6 Best Ways To Build Wealth on a Six Figure Salary

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As your income increases, it will also be tempting to have your spending go up. You’ll want to treat yourself to everything you couldn’t afford before your six-figure salary. However, it’s essential that you take the time to create a plan so that you start building wealth so that you don’t spend your money frivolously.

What are the best ways to build wealth on a six-figure salary? 

1. Make a Game Plan

Before you start looking for the best investment opportunities out there, it’s critical that you seek guidance so that you have the right resources on your side. A wealth advisor can help you create a plan to make wise decisions with your money. Luckily, most advisors will offer a complimentary consultation to get a sense of what you’re dealing with. 

“Lots of free matching tools could help you sort through thousands of advisor profiles to hook you up with the best money manager for what you need specifically,” said Diana Howard, financial analyst at CouponBirds. “At the same time, local banks will be happy to give you financial advice and recommend suitable products for you for free.” You want a plan based on your unique financial goals, so you’re not blindly investing your money. 

2. Max Out Your Retirement Accounts

“It’s crucial to regularly contribute to retirement funds like a 401(k) or an IRA,” expressed Howard. “If you put $5,000 a year into a Roth IRA that earns around 10% on average every year, you’ll have a balance of roughly $250,000 in 20 years. Besides, Roth IRAs are tax-friendly savings accounts.”

If you can meet the income limits in the year, you can contribute $6,000 to your Roth IRA. When you pass the age of 50, you can add $7,000 to your Roth IRA. Either way, the goal is to set aside funds for your retirement so you don’t have to work forever. You’ll also want to enjoy a comfortable lifestyle in your golden years. Your future self will thank you for the decisions you make today. 

3. Establish An Emergency Fund

While you will likely want to invest most of your funds to maximize the returns, you may want to consider keeping some liquid cash. This is where you’ll save money for unexpected expenses like medical bills, car repairs, or job loss. Many financial experts suggest setting aside three to six months’ worth of living expenses to protect yourself. 

Even though this may seem unnecessary when you have a six-figure salary, you must remember that life has no guarantees. If you lose your job, you want to survive a few months without stressing about the bills. You also never know when life will throw you a curveball in the form of a medical emergency or some sort of repair around the house. 

4. Build a Diverse Investment Portfolio

“Investing can be the easiest way to bring in the bucks, but it’s also a pretty risky business,” stated Howard. “So first, you need to find the right expert for your special situation.” The goal is to build a diverse portfolio for your short-term and long-term goals. You could invest in index funds if you want to play it safe, or you can work with an advisor who will help guide you. 

5. Pay Off Your Debt

You can’t focus on building wealth if you still have to make debt payments. It’s crucial that you pay down your high-interest debt so that you have more money to invest in your future. As your salary increases, you’ll want to prioritize becoming debt-free. You can follow the popular debt snowball method, paying down your lowest balance first to build momentum. You could also pay down the debt with the highest interest rate first if you want to go with the best mathematical option. 

6. Consider Legacy Planning

“Finally, consider legacy planning to provide for your family,” shared Howard. “This ensures older relatives are cared for in retirement while setting up younger ones financially. The basic options are wills and trust funds. 529 plan also helps pay for education expenses tax-free from kindergarten through graduate school and allows you to play an active role in the education of your grandchildren.” Building wealth is about creating opportunities for yourself and helping those around you. This is why you’ll want to consider your impact on your family. 

Closing Thoughts

As your salary increases, you’ll want to get serious about building wealth to protect yourself in the future. You can reach your financial goals with the right resources by staying focused on the journey. The sooner you start paying off debt and investing your money, the sooner you can become financially free. 

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