5 Things To Do When You Start Making 6 Figures
Regardless of what industry or field you’re in, making a six-figure salary is a big deal. It doesn’t matter if it takes you years of hard work and promotions, or you get a lucrative salary right out of college, it’s an achievement either way. When you do hit that career milestone, it’s a great time to take stock of your financial situation and make some crucial decisions upfront.
1) Assess The Immediate Impact
With a higher income, you may no longer qualify (or qualify for a reduced level) for certain income-based services.
For example, if you have a Roth IRA, you may no longer be eligible to contribute to it. In 2019, you can only contribute a reduced amount to a Roth once you hit $122,000 and can’t contribute at all once you reach $137,000. Married couples filing jointly start phasing out at $193,000 and can’t contribute once their combined income reaches $203,000.
Other things that might be affected by your higher income are any subsidies you are getting for health care and the payments for any student loans you have.
2) Update Your Budget
It’s really easy to succumb to the idea that because you’re making more, you can more. Any financial planner worth their salt would encourage you to allocate a reasonable portion of your additional income to savings.
Other items to prioritize would be paying off any outstanding debts, purchasing or increasing disability insurance, and starting an emergency savings account.
3) Check Your Tax Withholding Amount
If you’ve been getting tax refunds in previous years, that may go away with your new six-figure salary. It doesn’t hurt to review your W-4 and make any necessary adjustments. The last thing you want is to get a big fat bill from the IRS next April.
If you’re not sure how much withholding is the right amount for you, consider speaking with a certified tax professional to point you in the right direction.
4) Revisit Your Retirement Plan
It’s never too late to start planning for retirement. Your new salary provides the perfect opportunity to start or update your retirement plan. If your employer offers a sponsored retirement plan, get all the details, and strongly consider making the maximum contribution every year from now on.
If you’re self-employed or don’t have access to an employer-sponsored retirement plan, there are several options available. You can set one up yourself or with the help of a financial professional.
5) Speak With A Financial Planner
Having a clear financial plan is one of the best ways to make the most of your new six-figure salary. If you struggle with any (or all) of the items mentioned above, consider speaking with a financial planner.
An experienced financial professional can help you assemble all the disparate parts listed above into a cohesive whole that is custom-tailored to your goals and income level. To learn more, or to get help with your financial plan, contact us today.
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