What To Do When Your Income Reaches Six Figures
By Carolanne Chavanne, CFP®
Reaching six figures is no easy feat. If you’re one of the hard-working few who has made it to this milestone, give yourself a pat on the back. But before you go reaching for a bottle of champagne or calling a Ferrari dealer, consider taking a few practical steps to plan for a successful future.
Putting together a strategy for your new level of income is the smart move for your new financial reality.
Steps to Take
There is no one-size-fits-all strategy for maximizing your new six-figure income. Every person is different, and some suggestions may mean more to you than others. But there are tried-and-true methods that can point you in the right direction when it comes to your financial health.
Review Your Budget
Now that you are making six figures, you may be tempted to never look at your budget again. Resist this temptation and go back over your budget to make sure your spending is based on your plan. Feel free to adjust your line items to match any new priorities without going overboard. Careful planning will let you know if you are on track with your goals and how much you are allowed to spend on that must-have splurge item you found on Instagram. Your renewed budget will set you up nicely to follow your other new goals, knowing that your day-to-day matters are on firm footing.1
Target Unproductive Debt
Not all debt is bad, as much of it helps you both financially and in terms of your quality of life. But certain types of debt, like credit cards and personal loans, are burdens you don’t want to carry around forever. Set a goal to eliminate your unproductive debt and free up more of your financial resources for more important things. Each penny you save can go toward retirement and other investment opportunities.
Build Your Nest Egg
Life is full of the unexpected. Plan for it by setting aside a nest egg, or enough liquid money to cover six to twelve months of your life. This reserve will help shield you from possible disasters like job loss, a serious injury or illness, or divorce.
Maximize Your 401(k)
Start planning for your retirement if you haven’t already. Contributing to your 401(k) is a smart, easy way to put away funds for your golden years. Shooting for 15% is a good rule, but reach even higher if you find yourself in a good position. Aim for the maximum limit of $20,500 if you are under 50 or $27,000 if you are above.2
Move Forward Confidently
Restructuring your budget, eliminating your unproductive debt, creating a substantial nest egg, and maximizing your basic investment products like your 401(k) should see you move into a much more comfortable place in life. A six-figure income combined with some simple planning can help you stop working for your money and start having your money work for you.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.