7 Things You Should Do When You Start Making 6 Figures

You work hard to earn your money. But when you cross a certain income threshold, you should make your money work hard for you.

Many people make it their goal to earn more money, but do you know what savvy things you should do with your income when you do? When I hit six figures, personally, I spoke with a financial planner and explored my options so I could make the most of my money.

Among the many steps we talked about, these stuck out.

1. Add to Your Retirement Plans

Many people don’t maximize their retirement contributions, and they’re missing out. In 2024, the IRS has increased its contribution limits. If you put money in a 401k plan, you can contribute up to $23,000. Those over 50 can also add up to $7,500 for a total of $30,500.

If you have an IRA, the limit has increased to $7,000 per year. These are all tax-free contributions, which means the amount of income you’ll be taxed on is lower.

2. Build up Your Emergency Fund

I cannot state this enough. Most Americans don’t have enough in their emergency fund, or worse, an emergency fund at all. When you start making six figures, increase the amount of money you put aside.

The sweet spot is to have between three and six months of monthly expenses put away. When you start making more money, this should be one area you focus on.

3. Invest

One of the best ways to grow your money is to invest it. But don’t your eggs all in one basket.

Diversifying is the key to minimizing your investment risk. If you’re knowledgeable about stocks and the market, this can be easy enough to do. Otherwise, seek out the help of a capable financial planner who can help ensure your portfolio is working for you.

4. Adjust Your Tax Withholdings

This is often one of the things people forget to do. The more money you make, the more Uncle Sam takes. You may find yourself in a higher tax bracket with your tax withholding too little to cover the debt.

It can’t hurt to check your tax forms and make sure everything looks good to avoid a shock come tax season. If you’re unsure, speak with a tax professional for expert advice.

5. Adjust Your Budget

By adjusting your budget, I don’t mean increasing it. In fact, you should try to minimize your debts so that you can make the most of your larger paycheck.

Avoid the trap of spending more because you make more. It’s one we likely all fall into at one point or another. Instead, pinpoint some items you might be able to lower or eliminate completely, and definitely put more in your savings.

6. Eliminate Bad Debt

Bad debt can be a Debbie downer on your finances. One step to take when you start making more is to eliminate as much as you can.

That means paying more on your high-interest credit cards. You don’t have to pay the entire balance off, but do pay more than the minimum payment. The quicker you knock the balance down, the less they can charge you.

7. Develop a Long-Term Plan

Where do you see yourself, financially, in two years? Five years? Ten years?

Developing a long-term financial plan can help you reach your goals and get you on the road to freedom. By mapping out your short- and long-term objectives, you can get a clear picture of what it is you need to do to achieve them. And then, put that plan into action.

How to Be Smart With a Six-Figure Income

It’s super tempting when that first paycheck rolls in to go out and spend it. Many people who make more money spend more money, in turn. Don’t do that. Or rather, don’t make a habit of it. Going out to a nice dinner or buying an outfit to celebrate once is fine. We all need treats sometimes.

Rather than sacrifice your financial future, take a good look at your income versus your expenses. Put more money away than you spend, but diversify the savings so that when retirement comes, you’ll be able to sit back and enjoy life your way.

How Many People Make a Six-Figure Income?

Not many Americans make six figures a year. According to Zippia, only 18% have achieved that milestone.

Don’t let that discourage you. In fact, let it encourage you. By planning out your goals and financial future as early as possible, you could join those ranks. I promise it’s not as difficult as it seems, but it does take some hard work. If you’re diligent, you’ll set up multiple passive income streams so you can sit back and enjoy life.

What Kind of Jobs Pay Six Figures?

White-collar jobs tend to be the top-paying jobs that inch into six figures, sometimes seven figures for giant corporations. Think managers, CEOs, and top experts in their fields. Some blue-collar positions also pay six figures, especially when you work your way up the ladder.

However, if you have the know-how and the willingness to make it happen, you can earn six figures working at home doing what you love, whether it’s writing or crafting. If you bring something unique to the market and know how to draw attention, you’ll be well on your way.

Can You Make Six Figures Without a Degree?

Yes, it’s absolutely possible to make six figures without a degree. Many companies will hire people based on their actual experience in place of a college education. For example, if you’ve never been to school for coding but it came naturally to you and you picked it up by watching YouTube videos, guess what? You could land a coveted job based on this.

Real estate agents, truck drivers, fire chiefs, and IT workers are just some jobs that could easily pay six figures.