Earning six figures a year can be the finish line.
It can be the golden milestone, the badge of honor showing to the world that you made it and have now claimed your fat slice of the American Dream.
You can save more. Invest more. And most importantly, spend more. Once you start earning six figures, you’re a “high earner.” You get the velvet rope treatment and enter a club with other high earners basking in your newfound echelon of society.
Well, that used to be true. What was unimaginable before is becoming increasingly common: Some people need much, much more than $100,000 a year to get by.
High earners in the most expensive cities in America
The internet lost its collective mind in July 2018 when the U.S. Department of Housing discovered that a family of four living on an income of $117,400 would be considered “low income” in San Francisco.
Of course, at first glance this sounds ludicrous. Six figures is the gold standard of high-earning. How is it possible that you’d be considered “low income” when you’re earning more than $100,000 a year?
“I live in the D.C. area, so $100,000 doesn’t make anyone’s jaw drop,” says Steve, 41. “If you’re making $200,000, that’s good but it’s still just upper-middle class around here.”
Like many in the area, Steve (not his real name: several names throughout this piece have been changed) is a contractor for the federal government earning roughly $200,000 a year. He’s also very familiar with the high income needed to sustain living around our nation’s capital, which is home to the richest county in the nation.
“I once did a cost of living analysis of D.C. and found that it was comparable to some of the most expensive cities in America,” he says.
And he’s right. Washington, D.C., stands toe-to-toe with the likes of Manhattan, New York; San Francisco, California; and Los Angeles, California, as one of the the most expensive cities to live in.
Nearly 3,000 miles away in the shade of the San Gabriel mountains, Marc, 47, knows the feeling too. He lives with his wife and two sons in Burbank, California, just north of Los Angeles.
While his job as a freelance television editor provides him with roughly $175,000 a year, he also feels the constraints of the city he lives in.
“Housing is pretty ridiculous in LA,” Marc says. “We bought our house in Burbank in 2009 at the height of the housing market crash. Even then it was still pretty expensive.”
A recent report by CoreLogic, a real estate analytics firm, found that home prices in Los Angeles are actually grossly overvalued. In fact, housing prices are 10% above where they should be with long-term trends.
The result: Home costs in LA are outpacing the consumer’s ability to purchase them.
Marc sometimes struggles with a high mortgage. As an independent contractor, he goes through frequent periods of feast or famine. Depending on the season, he might not get work for a while.
“Over the past year, I’ve had three weeks where I just didn’t have work,” he says. “It’s a little bit of a hustle. Finding work can be a pretty consistent thing, but maybe it’s because I have a family to support and a mortgage. I feel pressure to keep the machine running.”
That pressure can follow you even in the best of times too.
Carly, 34, lives out of Staten Island with her husband and two-year-old son, and works in New York as a business consultant earning a base of $135,000 a year. But that wasn’t always the case. In fact, she lived for a decade abroad in abroad earning a fourth of what she does now.
“I’ve always been very ambitious,” says Carly. “So whatever I’m making, I always want to make more. On the one hand, though, I’m making six figures, which is considered the gold standard for high earning.”
Living in the NYC area comes with its own challenges though. Finding affordable housing in the city is so difficult it’s spawned memes, YouTube vids, and even a Tumblr blog dedicated to terrible and expensive New York apartments.
That hasn’t stopped Carly from starting a family though.
“The fact that I’ve broken through [to six figures] is exciting,” she says. “Financial institutions think so too since I recently got approved for a mortgage.”
She has high hopes for her future and building out her version of a Rich Life — and her income helps with that dramatically. But still, even she’s a little nervous about the future.
“I’m the main breadwinner right now,” she says. “So I’m in the position where I’m trying to keep my family afloat. It adds a lot to stress.”
She continues, “I remember a few months ago, my family was renting in an apartment that turned out to be infested with mice. It was terrible. If I were single, I’d just go sleep on someone’s couch. No big deal. But since I had a family, we were essentially facing homelessness. I had many moments of panic.”
“When you’re faced with the tremendous pressure of needing to have a job at all times, you start thinking, ‘What do we REALLY need to get by?’”
And in all likelihood, it’s more than what she earns now.
“It’s a lot of pressure,” she says.
The belt tightens at $175k
In LA, finances are often top of mind for Marc for three reasons:
1. The sporadic nature of his freelance video editing job.
2. His family he must provide for.
3. His mortgage, which he must pay if he wants to keep his house.
Since work can be uncertain as a freelancer, he’s turned to “diversifying” his earnings through Airbnb side hustles.
Still, when finances get short, he really starts to feel it.
“We do have to tighten our belt during lean periods,” he says. “We have to cut out contributing to our retirement and kids’ college funds. I’m 20 years out from retirement, so when there’s a year we don’t contribute the full amount to our Roth IRAs, it’s a lot of money. It’s really not the place I want to be.”
He continues, “I hate it sometimes. I absolutely hate it. Don’t get me wrong: I love my job. I love my family. I love my life here. But since I’m the financial person and breadwinner in my family, I feel that burden resting squarely on my shoulders.”
Delaney and the theory of relativity
Just a few hours south of San Francisco (home of the low-income six-figure family) lives Delaney, 52.
She lives in a small nondescript California city of 40,000 people. There the cost of living is very low — or at least it is when compared to LA and San Francisco.
Looking at her life, you wouldn’t think she’s a high earner. Unmarried and with no children, she lives in a small three-bedroom house amongst a neighborhood of others. She drives an old Fiat. For fun, she likes to play the guitar and go camping with friends.
However, she’s actually a web developer who makes more than $11,000 a month as a freelancer.
Despite this, she’s apprehensive to say that she’s a high earner.
“Relative to my community, I’m a high earner,” Delaney clarifies. “But if I lived in San Francisco, I’d be barely getting by. If I lived in New York, I’d be barely getting by. In my little bitty niche of the world, though, I’m definitely a high earner. I earn well over twice the median for my community.”
She continues, “It’s all relative though.”
And she’s right. The people we spoke to earned roughly the same salary — yet experienced completely different perspectives on what it meant to be a high earner.
While some felt like their income was just barely enough some days to get by (like with Marc and sacrificing his retirement fund), others were more than happy with what they had (like Delaney).
Earning six figures is an awesome thing to aspire to. And, depending on where you are, it can give you a great living and allow you to live out your Rich Life.
But six figures is not a catch-all solution.