,159
- Food: 10-15% – $1,159 – $1,738
- Utilities: 5-10% – $580
- Housing: 25% – $2,898
- Transportation: 10% – $1,159
- Health: 5-10% – $580 – $1,159
- Insurance: 10-25% – $1,159 – $2898
- Entertainment: 5-10% – $580 – $1,159
- Personal Spending: 5-10% – $580 – $1,159
- Miscellaneous: 5-10% – $580 – $1,159
Now, these are just his recommended allotments. Obviously, if you live in NYC, your housing and food costs go up considerably, and if you live in Idaho, they probably go down.
Is a 6 figure salary good?
It sounds good, right? But where does a six figure income fall in the mix of average wages in the US? US Burea of labor doesn’t give an average salary, they tell you the median wage. What’s a median wage? According to The Balance, ” The word “median” literally means the middle and, as it pertains to salaries, it is the one that, if you list in numerical order all the salaries for every individual working in an occupation, falls in the middle of the list. Half the individuals on that list earn less than the median and half earns more.”
According to the Bureau of Labor Statistics (BLS), the median wage for workers in the United States in the second quarter of 2021 was $990 per week or $51,480 per year.
So if you’re simply measuring based on others, making a six figure income is really good. But that’s not the only deciding factor. In some cases making $50,000 a year salary is great!
Costs of a six figure salary
You must consider that these careers while earning high pay, they also come with costs. For example, to become a dentist, according to Collegeave, “Over four years, a dental student can expect to pay anywhere from $151,508 (in-state, public school) to $268,348 (private school) and up.”
That is in addition to the cost of your undergrad program, which the average total cost of public colleges: $25,290 (in-state) $40,940 (out-of-state) average total cost of private colleges: $50,900 according to ValuePenguin. Yikes, that’s a lot of debt for a bachelor’s degree! Student loan debt is crippling our graduates, but for so many, they see it as the only way to secure a 6 figure job.
Other costs of having a high-earning job that isn’t so easily seen or quantified are…
- More likely to be a high-stress work environment, which takes a toll on mental and physical health.
- More likely to work more hours (i.e., 70 hr work week vs. traditional 40 hr work week). Which means work/life imbalance.
- You start your career later in life.
- Loss of personal identity – you become your job.
- If you grow to hate your job, you are less likely to leave it.
- You may be required to keep up a higher standard of living (aka more expensive). Examples are more expensive cars, clothes, the need to look a certain way (plastic surgery, etc.)
- Your life is more public; people want to know more about you and engage with you.
- May need to live in a high-cost area (i.e., New York City, LA, etc.)
Debt among 6 figure salary earners
Many people who earn a six-figure salary are still in debt. According to CNBC, “those with a net worth between $100,000 and $199,999 are the most likely to carry credit card debt, followed by people with a net worth between $200,000 and $1 million. Adults worth more than $1 million were the least likely to carry such high-interest debt, Bankrate found.”
And Investopedia reports that “A surprising number of upper-middle-income earners, those making six figures, are also scrambling to make ends meet, other research shows. A recent study by global advisory firm Willis Towers Watson found that 18% of employees making more than $100,000 annually live paycheck to paycheck.”
The job market for 6 figure income earners
When choosing your six-figure salary career, you should also consider the growth potential for that career field. For example, “Employment in healthcare occupations is projected to grow 15 percent from 2019 to 2029, much faster than the average for all occupations, adding about 2.4 million new jobs. Healthcare occupations are projected to add more jobs than any of the other occupational groups.”
Another good employment category is in business and finance. According to BLS, “Employment in business and financial operations occupations is projected to grow 5 percent from 2019 to 2029, faster than the average for all occupations, adding about 476,200 new jobs.”
While jobs in Art & Design are on the decline, “Employment in arts and design occupations is projected to decline 4 percent from 2019 to 2029, losing about 32,900 jobs.”
While job growth /decline shouldn’t be your main driver in choosing a career field, it can help you make a more informed decision.
How much is 7 figures?
This is the next progression of 6 figure income earners. They venture into an even higher salary of at least $1 million a year, which is what’s called a 7 figure income.
- Investment banker
- Professional athlete (usually NBA, Baseball or Football)
- A list actor or musician
- Entrepreneur that made it big
- Corporate CEO
- Law firm partner
Those are just a few examples, yet these careers are out of reach for most of us.
But remember, you don’t need to earn a million to be a millionaire. As long as you have a net worth of over $1 million, you have bragging rights. (Remember, your net worth is your assets minus liabilities.
You can start investing at an early age, have a regular job, and grow your investments by over $1 million. Or you can have multiple income streams that all total $1 million, it’s totally possible!
If you’re curious, you can check out the Forbes list of the richest people in the world. Some inherited an empire, and some built their own (i.e., Jeff Bezos, Elon Musk, etc.).
At the end of the day
It’s no surprise that earning a 6 figure income is the goal for so many. It sounds impressive, and you’d be able to buy a lot of stuff, but it comes at a cost. In actuality, when asked how much is 6 figures? It’s just what you’ve traded your time and skills for. That’s all.
The best thing you can do when career planning is to look at the costs and then measure the payout and decide if you’re willing to do it and if it is worth it. Your financial goals may not ever require a higher income. So it might be worth it or it might not, and whatever you choose is just fine.
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