I Earn Six Figures. So Why Am I Still Struggling to Get By?

You're not alone if you're bringing in more than $100,000 a year and still struggling to get by. It may be cold comfort, but a joint study by PYMNTS and Lending Club found that 51% of people earning $100,000 or more report living paycheck to paycheck. And yet, the average annual median in the U.S. is $56,940. How can those earning so much more spend as much as they make each month? Here, we explore a few of the factors that make it possible.  

Where they live

Living in Omaha, Nebraska, is nothing like living in Long Beach, California, and Albuquerque, New Mexico, is nothing like living in Austin, Texas. Simply put, living in some areas of the country costs far more than others, and at the end of the month, there's less left in the bank account. 

To test this hypothesis, we used Sperling's Best Places Cost of Living Calculator to compare one city to another. None of the calculations include the cost of childcare or taxes. 

Here's what we found:

• Someone earning $100,000 annually in Omaha, Nebraska, would need to make more than $177,000 in Long Beach, California, to maintain the same standard of living.
• A person in Albuquerque, New Mexico, earning $100,000 annually, would need to make $169,000 in Boston, Massachusetts, to keep pace with their current income. 
• A salary of $100,000 in Kansas City, Missouri, would need to jump to just over $147,000 if the person moved from KC to Austin, Texas. 
• To keep pace with a salary of $100,000 earned in Lansing, Michigan, a person would need an income of over $168,000 in Portland, Oregon. 

And it's not just cross-country moves that change the spending power of $100,000. For example, a person earning $100,000 a year in Champaign, Illinois, would need to earn just shy of $144,000 to keep pace if they moved two hours north to Wheaton, Illinois. 

Childcare

According to the Economic Policy Institute (EPI), childcare costs vary wildly too, depending on where a family lives. For example, here are the recent average annual costs of infant care in 10 states:

• Alabama: $6,001
• Alaska: $12,120
• Colorado: $15,325
• Delaware: $11,021
• Indiana: $12,612
• Louisiana: $7,724
• Massachusetts: $20,913
• Mississippi: $5,436
• New Jersey: $12,988
• South Dakota: $6,511

In Hawaii, the average annual cost of infant care is $13,731. To put that number into perspective, infant childcare costs $4,022 more per year than in-state tuition for a four-year public college in Hawaii. 

According to the humanitarian aid organization UNICEF, the U.S. ranks No. 40 out of 41 countries in providing accessible, affordable, and quality childcare. That cannot be blamed on parents. 

An article from The New York Times reveals the U.S. spends only 0.2% of its gross domestic product (GDP) on childcare for kids aged 2 and under. That amounts to approximately $200 a year for most families through the childcare tax credit. Compared to the $18,000 per child Sweden contributes and the $30,000 Norway spends on early childhood care, it's clear that American parents take a substantial financial hit when it comes to paying for quality daycare. 

Let's say a household living in Texas earns a combined income of $100,000. They have two children, ages 11 months and 4 years. After taxes, the couple brings home approximately $6,000 per month. The average cost of childcare for an infant in Texas is $9,324 annually or $777 per month. The cost of care for their 4-year-old is $7,062 annually or $589 per month. 

Of the $6,000 the couple brings home, $1,366 automatically goes to childcare. 

Note: These are rough numbers. While we calculated take-home pay based on taxes, we did not include other costs that would reduce the amount of their take-home pay. This includes expenses like medical coverage and union dues. Ideally, it would also include retirement contributions.

Lifestyle creep

Lifestyle creep is sometimes referred to as "lifestyle inflation." It happens when an increase in income leads to more spending on nonessentials. For example, as a person's income increases, they may go on nicer vacations, eat out more, or buy more expensive clothes. The things they once viewed as luxuries become necessities, eating up a more significant portion of their income. 

The word "creep" is appropriate because it can happen so slowly that a person doesn't notice it until they find themselves living paycheck to paycheck. 

We didn't even touch on high taxes in some regions, the exorbitant price of housing, or current inflation concerns. Given all the bills that roll in each month, it's easy to understand how even higher-income households could be hurting.