Michael Baum, CFP® RICP®
Vice President & Associate Financial Advisor
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, you should put together a strategy for your new level of income. It’s the smart move to maximize your new financial reality, as well as your chances of achieving your financial and lifestyle goals for the future.
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’re making six figures, you may be tempted to never look at your budget again. Resist this temptation – for many, it takes intentional effort to avoid letting expenses rise to meet income. And, as you’re probably already aware if you’ve only just crossed the six-figure threshold, that amount of money doesn’t go as far as it once did. So go back over your budget to make sure your spending is in line with your goals. 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 build toward new goals, knowing that your day-to-day expenses are covered.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 (student loans or a mortgage, for example). 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 at your new income level. This reserve will help shield you from possible disasters like job loss, a serious injury or illness, or divorce.
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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
That may sound like a lot, but let’s take a look at the “under 50” number as an example. That breaks down to about $394 per week. If you’re making $100,000, that means you’d be putting about 20% of your gross weekly salary toward savings, which fits right in with the 50/30/20 rule. (Check out our blog at whzwealth.com/blog if you aren’t familiar with that rule.)
Move Forward Confidently
Restructuring your budget, eliminating your unproductive debt, creating a substantial nest egg, and maximizing your retirement savings vehicles like your 401(k) should see you move into a much more comfortable place in life. A six-figure income combined with some strategic financial planning and an ongoing commitment to that plan can help you stop working for your money and start having your money work for you.
Creating that plan can bring up a lot of questions and there are some complicated matters to consider such as taxes and how best to save for multiple priorities at once. That’s where a trusted financial planner can make all the difference.
We act as fiduciary financial planners for our clients, meaning we partner with them to create a strategic financial plan based on their individual goals and with their best financial interests at heart. We do this using our strategic Plan Well, Invest Well, Live Well™ process. Get in touch for a no-obligation consultation to see how your new six-figure salary can take you in achieving your goals for today and all the days to come. You can contact us on our website, whzwealth.com, by phone at (860) 928-2341, or by email at firstname.lastname@example.org.
Presented by Vice President, Associate Financial Advisor, Michael Baum, CFP® RICP®. Securities and advisory services are offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. These materials are general in nature and do not address your specific situation. For your specific investment needs, please discuss your individual circumstances with your financial advisor. Weiss, Hale & Zahansky Strategic Wealth Advisors does not provide tax or legal advice, and nothing in the accompanying pages should be construed as specific tax or legal advice. 697 Pomfret Street, Pomfret Center, CT 06259, 860.928.2341. http://www.whzwealth.com