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Posted: 1:49 p.m. Thursday, Sept. 20, 2012

Six-figure salaries not all they're cracked up to be

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By Clark Howard


Is a six-figure salary still the status symbol it once was, signifying that its earner has "made it"?

Maybe not. I read a BankRate.com story about how the lifestyle that used to cost $100,000, because of inflation, would cost you nearly $400,000 today.

But even with that, how likely is it that you as a family can crack that $100,000 income barrier? Only nearly 1 in 5 families do. Earning $100,000 is roughly double the average family income, somewhere around $50,000.

The funny thing about money is that if you ask people who earn north of $100,000 if they feel wealthy,  they'll tell you overwhelmingly no. That's because of what economists call the marginal propensity to consume.

Marginal propensity to consume means that as income rises, your wants rise right in tandem with it. So if you earn $50,000 one year and go up to $75,000 the next, you find a way to spend that extra money.

The whole key is as your earnings rise, you should be increasing what you save. The reason people who earn $100,000 don't feel wealthy is because they spend it all.

Remember, increase the percent you save when you get a pay raise. The more you save, the more freedom you earn.

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