So you’ve finally arrived. After years of effort, you’ve joined the elite class of Americans that make over $100,000 a year. Now’s the time to cut loose and enjoy the fruits of your labor, right?
Earning six figures doesn’t mean your money troubles are magically over. In fact, according to LendingClub Corporation, 45% of people who earn over $100,000 are still living paycheck to paycheck! If you want to leverage your six-figure salary to truly live your best life, here’s what you need to do.
Make a Spending Plan
When you find out you’ll be getting a six-figure salary, the first thing you need to do is determine how you’ll be spending your newfound wealth. The best way to do that is create a spending plan.
In order to create a spending plan, first figure out your monthly income. Next, list your monthly expenses and add them up. This will include your essentials, like rent, utility bills and groceries, as well as discretionary expenses like eating out, buying clothes and getting coffee.
Once you’ve added up your expenses, subtract them from your income. If your expenses are less than your income, your spending plan is in good shape. If your expenses are more than your income, though, you’ll need to reduce the amounts in your spending plan categories to make sure your expenses at least equal your income.
Alert readers will probably realize that this process is the same process as creating a budget, and they’re right—a spending plan is a budget and vice versa. When you make a budget, you’re figuring out what you’ll spend your money on and making sure that the essentials are taken care of. Calling a budget a spending plan simply emphasizes that you are in control of how you spend your money, and makes you feel better about making financially responsible choices.
Examine Your Priorities
After you’ve created your spending plan/budget, you’ll probably have quite a bit of money left over. While you could spend it on a lot of fun things and experiences, the best thing you can do with that money is use it to give yourself a rock-solid financial foundation that you can build on to achieve your greatest financial goals.
Take some time to assess your current financial situation and figure out how you can use your new salary to bolster it. If you have debts, for instance, you can use the extra money in your spending plan to start paying them off. You could also use your salary to bulk up your emergency fund or pay into your retirement.
Plan for the Future
While building up your financial foundation should be your highest priority to start, you probably have other goals you’ll want to achieve. For instance, you might want to:
- Buy a new house
- Get another car
- Travel Internationally
- Save up for your children’s college tuition
- Have a nice wedding
- Get tickets to the Superbowl
Think about which of these goals is most important to you and start putting aside some money for it. If you really want to make sure you reach that goal, make it a SMART goal—in other words, make sure your goal is Specific, Measurable, Attainable, Realistic and Time-bound.
One of the best things about making $100,000 and more is that you can work on multiple goals at the same time. If you need help in order to make sure you achieve all your goals, you might want to work with a wealth planner, like our friends at Round Table Wealth Partners. They’ll help you figure out the best way to achieve your goals and put your money to the best possible use, from opening multiple saving accounts to showing you high net worth spending strategies that can really maximize your money.
After you’ve completed all these steps, do something nice for yourself. It’s okay—you’ve set up a financial foundation that will get you through almost any emergency, and your money is going towards the goals that are most important to you. You deserve a reward.
Manage Your Income With First Alliance Credit Union
If you’re making over $100,000 a year, a few simple steps will take you away from living paycheck to paycheck and letting you live your best possible life. First, develop a spending plan that will ensure your basic expenses are covered. Then figure out what your priorities are and set some concrete financial goals.
No matter what your salary is, you can make sure you’re managing it effectively when you become a member of First Alliance Credit Union. You can use traditional savings accounts and money market savings accounts for your emergency fund, invest your money in a certificate of deposit and keep an eye on the progress you’re making toward your goals by using our online banking platform or mobile app.