Reaching a six figure income is a huge financial milestone. Earning $100,000 or more per year opens the door to greater financial opportunities, but it also comes with new challenges. Many people assume that hitting this income level means automatic wealth, yet without the right financial habits, it’s easy to fall into lifestyle creep, overspending, and missed opportunities for long-term financial security.
To make the most of your six figure income, it’s essential to take strategic steps that will set you up for financial success. Here are three critical things to do after reaching this income milestone.
1. Maximize Retirement and Tax-Advantaged Accounts
One of the biggest mistakes high earners make is failing to optimize tax-advantaged savings. With a six figure income, taxes can take a big chunk out of your earnings. By contributing to retirement accounts and other tax-efficient investments, you can reduce taxable income while growing your wealth.
How to Maximize Your Savings:
- Max Out Your 401(k) – If your employer offers a 401(k) plan, contribute the maximum limit ($23,000 for 2024, or $30,500 if you’re over 50). This reduces taxable income while growing tax-deferred retirement savings.
- Contribute to a Roth IRA or Backdoor Roth IRA – If your income is too high for direct Roth IRA contributions, consider a Backdoor Roth IRA to enjoy tax-free withdrawals in retirement.
- Use a Health Savings Account (HSA) – If you have a high-deductible health plan, an HSA offers triple tax benefits: tax-free contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
- Invest in a Brokerage Account – If you’ve maxed out tax-advantaged accounts, a taxable brokerage account allows for additional investing with flexibility.
By prioritizing these accounts, you ensure that your six figure income is working for you rather than being lost to unnecessary taxes.
2. Avoid Lifestyle Creep and Increase Savings Rate
With a higher income, the temptation to upgrade your lifestyle is strong. Many people immediately buy a bigger home, get a luxury car, or increase discretionary spending. While treating yourself is fine, failing to control lifestyle inflation can lead to living paycheck to paycheck, even on a six figure salary.
How to Control Lifestyle Creep:
- Keep Fixed Expenses Low – Just because you can afford a bigger house doesn’t mean you should buy one. Housing costs should stay below 30% of your income to ensure financial flexibility.
- Continue Living Like You Earn Less – If you were comfortable before hitting six figures, maintain that lifestyle and save the extra income.
- Automate Savings – Set up automatic transfers to savings, investment accounts, and emergency funds before spending on luxuries.
- Use the 50/30/20 Rule – A simple budget guideline is 50% needs, 30% wants, and 20% savings/investing. With a higher income, aim for saving at least 30-40% instead of just 20%.
By keeping expenses in check and increasing your savings rate, you create long-term financial security instead of temporary wealth.
3. Build Multiple Income Streams and Invest for Growth
Relying solely on a salary—even at six figures—can be risky. Job loss, economic downturns, or unexpected expenses can quickly disrupt financial stability. To secure long-term wealth, diversifying income sources and making smart investments is crucial.
Ways to Build Additional Wealth:
- Invest in Real Estate – Rental properties or house hacking can provide passive income and long-term appreciation.
- Start a Side Business or Freelance Work – Leveraging skills for consulting, coaching, or online businesses can create additional income streams.
- Invest in Dividend Stocks – Building a portfolio of dividend-paying stocks generates passive income and long-term growth.
- Consider Alternative Investments – Peer-to-peer lending, REITs (real estate investment trusts), and private equity can diversify income beyond traditional stocks and bonds.
- Increase Career Earnings – While diversifying income is essential, advancing your career, negotiating raises, or learning high-income skills ensures continued growth in your primary earnings.
By investing wisely and creating multiple income streams, you protect your financial future while making the most of your six figure income.
Final Thoughts: Smart Money Moves for a Six Figure Income
Reaching a six figure income is an incredible accomplishment, but it’s just the beginning. Without a solid financial strategy, high earners can still struggle financially. By maximizing tax-advantaged accounts, avoiding lifestyle creep, and building multiple income streams, you set yourself up for long-term financial success.
A high income alone doesn’t create wealth—smart financial decisions do. The key is using your money strategically to grow wealth, reduce risk, and achieve true financial freedom.