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Once You Make Six Figures, You Need To Worry More About Your Money

By News Creatives Authors , in Small Business , at March 29, 2022

CEO Prosperwell Financial, Wealth Advisor RJFS

The goal for many people, including entrepreneurs and business leaders, is to make a six-figure income. Once you make at least $100,000 a year, you might think you have made it to the top of the mountain and that you have achieved success. However, the major problem is that you begin thinking less about your money because you feel you have made it. The truth is that once you are making six figures a year, that’s when you need to think even more about your money.

When you have achieved a six-figure income, there is a feeling that you can spend more money—you can take vacations, buy that big TV, take your family out to dinner, get coffee every morning, etc. Stop. Pause. Breathe. Think. Just because you are making six figures a year does not mean you should spend six figures a year. Here are five things you need to do first when you are making six figures:

1. Max your 401(k). At a minimum, you want to put 10% away from the day you graduate high school until the day you retire. If you are a woman, you want to save 12%, but that is a whole other article. Ideally, you are maxing out the limit of $20,500 if you are under the age of 50—and if you are over the age of 50, the max is $27,000.

2. Max your Roth IRA. If you meet the income limits, in any given year, you can add $6,000 to your Roth IRA. If you are over the age of 50, you can add $7,000 to the Roth IRA.

3. Have no bad debt. It’s so easy to spend. We get messages constantly to spend money. The problem is that if you get into credit card debt, that is bad debt, and you’ll want it to be gone. If you have a car with a loan, you’ll need to pay that off. Debt is bad, and you want it gone.

4. Have liquid money. Any wealth advisor is going to tell you to have six to 12 months of expenses set aside in liquid money. This is for the stuff that happens called life, whether it’s a medical emergency, your car breaks down or you lose the six-figure-income job.

5. Get a financial plan. We find that once people make six figures, they want a new car, a bigger house, a cabin, fancy clothes, expensive trips and so on. A wealth advisor can get you on a financial plan to show you what all of these things look like for you financially so you can make smart financial decisions.

Most wealth advisors offer a complimentary consultation. You can interview a handful of advisors to see who you like and who would be a great fit for you. If you are a business owner, you should look for a wealth advisor who is a business owner so they have the real-life practical experience to advise you even better. If you are an executive with stock options, make sure your advisor has experience with stock options. Find a team. Find someone you connect with. You want to find a wealth advisor who is focused on education, who makes financial planning their process and who will provide you with a financial plan.

Congrats on making six figures! Now, focus on these five things to worry less and think about your money more.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc. Prosperwell Financial is not a registered broker/dealer and is independent of Raymond James Financial Services.

This material has been designed for informational purposes only. It is not a recommendation of any kind. Investing involves risk, including the risk of loss of principal. Please speak to a financial professional regarding your specific situation. Raymond James does not provide legal or tax advice. 401(k) plans are long-term retirement savings vehicles. Withdrawal of pre-tax contributions and/or earnings will be subject to ordinary income tax and, if taken prior to age 59 1/2, may be subject to a 10% federal tax penalty. Roth IRA is a tax-advantaged savings account where you make after-tax contributions and withdraw those contributions tax-free and penalty-free at any time and for any reason. You can potentially withdraw any earnings tax-free once you have met the 5-year rule and withdraw the earnings for a specific reason (age 59½, death, disability, qualified first-time home purchase).


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