Finance

The Ideal Budget Breakdown for a $100,000 Income

Many people set their sights on earning over $100,000 a year, but without a proper budget, it can feel like your income disappears as quickly as it arrives—even with a six-figure salary.

Budgets often get a bad reputation for being limiting, but in reality, a solid budget does the opposite. It helps you prioritize your spending and keeps you on track to reach your financial goals.

So, what should a budget look like for someone earning $100,000 annually? Here’s what you need to know.

Gross vs. Net Income: What’s the Difference?

Earning $100,000 a year doesn’t mean you’re actually bringing home a six-figure salary. After deductions like taxes and other contributions, your gross income of $100,000 typically turns into a net income between $70,000 and $80,000 (your actual take-home pay). Some of the deductions that reduce your paycheck include:

• Federal and state taxes (which vary depending on your state, filing status, and tax bracket)

• Contributions to retirement plans and tax-advantaged accounts like a Health Savings Account (HSA)

• Out-of-pocket premiums for health, life, and other insurance plans provided by your employer

While these deductions might seem like they’re taking away from your paycheck, it’s important to remember that skipping these contributions can result in lost benefits in the long run.

“Asking clients if they receive matching contributions on their retirement plans through their employer is a key step,” says Jamie Hobkirk, CFP, CFA, and portfolio manager at Reynders, McVeigh Capital Management. “If they do, I usually recommend contributing at least that amount. Automating retirement savings can help prevent the temptation to spend that money on other things.”

The same logic applies to insurance premiums—investing in those plans monthly can help you avoid unexpected medical expenses down the line.

What Should a $100,000 Salary Budget Look Like?

Start by reviewing your most recent pay stubs to get a sense of your monthly net pay. Once you have that amount, you can divide it across your key spending categories.

For our example, let’s assume you take home $75,000 after taxes and deductions, which comes out to $6,250 per month. Now you’re ready to begin budgeting!

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