The Best Financial Strategies by Income: $50K, $100K, $150K+

Two years ago, I made a video on financial strategies by income, and $100,000 was the top bracket salary back then. Now, today, $100,000 is the middle bracket of this video, and that's how fast things have changed. I'm breaking down the exact strategies and milestones for three income levels of 50K, 100K, and for the high earners of 150 to $200,000 and up. There are basically three themes for each of these incomes. So at 50K, the game is about defense and building a solid foundation. At 100K, it's automation and optimization of what you're already working with. And at $150,000 and up, it's about tax efficiency and compounding. So let's start at the $50,000 per year income level. When I graduated college, my first salary was $38,000 a year working in customer service, which adjusted for inflation is actually pretty close to 50K today. Now, at that time, money was pretty tight, but it was still workable. And I think that if you're at this income level, you just have to understand the importance of every single dollar and give every dollar a job. The take-home pay at 50K per year is right around $3,400 a month, depending on your state. So that is your budget for your transportation, your groceries, your rent, and hopefully a little bit of savings. So the strategy at the 50K income level is all about the sequence in which you allocate your money. There are five priorities I think that we should talk about here. The first is going to be to kill off any high interest rate debt. And in 2026, that also includes buy now, pay later debt. The average credit card balance in America is over $6,000 according to Forbes. And at today's interest rates, that costs people over $100 a month in interest alone. If you make $3,400 a month to take home, $100 is going to be the difference between building savings and simply staying afloat and paycheck to paycheck. What's even scarier are companies like Klarna, Affirm, and Afterpay. They're going to promise you that you can buy something now and not pay any interest on it, and you can pay it off in four easy payments. What happens though is that if you stack three or four of these, then you've got hundreds of dollars a month of committed future income, which is basically just what debt is. So stay away from these if you can. If you do have buy now, pay later debt, I would write down all the debts that you owe there and then kill this debt before moving on to priority number two. Number two is to get your full employer 401k match if you have access to it. So let's say your employer matches 4% of your salary on a $50,000 income. That's $2,000 a year of completely free money. The best part is, is that it's a 100% return on your money. So to be honest, there is no debt payoff or investment or anything on earth that basically guarantees you 100%. So if your employer offers this, I would definitely take advantage of it. I know some people will even prioritize this step before paying off debt, and you definitely can because mathematically, it might be the more optimal thing to do. However, for me, I still think that the behaviorally best thing to do is to pay off any high interest rate debt and then start investing. The third priority is to prioritize that emergency fund, and you can start off pretty small. You've probably heard me say on the channel that you want to have an emergency fund worth between three to six months of expenses. That is still the goal. But if you're at a 50k income level with some debt, then I think a more realistic goal to shoot for is maybe one month of expenses saved up. So that would be $3,400 or your take home pay per month in a high yield savings account first. And even having one month is nice because if you do run into something like a car repair, it doesn't go straight onto a credit card and you won't undo any of your financial progress. Number four is the Roth IRA. So if you're making about 50k per year, the Roth IRA is basically your best friend. It's designed for you. You're in a really low tax bracket at the 50k income level currently. So you're gonna pay taxes on your income now. But then with the Roth IRA, since the investment returns grow tax-free, any investment gains that you make in the Roth IRA, you won't pay any taxes on. So it's a really good trade to pay low taxes on your income now, contribute it to the Roth IRA, and then have your investments grow tax-free. The Roth IRA contribution limit in 2026 is $7,500 a year if you're under the age of 50. And most people at the 50k income level may have a hard time maxing that out because that's 15% of your total gross income. Just $200 a month invested into a Roth IRA starting at the age of 25 could still amount to over $700,000 in retirement at historical market returns. The last thing at this level you need to consider is what your time is worth. And that's priority number five. 50k divided by 2000 working hours a year means that your time is roughly worth 25 bucks an hour. So anytime you're making a decision around where you wanna spend your time, you need to think about the fact that one hour is equal to $25. So if you're gonna do a side hustle, it should at least make you that, if not more. While it's nice to earn some side hustle income, the highest ROI move usually isn't doing something like DoorDash or Uber. It usually is a certification or credential that allows you to increase your salary permanently. If you could increase your income permanently from let's say 50k to 55 or 50k to 60k per year, that is usually worth more than doing side hustles every weekend. So the goal at the 50k income level, it's not to optimize for the 50k income level forever. At 50k, it's hopefully just a stepping stone to higher incomes and the habits that you're building at this income level with what we've just talked about. That's gonna save you a lot of money in the long run. Then when you've started to make more money, you're gonna have all these systems in place to keep more of that income. And hopefully that is a really great thing. All right, now let's talk about the 100k level because this number doesn't really mean what it used to. I alluded to that a little bit earlier and that's because the median household income in America right now is around $84,000. That means a $100,000 salary is barely above 20% of the median household income. Now back in 2016, the median household income was around 59k, which means that 100k salary back then was 40% more than the median household income. So 100k might've made you feel pretty rich back then, but these days it just kind of feels fine. Still though, I think it's a really big accomplishment to get a six figure salary. Not many people can get here. So if you're at this income level, I do want to applaud you. Most, if not all of your survival problems are solved at the $100,000 salary level. And you do get some optionality when it comes to other financial decisions. That's enough for rent, it's enough for your groceries and your bills, and you probably have some discretionary income. You can save a little money and spend without tracking it and nothing catastrophic can really happen to you as long as you're being reasonable with that income. If you overspend at the 100k level, you might not really feel it, but someone at the 50k level, if they overspend a little bit of their income, since their margins are thinner, that could be the difference between them making rent or not. So there are three huge moves that you can make at the 100k income level that are going to help you save and grow your income further. The first move here is to automate your savings before you even see the money. And this is a system I want you to follow, and it's called the reverse budgeting system. That's where you start by setting aside your savings first every time you get a paycheck. So for example, if your monthly income is $6,000 and you want to save $600, you would set that $600 aside before doing anything else. Then you can use the remaining $5,400 for all of your other expenses. Now the trick here is to automate it so that you can't spend it at all, the savings that is, or that it doesn't even hit your account. And in this way, you won't even need a real budget because you've already reverse budgeted already. Now in terms of how much you should be saving, I always like to aim for a 15% savings rate. That means if you are making 6k a month, maybe aim for $900 in savings. However, if you're finding that say your current savings rate is only 3% or 5%, you may have to start with a more attainable goal like a 10% savings rate first. In addition, the next time you get that paycheck, make sure the savings you set aside is automatically being moved into an IRA, a back to a Roth, a high yield account, or even a brokerage account. If you're able to save and invest 15% of your take-home pay, so maybe $900 on a $6,000 a month salary, that's the equivalent of $10,800 per year. Starting at the age of 30, if you're investing this by the time you're 65, you'll still end up with over $2 million. The second big move at the 100k level is one that I haven't talked about too much. And that is considering to start an HSA or a health savings account. In this account, you can invest, but you can also pay for qualified medical expenses. And it's actually one of the most tax efficient savings vehicles because it offers what's called triple tax benefits. First, contributions are tax deductible, which means that lowers the total amount of income tax that you pay in any given year. Second, the growth of this account is tax-free, just like the Roth IRA. And third, withdrawals for qualified medical expenses are tax-free, and that's the key. Now, you must be enrolled in a high deductible health plan to get an HSA, but these plans are actually pretty popular. So for the majority of you out there, you should be able to enroll. The 2026 contribution limit is around $4,400 for individuals and $8,750 for families. Now, here's the strategy with this. You wanna max out the HSA, you wanna invest the funds within the HSA, and then you wanna pay your medical bills out of pocket and save the receipts. I know that sounds pretty weird. Why would you pay your medical expenses out of pocket when you just started an HSA? Well, that's because there is a loophole. There is no time limit on reimbursing yourself. So that means you can reimburse yourself against your HSA in the future. So pretend you contribute $4,000 into your HSA, you invest that money, it compounds at 8% for 30 years, and in 30 years, that's worth about $40,250. Meanwhile, over the same 30 years, you're paying your medical bills out of pocket with your regular money and you're saving all the receipts. So let's say at the end of the three decades, you have receipts for $1,500, $2,000, and $3,000. That's $6,500 of expenses that you've never reimbursed yourself for. Well, when it comes time 30 years later, you can hand yourself those receipts and pull $6,500 out of the HSA completely tax-free, no questions asked. And for the other $33,000 in there, it's still there for medical costs or after the age of 65, it just starts to be treated like a traditional IRA as well and you can withdraw it from there too. In other words, it's like you've turned your HSA into an extra retirement account. You still got the tax deduction going in. It grew tax-free the whole time and it comes out tax-free for medical expenses and you can save the receipts so you can decide when you wanna take that cash out. All right, financial move number three at the 100K income level is to know your number. At 50K, the question is, am I gonna be okay this month? But at 100K, I think the question then becomes, when am I done? When am I gonna be financially independent? The number here is easy to calculate. It's how much you spend in a year times 25 and that's the 4% rule written in another way. If you spend 60K a year, your number is gonna be 60K times 25 or about $1.5 million. Now, the moment you know this number, every financial decision will get a lot easier because you can work backwards and figure out how long it's gonna take you to financial independence. Now, the fascinating part about finance and personal finance is that your retirement date depends basically on your savings rate and not your income. If you're diligent about saving 20% of your income, you can retire in roughly 37 working years and if you save 30% of your income, that drops to 28 years and if you save 50%, it's 17 years. The reason this happens is that if your savings rate is naturally higher, that just means you're spending less money and you need less money overall in order to hit that financial independence number. So your homework for today, if you make $100,000, 50K or even more is to calculate your actual annual spend. If you can figure that out and multiply it by 25 and write that number down, that is gonna be your finished line. You could probably even play around with that to see what that number might look like if you were to reduce your expenses by one or $2,000 per year or if you were to increase your income by five, 10K or maybe 15K per year, you're gonna see how that relationship's gonna change. Let me know in the comments what your financial independence number is if you're watching and I'd love to hear what it is and I'm sure other people would too. All right, now let's get into the last bracket which is the 150,000 to $200,000 and up bracket because there are a lot of sophisticated strategies that you can employ in this high earning income range. Your largest expense at this income bracket changes a lot. I would say across the board, it's no longer gonna be rent or transportation. It's usually taxes. The marginal tax bracket at this income range is gonna be around 24 to 35% and most of the time it's gonna be above that 30% number. So the more in taxes that you can save here, the better your compounding will be for your overall wealth. Now, speaking of compounding, we also wanna prioritize the safety of our money at this level because once you start making higher of an income, capital preservation starts to enter the strategy. All right, so the first move you can make at this income range is the backdoor Roth IRA. You might've heard this if you make more than 150K per year but at $153,000 in income, if you're a single filer, you can no longer make a full contribution to the Roth IRA and past 168K, you can't contribute to one anymore. To fix this, many high earners opt for what's called a backdoor Roth IRA and that works in two steps. First, you contribute to a traditional IRA since there's no income limit for it and most importantly, you don't invest the money. And then all you have to do within your brokerage account is click the button, convert it to a Roth. The only times where this gets a little bit tricky is if you already have an existing traditional IRA with funds invested. At that point, you would have traditional IRA funds as well as Roth IRA funds and so you need to be careful and avoid what's called the pro rata rule. I'll leave a link on a resource on how to do the backdoor Roth IRA as well as mistakes to avoid in the description below. If you're able to do this successfully though, it's one way to really shelter your income from your overall tax burden. Another type of backdoor Roth IRA is what's called the mega backdoor Roth. This is something that companies will actually allow you to take advantage of, namely big tech companies like Google, Microsoft, Meta and Amazon to name a few. I'm gonna leave a full list of all the companies offering a mega backdoor Roth in the description below so you can check that out after this. So here's how it works. In the mega backdoor Roth, you can actually contribute beyond the normal contribution limit of $24,500 per year. So first you would contribute that amount, the 24.5K into your normal 401K. And then Amazon, for example, they set up their own after-tax account for you which is a perk that you get for working there. This allows you to contribute 42.5K more dollars to an after-tax account. And then from there, you do an in-plan conversion to a Roth. That's pretty crazy now because if you're someone who has access to this, you are contributing up to $67,000 of your own money per year into this account. And this is gonna really help you generate that wealth over time. I am pretty jealous. I don't have access to this, but if you do, you definitely should take advantage. The second move you need to consider at this income range is just simply diversifying your portfolio. There is a high earners playbook from the Henry Finance Reddit. And I will link this also down below in the description, but they suggest having 80% to 100% in equities under the age of 50 with a small allocation of 5% to 10% in alternatives like precious metals or crypto if you're comfortable with that. After you're 50, you wanna adjust it downward to 70% or 60% in equities to reduce volatility and preserve capital. For additional diversification, you can even consider adding in international ETS which have been performing pretty well as of recent. I think this recommendation from this guide is pretty spot on. I've shared on this channel before that the younger you are, the more risks that you can take because you're in this phase of generating wealth. But the older that you get, the more that you wanna actually start protecting that wealth. The third move at this income range pertains to you, especially if you have what's called RSUs. RSU stands for Restricted Stock Units. And if you work for a company that offers you RSUs, it's a really great benefit because not only is it stock, but it probably incentivizes you to stay at that company longer. A huge percentage of people earning 150 to 200K or more get there through an equity package like RSUs from a tech company or stock-based compensation from a public company. Now, here's the thing about RSUs in particular. RSUs are taxed as ordinary income when they vest, whether you sell them or not. So that means the IRS will treat it like a cash salary. So say you have 100 shares vest when your company stock trades at $200. That's $20,000 of W-2 income whether you touch the shares or not. So the move is just to have a strategy for this. And the default is for a lot of people to sell the RSUs as they vest and redeploy the money into a diversified portfolio. If you hold the RSUs and the share price increases, then you will owe capital gains when you sell the stock in addition to the tax that you already owed when they vested. The guide on Reddit actually talks about this as well and they want you to diversify if you have more than one third of your total investments allocated in your company's RSUs. As a general statement, that's usually correct in order to avoid being too concentrated. So that's also something to consider. And the last move to consider at this income range is what your tax bracket will be when you retire. For most people at this income, the answer is that your tax bracket is lower in retirement than what it is right now. With your current tax rate being between 24 to 35% or more, if you think in retirement it's gonna be lower, then your traditional 401k contributions should be prioritized. Maxing a traditional 401k at $24,500 saves you roughly 8 to 9.5k in taxes this year at your marginal tax rate. And then when you retire, if your tax rate is closer to zero, then you are winning on both ends. So if you have a pre-tax 401k plus a backdoor Roth, that's actually a great combo because you're deferring taxes when your rates are the highest right now. You're also gonna get that money tax-free from the Roth IRA, and that's gonna be really nice when you retire. Having both of these should save you a ton of money throughout your high earning years, and I hope that you maybe employ some of these strategies. All right, guys. So those were the best financial strategies for all these income ranges in today's video. I hope that you enjoyed this video. And if you wanna watch the OG video on the financial strategies for 40k, 75k, and $100,000 in income level, make sure to check that out right here. I'll see you guys in that video or a future one on the channel. Thank you again for being here. I appreciate you. Have a great weekend. All right, peace.