$100,000 ain't what it used to be
We need a new benchmark for a salary that says you've made it. Many think $150,000 says 'rich,' but others think the figure is north of that.
This post comes from Len Penzo at partner blog Len Penzo dot Com.
Reaching that milestone became a personal goal after I graduated with an electrical engineering degree in 1988 and took my first job at a salary of $31,000. At the time, I figured that once I was earning $100,000 per year, I'd be set for life and able to buy whatever I wanted, whenever I wanted it.
The funny thing is, once I finally had that coveted six-figure salary, it wasn't all I had hoped it would be. While I did have more spending power than those who weren't earning $100,000 per year, I didn't feel rich. I certainly wasn't making enough money to stop worrying about how I was spending it.
Even today, with my income significantly higher than it was when I first crossed the $100,000 mark more than eight years ago, I still don't feel rich. Financially free, yes. But rich, no -- especially after my paycheck deductions to cover taxes, the mortgage, the money I faithfully set aside for retirement and my emergency funds.
True, I'm thankful to live in a nice, albeit very modest, home in a safe Southern California neighborhood. But the Honeybee and I still drive our old Hondas: a 2001 Odyssey and 1997 Civic, respectively. We also still shop at places like Costco and Target, cook most of our meals at home and eat leftovers to save money. Post continues below.
Moving the goal posts of success
The reality is, at one time, earning $100,000 annually used to be a sign of real wealth. The pinnacle of success. Not anymore.
Clearly, I'm not the only one who feels that way either.
A recent poll by Gallup found that Americans essentially set the threshold for being "rich" at an income of $150,000 annually. Forty-seven percent of Americans -- myself included -- think the actual number is somewhere north of that.
Don't get me wrong. Earning $100,000 annually is nothing to sneeze at, and anyone earning six figures is obviously better off than those who don't. But it's not all it's cracked up to be.
That's because the dreaded one-two punch of time and inflation has moved the goalposts. So much so that the importance of the old $100,000 measuring stick has been obliterated.
In fact, in order to have the equivalent purchasing power that came with a $100,000 salary back in 1988, one would have to have an annual income of approximately $181,890 today.
One example of how rising costs have made the $100,000 benchmark obsolete is the price of housing. According to the U.S. Census Bureau, the median price of a home in 1988 was $112,500; by 2010 it was $221,800 -- almost double.
The $100,000 club isn't very exclusive anymore
Of course, inflation has also increased salaries, and more people are earning $100,000 than ever before. But that only serves to further diminish the six-figure-income mystique.
For instance, census data show that in 1992, approximately 5% of all households were earning at least $100,000 annually. However, by 2007, that figure had quadrupled to 20%.
The proof is in the pudding: Jobs paying $100,000 or more per year are nowhere near as rare as they used to be 25 years ago. In fact, today they're quite common.
A quick search over at Salary.com revealed an astounding 853 job titles with median salaries of $100,000 or more -- and you definitely don't have to be a brain surgeon (median salary: $473,854) or rocket scientist ($119,890) either.
Today, you'll find corporate secretaries ($184,719) in the Hundred Grand Club hobnobbing with senior attorneys ($144,207), and regional chefs ($111,972) mixing it up with dentists ($133,757).
The bottom line
True, there are some places where an annual income of $100,000 will go a long way -- but there are other places where it won't.
No matter where you live, the bottom line is this: Earning 100 grand a year certainly no longer has the cachet it once did. Sorry.
I think it's finally time for a new benchmark, folks. Two hundred thousand, anyone?
More on Len Penzo dot Com and MSN Money:
- 19 things your millionaire next-door neighbor won't tell you
- Why your expensive luxury car doesn't impress smart people
- Bad delivery: Sneaky pizza delivery fees
- Poll: Rich aren't paying fair share of taxes
- 5 ways to get rich . . . or poor
Old is somebody 20 years more than your current age
Rich is somebody earning twice your current salary...
If inflation is causing a 6-figure earner to feel poorer. Imagine how the low wage earner must feel. Some, try as they may, may never exceed the escape velocity of poverty, notwithstandning the endless bootstrap and hard work ethic lectures they receive.
Count your blessings.
Think of others.
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