Making $200K and Still Feel Financially Stretched? You’re Not Alone

James DeLapa and his wife live in San Diego, and together they earn mid six-figures at their tech jobs.

But in a high cost-of-living area, after paying for child care for their toddler daughter, and putting money away for retirement and college, they don’t feel flush with cash.

Among other things, DeLapa has a full-time nanny they pay as a household employee, taxes and all. And because they live in a fire-risk area, their homeowners insurance premium soared so high they had to make substantial changes to their deductible and coverage amounts.

“Costs go up on fixed items,” he says. “Your insurance goes up, your groceries go up, and it isn’t necessarily reflective of the raises and promotions, so we do have to regularly be mindful of what’s going on in our environment.”

Melody Morton-Buckleair, a single mom who owns two businesses in Texas, grosses more than $35,000 each month but isn’t able to save enough money for the future.

“On paper, it looks like I’ve ‘made it,’” says Morton-Buckleair, who runs two pilates studios. “But behind the scenes, I’m managing studio overhead, paying off high-interest debt from business growth, and covering everything for my two teenage boys.”

When earning more doesn’t feel like enough

Ed Silversmith, a certified financial planner in Pittsford, New York, refers to clients like these as HENRYs, which stands for “High Earners, Not Rich Yet.” In the U.S., nearly 1 in 7 households made $200,000 or more in 2023, according to the U.S. Census Bureau.

Some people in this category have high-earning jobs that require years of schooling and student loans, leaving them feeling like they’re behind their peers who’ve been working since they graduated from college.

Others make good salaries and battle lifestyle inflation.

“People get so excited when their salaries and bonuses are getting larger and they can finally live the lifestyle they want,” says Carla Adams, a CFP in Orion, Michigan.

They upsize their house or cars (or both), and by the time they add in retirement and college savings, child care and paying for children’s activities, they feel squeezed.

“They quickly find that it’s really easy to fall into this lifestyle trap,” Adams says.

If you’re a high earner with budget challenges, there are some strategies to regain control.

Crunch the numbers

Modeling future scenarios is a great way to ensure that you’re on track. Financial planners have access to software that does this, but there are retirement calculators online that can help.

“I try not to tell my clients how to spend their money, but rather run the long-term projections,” Adams says.

For instance, Adams might show a client that cutting their spending by $1,000 a month will make a meaningful difference in their retirement picture. “Smaller changes now have an impact later on because of the power of compound returns,” Adams says.

Understand your spending

Spending is only a problem if it’s misaligned with your values or long-term goals, Silversmith says. Even if you make a sizable salary, tracking one month’s expenses can give you valuable insights.

Try a budgeting tool or spreadsheet to see where your money goes. If your spending isn’t compromising your future plans, Silversmith says, there’s no need for harsh self-judgment.

“The reality is, some people are going to look at the numbers and they’re going to walk away saying, ‘There are some places we can clean this up, but we really like the day care the kids go to,’” Silversmith says.

Right-size emergency funds

Larger-than-average emergency savings might be smart if you’re in a higher income tax bracket.

That’s because less of your income will be replaced by Social Security in retirement, assuming Social Security is still around, Adams says. And, if you have most of your savings in traditional retirement accounts, like 401(k)s or traditional IRAs, your withdrawals will be taxed at higher rates.

“The standard advice for people of any income is to be saving at least 10% to 15%,” Adams says. “High earners may need to be saving closer to 15% to 20%.”

Adopt a reverse budgeting approach

If you’re not going to track your expenses, consider automating your savings goals and using what’s left for day-to-day spending. That’s what Rob Schultz, a CFP in Encino, California, does with his clients, many of whom are physicians fresh out of training.

“We set out a target savings reserve and then put all the other required savings on autopilot,” Schultz says. This includes sending money toward kids’ college funds, student loans and retirement funds.

Avoid the ‘best case’ mentality

Build your financial plan around your base salary and be conservative about bonus or equity windfalls, the financial experts we talked to say.

“If you’re in real estate and you had a killer year, that doesn’t mean that for the next 10 years you’re able to inflation-adjust that amount and let your spending come up to meet that,” Silversmith says. There’s nothing wrong with rewarding yourself, but “you want to avoid lifestyle creep.”

On a similar note, don’t let a large salary motivate you to put off saving for retirement because you’re sure your income will keep going up.

“Unfortunately, if a layoff hits, it can take months or longer to find a comparable role, particularly at that income level,” Adams says.

Keep the big picture in mind

In the end, you have to live your life, so make decisions accordingly. If you don’t want to cut back on spending, you don’t have to — as long as you plan for it.