Just What Does a 6-Figure Salary Get You?
Once the definition of success, earning $100,000 or more per year doesn’t automatically mean you’ve made it to easy street these days. As kids in the ’80s (or earlier), we might have thought that amount was akin to a million dollars, but now, a six-figure income doesn’t mean as much as it used to. What happened? Inflation, for one.
(Photo Credit: Adam Tinworth/Flickr)
If you want to really wish for days gone by, try plugging $100,000 into the U.S. Bureau of Labor and Statistics’ inflation calculator. What you’ll find is that $100,000 in 1980 is worth $288,638 in 2015 money. Want to get even more nostalgic? Crank the year back to 1960, and you’ll see that 100 grand would get you $803,506 annually in 2015. That’s a lot of cabbage.
In fact, the real value of your wages has decreased 8 percent since 2006. So, if your paycheck is similar to what it was before the recession, it buys less than it did. It’s not your imagination: you really do have less money than you used to.
Why We Don’t Feel Rich
Well, things got expensive. Starting with taxes, we lose about 30 percent of our paychecks to state and federal dudes like FICA and Social Security. Before you go asking “Who’s FICA and why is he getting all my money?” remember that taxes go to good things like roads and bridges (or at least they’re supposed to) and also to paying for incomes when we get old and can’t work. But still, that bite off the top stings a bit.
Also, things cost more. Stuff like housing, transportation, or food will take more out of your paycheck every month than they used to. The mere cost of Thanksgiving Dinner has risen thanks to the increase in the cost of turkey and pumpkin pie mix. College costs more (and so do student loans), so many are starting out in the workforce already in debt.
Then there’s cost of living: $100,000 a year gets you a lot farther in Chicago, for example, than it does in New York. In fact, if you earn $100,000 in Chicago, and want to move to New York and live a similar lifestyle, you’d need to make a whopping $187,136 a year.
Tips for Living Smart on Any Budget
- Don’t count on someone else to save for your retirement. You’re going to have to squirrel away some money every paycheck, and probably invest it too. Automatic savings plans where that money goes right out before you see it in your bank balance are easy and effective. Check with your bank, they probably offer it.
- Make a budget. Know what you’re spending every month by tracking it and keeping to a limit. Already spent your monthly cute boot budget? Sorry, those adorable booties are going to have to wait till next month. You’ll live. I swear.
- Plan for your big ticket items. If you know you want to take a big trip or buy a big house later on, start saving now. Sock away a little bit each month (there’s that automatic savings plan again) and you’ll be surprised how the nest egg can grow. What’s more relaxing than taking a vacation debt-free?
- Strive for that raise. Try to set professional goals so your next job pays even better than your last. Need some tips on what you should be earning? Check out PayScale’s salary survey. It’s free!
Tell Us What You Think!
Do you get by on way less than $100,000 a year, thanks? We want to hear from you! Leave a comment or join the discussion on Twitter.