"Despite the covid, I still made my 6 figures last year".
You might have heard people talking about "6-figures "in some way, whether it is related to how much they get paid, or their net worth. For example : "I am reaching 6 figures in my new job!"
And you may have also heard or seen references to 7-figures, 8-figures, and even 9-figures too!
Is it an American concept crossing the Atlantic, or a new buzz word? I only started hearing about it last year and wanted to know more.
What do such numbers exactly mean? What is a 6-figure salary and how do you get there? What does it take to build a net worth of 6-figures? Did I already reach 6-figures? Am I far?
You will learn all the basics about these numbers (and more) below!
6-figures is simply something between 100,000 and 999,999, and when people use this term, they are typically referring to the income someone makes per year from their job or their own business (in dollars or euros).
Although this can look like a lot of money, making 6-figures doesn't mean someone is actually wealthy. Before we get into that, another notion I want to define : What does it mean to have 6-figures?
Earning a 6-figure salary can be great for your financial situation and help you save and invest more.
But, if you are earning 120 or 130,000 dollars (or euros), that amount of money might not give you as much confort as it once did 20 or 30 years ago (because of inflation). The cost of living, debt, and other expenses can easily burn through a 6-figure salary, and you will feel the pinch if it is just above 100,000.
In order to ensure this money works well for you, there will be a few things worth focusing on:
a) Understand lifestyle "slips"
When people make more money, typically their expenses and spending will go up. You become used to having more things. Your "wants" slowly become "needs" in your mind, and a 100,000+ salary can disappear very quickly.
In the US, 18% of employees who make more than $100,000 are living paycheck to paycheck! That is almost 1 in 5 ...
As strange as it may sound, earning more money does not solve most money related issues or make you automatically richer. While there are multiple reasons why that is, spending and instant gratification can play a major role.
Often, we neglect our budgets or truly looking at the overall state of our finances. So even with a nice 6-figure salary, you might find yourself living above your current means. Watch out for your expenses and do not over estimate your capacity to pay for everything you want.
If you want to truly maximize your income, make a budget and keep track of spending, net worth, expenses, and investments over time. I have developed a set ofexcel sheets that I use in Money Coaching and for myself. Feel free to ask!
As you may know, where you live plays a huge role in how far your 6-figure income can go.
For example, if you live in a major city like San Fransico, Tokyo or Paris with a family, that 100k+ per year won't go nearly as far as if you are living in South East Asia or Eastern Europe. Naturally, those cities have higher-paying jobs, but it may still feel like living on $45,000 per year at the end of the day if you have to pay for everything 2 or 3 times more than you would somewhere else.
With the rise of remote work (pending your career field), you can now make more informed choices about where to live. I predict a lot of people will, over the years, realise they can have a better quality of life and be financially better off somewhere else.
My first take away : Making a 6-figure salary is definitely good and can certainly be huge for your personal finances. But, if you are not looking at your overall finances carefully, eliminating debt, and using the income to save and invest — how good is it really?
Everyone has the opportunity to generate 6-figures, which can go a long way for your finances and quality of life. Agreed, not everyone want it or need it, and you can be on the low or high end of 6-figures and how far the money will go depends on your spending, cost of living, etc. But for sure you can get to this income level in this day and age!
It might feel daunting at first, but far from impossible if you set it as a goal.
Here are some ways to get you there :
Ask for salary increases when deserved
Consider job-hopping conservatively to increase pay
Negotiate salary offers and company perks (salary is not everything you can get in exchange for your job)
Start your own business or freelancing
Invest in appreciating assets and aim for passive income
I think we have all heard that "money doesn't always equal happiness".
Six-figures or not, the key is living within your means, saving and investing, finding ways to make money beyond your full-time job, and using smart money management techniques.
Make sure Money works for you and not that Money controls you : In Money archetype terms, this is Magician and Warrior in action!