6 Figures-What It Means And How To Earn It
When discussing salaries, you often hear about six-figure salaries. For many, six-figures feel like that mythical and legendary wall that few can get past. For others, it is the minimum salary needed to live comfortably due to the high cost of living in their area.
This article is going to touch upon several topics when it comes to 6-figures:
We will clearly define what it means to make a six-figure salary.
We’ll illustrate what a six-figure lifestyle really looks like.
We will then explore how common a six-figure annual income really is.
We will cover the common traits of people who earn six-figures in annual compensation.
Lastly, we will explore a few different ways to start earning 6-figures if you haven’t quite hit that threshold yet.
Clearly Defining The 6-Figure Salary
We need to be on the same page here, which means we need to clearly define what six-figures means. In general, when people use the term six-figures, and for this article’s purposes, it means earning a salary of anywhere between $100,000 and less than $1 million a year. If it is a currency other than the US dollar, it refers to its equivalent in the local currency.
Keep in mind the term six-figures is usually referring to the lower end of the range listed above. When people say they want to make a six-figure salary, they are usually thinking of something in the $100,000-$200,000 median salary range.
As the number increases beyond that, people referring to their salaries will begin to use terms like mid-six-figures or high six-figures. When their yearly earnings are close to $1 million, people will usually include the word million by saying something like “just shy of a million” or “almost a million.”
While this can be relative, earning $100,000 per year is the beginning of what being rich looks like in many circles. You’re not yet a millionaire, but if you started making a six-figure salary at a young age and started building wealth by saving and invested your money properly, you could easily be a millionaire within 10-15 years.
Now that we have clearly defined what we are talking about when we refer to six-figures let’s take a closer look at what that means in the next section.
What Does A 6-Figure Salary Really Look Like?
If we take the minimum amount that fits the definition, an gross annual salary of $100,000, and break it down into a standard workweek of 40 hours a week over 52 weeks, for a total of 2,080 working hours in a year and a 6 figure salary equals:
Hourly Income = $48.08 per hour
Weekly Income = $1,923.08
Bi-Weekly Income = $3,846.15
Semi-Monthly Income = $4,166.67
Monthly Income = $8,333.33
Quarterly Income = $25,000.00
Semi-Annual Income = $50,000.00
\= an annual salary of $100,000.00
What Does A $100,000 (6-figures) Salary Get You?
Let’s first look at it in terms of a house. Some financial experts say that you can afford to spend about 28% of your monthly salary on a mortgage payment. If we assume a 4.5% fixed interest on a 30-year loan, you should not spend more than $450,000 on a home loan.
However, the type of house six-figures can buy depends on the area you are buying in. In certain locations in the United States, a $450,000 price tag will purchase a four, or five-bathroom house with a significant amount of land around it. For some of the most expensive cities in the US, like New York City or San Francisco, this can be a nice but relatively small one-bedroom apartment.
Greater Opportunities To Build Wealth
When it comes to saving money every month, many industry experts recommend saving around 20% of your salary. If we don’t take taxes into account, the monthly savings on $100,000 is around $1,600-$1,700 per month. That is a significant savings contribution every month.
However, if you start saving this amount at an early age, you will quickly establish financial security and take wealth building to a whole new level. By investing in an employer-sponsored retirement program, you will build long term wealth to enjoy a very comfortable retirement due to the power of compounding interest.
Depending on the cost of living in your area and your budgeting discipline, it is possible to save even more than this.
While someone making $100,000 per year really shouldn’t be driving a Lamborghini or a Ferrari, they can usually afford the payment and insurance on a nicer vehicle with a mid-range price. Granted, to maintain financial freedom with this 6-figure salary, it would make more sense to save up and buy a gently used vehicle in cash.
Experiencing A New World View
Unless you are spending entirely too much on your cost of living expenses, a person earning a $100,000 salary can usually afford to take dream vacations not financially available to most Americans. This can include upgraded seating to business class and booking nicer hotels.
Of course, if your salary were into the mid-six-figures or high six-figures, all of the things mentioned in this section would improve relative to your income as long as you avoid lifestyle creep.
What Cities Have The Most People Making A Six-Figure Income?
Location plays a big part in the ability to earn a 6-figures income from a full-time job. Large companies that pay well are often located in large cities with a higher cost of living. Out of the top 10 cities with the most six-figure earners, only one city isn’t located on either the east or west coast.
That city is Minneapolis, Minnesota.
Because the other nine in the top 10 are coastal, this is where most of the six-figure job potential lies.
The Top Cities With High-Income Earners
Topping the list, at no surprise due to the high concentration of tech companies, is Silicon Valley. This California region covers primarily the San Jose, Sunnyvale, and Santa Clara area. If going a little further, you can include San Francisco, Oakland, and Hayward. Silicon Valley has the highest percent of six-figure earners at 34.64% of all tax returns claiming a six-figure annual salary.
The Bridgeport, Stamford, and Norwalk areas of Connecticut have the highest concentration of six-figure earners on the east coast. After that is the area surrounding Washington DC. The areas surrounding both Seattle and Boston also have a high percentage of people making at least $100,000 per year.
While many employees who make a six-figure annual salary tend to live near some of the country’s most expensive cities, keep in mind that the cost of living makes a big difference in how making six-figures feels.
For instance, making $100,000 in San Francisco is the equivalent of making only $71,000 in Cheyenne, Wyoming. Therefore, you can make less in a lower cost of living city and actually be able to save more than someone earning more in a large metropolitan city.
How Many People In The United States Are Making 6-Figures A Year?
The percentage of Americans that are making $100,000 in the US might actually surprise you. While many might see it as a wall that few get past, it is surprisingly common these days compared to being a millionaire.
At first glance, 5.4% of the US population makes a six-figure income every year. However, this number is a bit skewed. It takes into consideration the entire population. This means it includes infants, students, and spouses who choose to stay at home instead of work. When you factor out these demographics and focus only on full-time workers, around 9% of all earners in the US make at least six-figures.
This means that almost 1 out of 10 full-time workers in the United States make at least $100,000 per year. Of course, this number increases when it comes to geographic location, profession, experience, and education level.
How Does Education Affect Earning Six-Figures?
When it comes to making a six-figure salary, education tends to play a big part. While there are plenty of exceptions of people who earn $100,000 or more per year without a college degree, having a higher education opens more opportunities for a six-figure salary.
The fields of study that lead to a 6-figures median salary tend to be in the STEM fields, or Science, Technology, Engineering, and Mathematics. This is expected since all of these fields are much easier for employees to figure out the exact financial value these positions bring to their respective companies.
While there are examples of people making six-figures in other fields like humanities, the arts, or other non-STEM fields, the overwhelming majority lies in STEM majors.
Engineers in several skilled trades tend to be the most common type of six-figure workers:
Mining and geological engineers
Several others are all at the top when it comes to an annual income of over $100,000.
The following are fields of study like economics, applied mathematics, computer science, industrial management, pharmaceuticals, and medical degrees of all types.
Surprisingly, degrees in business weren’t, on average, as high of earners as the other fields of study listed above, even though this field is common for people who go into it for the money. The exception to this is if you filter out the people with business degrees that go into business for themselves instead of working for another company.
What Professions Make Six-Figures Without A Four Year Degree?
While a four-year degree certainly helps if you’re looking at things from a statistics point of view, what about high-earning professions that don’t require a college degree? For many of these, some training or education is required for a specific job. However, many of the training requires much less time involved, and the employee pays for most of the certification requirements.
Avoiding the student loan debt that comes with a four-year degree can greatly impact the ability to meet your financial goals and build wealth.
Air Traffic Controllers
Topping the list are air traffic controllers. The high level of responsibility and focus required to do this job effectively pays very well. Air traffic controllers have a median income of around $125,000 per year and go up drastically with years of experience.
Being an air traffic controller requires only an associate degree that can be completed within two years or less. It also requires several years of intense, on the job training.
Real Estate Agent
Being a real estate broker might be one of the most common ways to earn a six-figure salary without the need for a college degree. Your salary will be highly dependent on commissions, so being great a sales will make a big difference in your success.
Commercial Airline Pilot
Being a commercial airline pilot pays a six-figure salary, and it technically only requires a pilot license. While having a four-year degree can make it easier to land a job, it isn’t required.
Commonly overlooked but an essential career, a funeral director’s average salary is in the six-figure range. This important profession is good for someone who can show compassion to families going through a difficult tragedy in their lives.
Hard Labor Jobs
Several jobs pay six-figures due to the hard, physical requirements and the danger involved. These are things like working on oil platforms, powerline repairers, power plant operators, or even nuclear reactor operators.
Many of these jobs require a little vocational school and extensive training while on the job.
Police Officer Or FireFighter
Depending on your location, even positions like a police officer or a firefighter can make a six-figure income. This will vary when it comes to states and cities, and it is also heavily dependent on how many years of service you have accumulated.
Making 6-Figures From Your Investment Strategy
A salary isn’t the only way to make six-figures per year. Some people who don’t quite make that kind of money from their full-time job still manage to live on six-figures every year after retirement.
To do this, they need to live frugally and then save and invest as much of their income as they can. Through the strategic use of a company’s 401k matching and other pre-tax retirement savings, your money can begin to snowball. Compounding interest can really make a huge difference, too, as long as you continue contributing regularly and never touch your retirement money while you’re still working.
Use Compound Interest To Your Advantage
Commonly, the amount people can expect to make from interest on their retirement investments every year is around 5-8%. To make $100,000 per year just on the interest without spending the base investment, you need about 2 million dollars in a retirement fund. Keep in mind that this isn’t all put in by you, but your retirement grows to over the years.
The earlier you begin investing in your retirement fund, the better. Also, even if you aren’t making $100,000 per year in your salary, the more money you make and the higher percent you manage to save for retirement, the quicker your retirement fund will grow.
There are several online calculators and other tools to help you figure out how to reach this goal. You simply add your current retirement savings, the number of years you have left for retirement, and your retirement goal. It will then tell you how much you need to be contributing every month to hit that goal.
For more information, check out my free retirement calculator to see how you’re doing.
At the very least, you should be maximizing your 401k contribution and taking advantage of employer matching programs. If you aren’t maximizing the amount that your employer will match, you are essentially throwing away free money.
The trick is not to live like you’re making $100,000 per year so that you can save and invest properly. Upon retirement, you can spend $100,000 a year by living off the interest you make without ever spending a dollar of your $2 million nest egg.
What Are The Best Ways To Start Earning Six Figures?
Reading through this article, you have probably already figured out several ideas on how to work your way to making a six-figure income. To be clear, let’s outline the most important things first.
If making a median salary of $100,000 per year is your goal, then it is important to take stock of your strengths and weaknesses, as well as your experience. If you’re young and in college or about to attend college, it is most beneficial for you to choose a STEM field with a high paying career path similar to those mentioned above.
Do your best to avoid student loans if at all possible.
If college isn’t your thing or you are significantly older and fear the cost of an education may not be worth it to go back to school, you should start researching one of the non-college career paths listed. Find a vocation that interests you and start working towards completing the technical school or other requirements.
Increase Your Value And Become Irreplaceable
If you have a career already and you aren’t making six-figures yet, but you know it is possible in your field, then you need to be doing everything you can to increase your value to your employer. You need to remember that it is always easier to get a raise by switching companies every few years than getting recurring promotions at your current company.
Studies have repeatedly shown that most of the time, a competitor is willing to pay more to get an experienced worker from another company than they are willing to give large raises to their current employees or promoting from within. If you’re young, in your 20s, then, every few years, it may be a successful strategy to pursue a higher paying position in your industry with another company.
You can choose a final company to stay with for the remainder of your career once you’re comfortable with your salary and the ranking of the position you hold within the company. This is usually the fastest route to a six-figure income.
What About The Higher End Of 6-Figures?
When it comes to the higher end of six-figures, say $500,000 or more, this is where the traditional professions start to fall short. When people make high six-figures or even seven-figures per year, it’s usually because they have either landed a chief executive position with a large company and have a high-end sales position with no commission limit, or they own their own business.
Working For Yourself Is The Secret
Real estate seems to be the most common way to reach the higher end of six-figures and beyond the paths previously mentioned. Depending on your location and your selling skill, you can make a high six-figure income as a real estate agent, either working for a company or working for yourself.
People who work in real estate commonly start investing in real estate as well. They will buy properties as rentals, or if they see an incredible deal on a property that needs some work, they will buy it and flip it. Even though this article is talking about six-figure earners, keep in mind that real estate is the industry that has produced more self-made millionaires than any other industry.
Getting an upper management position that pays above $500,000 is really only common for some of the largest companies in the world. On top of this, it usually also involves decades of experience in corporate life, often in that industry, before you can land one of these coveted positions.
Starting your own business is another way to make $500,000 or more, but like many things in this article, it will be based on your skills and abilities to succeed in the industry that you start a business in.
Don’t Forget About Uncle Sam And 2021 Tax Brackets
Keep in mind, the more money you make, the more you will pay in taxes. The Internal Revenue Service recently announced the 2021 income tax bracket structure:
37% for individuals making over $523,600 or $628,300 married filing jointly
35% for individuals making over $209,425 or $418,850 married filing jointly
32% for individuals making over $164,925 or $329,850 married filing jointly
24% for individuals making over $86,375 or $172,750 married filing jointly
22% for individuals making over $40,525 or $81,050 married filing jointly
12% for individuals making over $9,950 or $19,900 married filing jointly
10% for individuals making less than $9,950 or $19,900 married filing jointly
How Common Will A Six-Figure Salary Be In The Future?
Because of economic growth, a rising cost of living, inflation, and competitive pay for the most in-demand positions, a six-figure salary will become more and more common. In as little as 20 years, $100,000 per year will likely be the median salary in most larger, more expensive US cities.
Soon after that, people will likely start talking about a seven-figure salary like they currently talk about a six-figure salary. People see this salary as a mythical wall that is incredibly hard to hit, but over time, more and more people will begin making a seven-figure salary.
In the end, it is really all about how much you make in relation to the lifestyle that you live.
This post originally appeared on Arrest Your Debt.