Why some say earning a $100,000 salary no longer makes you rich
Once considered the pinnacle of career success, a $100k salary isn’t worth what it once was thanks to cost-of-living and the housing crisis, it’s been claimed.
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A post in a popular personal finance forum sparked fierce debate about what’s considered a good salary these days, with many claiming six figures no longer cuts it.
Not too long ago, an aspiration of many Australians just starting their careers was to reach the point where their annual pay packet totalled $100,000.
That was seen as a major milestone and a leap towards financial stability, but some argue that’s no longer the case.
On Reddit, the forum HENRY, standing for ‘High Earner, Not Rich Yet’, is a go-to for those seeking financial advice, inspiration, and goal-setting tips.
One such conversation starter on Tuesday carried the subject line: “100K is the new 60K. Change my mind.”
The poster claimed that “people are still talking about $100k making them a high earner and being ‘rich’” but disputed that belief due to high inflation and cost-of-living and housing crises.
“Seriously? Fresh grads (non developer, non banking) are starting at 70-80k and hitting $100k in 3 years. Do people really still consider $100k being rich?”
A fierce debate
As of now, the post has received several hundred comments in less than 48 hours, with plenty of arguments on both sides of the viewpoint.
One person pointed out that soaring cost-of-living pressures have eaten up a lot of people’s disposable incomes, meaning that a median salary figure doesn’t tell the full story.
“‘Median Income’ is not ‘Middle Class’ anymore. Only the top 20-30% of earners are able to afford what used to be considered a middle class lifestyle,” they wrote.
Accounting for inflation, a $100,000 salary in the early 1990s would be worth about $232,000 today. That same pay packet at the start of the new millennium in 2000 would be the equivalent of almost $187,000 now.
One commenter said they knew people on six-figures, living in very high cost-of-living areas, who needed to share a home with flatmates to cope with the soaring cost of housing.
On the other side of the debate, one user disagreed and spoke of recently receiving “a smack in the face I needed to remember my privilege” when visiting the town they grew up in.
“I always knew I made a lot, but a decent number of my friends are city folk that make low 100s. Back home we’re looking at 30-60k and it’s just not cutting it, especially after the recent rent explosion.”
Another noted that for many people on low incomes, a $100,000 salary would be viewed as “unfathomably rich”.
Indeed, landing a job that pays $100,000 would put someone in the top 20 per cent of income earners in Australia.
The median full-time salary as of 2022 is a fair chunk less at about $78,000 gross, according to the Australian Bureau of Statistics.
But, as the 2021 Census showed, plenty of people earn below that amount – about 9.6 million of them.
Those not earning six-figure incomes would likely look with disdain at internet complaints about how tough things can be.
But is the grass really that much greener?
‘No longer a want, but a need’
David Rankin is an award-winning personal finance consultant, author and the director of Sort My Money, and said the notion of a ‘high salary’ has shifted dramatically in recent years.
“A salary of $100,000 or more used to be considered an achievement, but it’s now more of a need than a want for many people,” Mr Rankin said.
“Although wages have been growing at their fastest rate since the noughties, inflation means that our disposable incomes are actually shrinking.
“In the race between inflation and wages – so far, at least – inflation is winning.”
Mr Rankin agreed with the Reddit poster’s sentiment that earning $100,000 isn’t really what it once was.
“In 2024, I’d say $130,000 is the new $100,000,” he said.
Money coach and author Max Phelps said a salary of $100,000 only produces a borrowing capacity of about $500,000, which is “a fraction” of the average home price.
“In Sydney, our most expensive capital, the average price for a house is now $1.37 million, requiring an outrageous $220,000 household income to be able to afford an 80 per cent loan, versus $140,000 for the average capital city,” Mr Phelps said.
When they reach a six-figure income, many people learn that “the more we earn, the more we tend to spend”, he added.
“And so, we feel we need to earn to feel like we’re getting ahead.”
Mr Phelps, director of consultancy Golden Eggs, said the national savings rate is just 1.1 per cent of income.
“It’s no wonder we all feel like earning more must be the answer.”
A survey by WeMoney found 48 per cent of Aussies are living pay check to pay check, and a third have missed a credit card or major bill payment or paid late in the past year.
Sixty per cent of people worry about their debt levels and a third don’t feel confident about their current financial position, it also found.
Your rich and my rich differ
Some commenting on the Reddit post argued that the debate was one about perceptions and not cold, hard numbers.
One declared that “$70K is the new $60K” at just “slightly below” the median income, adding: “You probably just don’t see it as all that much anymore as you started making more money and getting exposure to people making money. Personal perspective changes faster than society.”
Mr Phelps, who penned the book Spending Fast and Slow, agreed and said the key to feeling “flush” is to control the flow of money and manage on whatever their current income us.
“We’ve all just gotten used to wasting more money on trivial things and then feel like we don’t have the money for the important, or essential things,” he said.
“The ‘fast and slow’ system from my book aims to correct this, so that variable spending becomes fixed and the more we earn the more we spend.”
How someone lives – and where they live – likely shapes their perspective of what a dollar is worth.
For example, someone on an annual salary of $100,000 will pay $22,967 in tax, not accounting for any deductions, offsets or the Medicare levy, leaving a net income of $77,233.
That equates to $6436 per month left over, which is undoubtedly a healthy amount to live off.
But how far a net position like that travels is limited by being based in expensive cities, like the country’s costliest locale of Sydney.
The latest data from SQM Research puts the median weekly rent in the New South Wales capital at $1024 for a house and $690 for a unit, while the median for all dwelling types is $825.
The average rent paid by an individual living in a standard area – that is, not prestige but also not rough or far-flung – is about $2057 per month, according to financial comparison website finder.com.au.
On top of that, a typical Sydneysider will pay each month on average $183 for utilities, $70 for an internet service, $107 for health insurance, and $193 on public transport, the finder.com.au analysis shows.
For those with a car, it’ll cost almost $200 a month to put petrol in the tank.
Unless willing to use payphones, a cheap and simple mobile phone SIM-only account – that is, no handset lease included – costs about $30 per month.
Relocation service My Connect crunched the numbers on food spend and found those in the Harbour City spend at least $400 on groceries each month.
Those calculations are for the absolute bare minimum living expenses and zero ‘luxuries’ like basic medicines and hygiene products, getting a haircut, or going for the odd beer after work or to the cinema.
Finder.com.au estimates a typical Aussie will spend at least $16 a month on toothpaste, toilet paper, deodorant and shampoo.
Should that person own the home they live in, rather than rent it, they’d pay about $5300 per month in home loan repayments based on the average loan size in New South Wales of $764,000 and current market interest rates.
Assuming they co-own the property with their spouse and share the costs, that equates to $2650.
Without spending a cent more than the essentials require on average, and if they rent, they’d be left with $3380.
Financial experts recommend those with capacity adopt a 50/30/20 principle.
Aussie finance brand uBank explains: “It’s an easy way of working out how much you should save and how much you should spend. Start by dividing your income into three parts – 50 per cent for your basic living expenses like housing, food and power bills, 30 per cent for your wants like restaurants, streaming sites and gym memberships, and 20 per cent into savings.”
Based on the scenario of someone earning $100,000 while living in Sydney and only covering the bare essentials, that would see $687 diverted to savings. That leaves another $1030 for ‘wants’ each month.
And at the end of all of that, that person would still be left with $1600 – a position many would be happy with, particularly in the current cost-of-living climate.
But add a few more lifestyle considerations and perhaps a child or two, as well as emergency or unexpected expenses, and that surplus might be quickly drained.
What makes a high income?
According to ABS data, just 2.61 million Aussies – or about 10 per cent of the population – earn $100,000 or more a year.
Many people will never reach a six-figure income in their working lives. Some will get there relatively quickly.
Last year, the average starting salary in Australia for uni graduates increased for the first time in more than a decade, nudging upwards by nine per cent to $74,700.
But some industry entrants fare much better than others.
In the mining sector, those just kicking off their career can bag an average of $103,000 from the get-go, data from the Australian Association of Graduate Employers shows.
Well-paying debut jobs like those obviously skew the data.
Some industries pay notoriously low starting salaries to graduates – like rookie pharmacists, who take home about $50,000, which is less than they’d make working full-time as a barista.
Across the board, the highest paying jobs in the country are in the field of medicine, with hefty typical packets for eye doctors ($533,000) and those operating on the brain ($600,000).
Anaesthetists bag $386,000 on average and internal medicine specialists, who earn an average of $304,000.
Not all of the most professional lucrative jobs require university degrees, but you will need trade qualifications to fill them, like construction management with pays an average of $154,000.
Originally published as Why some say earning a $100,000 salary no longer makes you rich
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