Just Hit 6 Figures? Here’s the Smartest Way to Grow It Fast

Reaching a six-figure salary is a milestone that reflects hard work, dedication, and career moves that have finally paid off. With a higher salary comes the question, “What should you do with the extra money?”

Six figures can build the foundation for financial freedom if you put your money to work for you. That means protecting yourself with smart savings, making the most of tax-advantaged accounts, and investing wisely. Explore how you can make your new salary go as far as possible.

Max Out Your 401(k)

Your 401(k), or similar employer retirement account, can provide the foundation for building long-term wealth. You can contribute as much as you’d like up to the annual limit established by the Internal Revenue Service (IRS), depending on your age. When you contribute up to the limit, you’re maxing it out.

Many people contribute just enough to get their employer match, which is basically free money, and stop thereafter. However, six-figure earners can often contribute even more.

Why max out your 401(k)? First, with a traditional 401(k) (not a Roth), your pre-tax contribution reduces your taxable income today. Second, retirement contributions are automatically invested, allowing your contributions and earnings to compound for decades. Maxing out your 401(k) also builds discipline, since your contribution amounts come out of your paycheck before it gets deposited into your checking account.

Think of your 401(k) account as paying your future self first, which can help you establish financial security in the years to come. “Starting early gives your money decades to grow through compounding interest,” said Kevin Kautzmann, CFP and founder of EBNY Financial, LLC. “That is when your money earns interest, snowballing your savings over time.”

Open and Max Out an IRA

Now that you’re earning six figures, you may have more money to contribute to retirement past the allowable IRS limit for 401(k)s. This is where you can use an individual retirement account (IRA) as another opportunity to save for your future, often with more investment choices than workplace plans like 401(k)s.

A Roth IRA is another great option if you qualify based on your income. You contribute after-tax dollars now, and withdrawals in retirement are tax-free. (A traditional IRA, on the other hand, reduces your taxable income today, but you pay taxes on your withdrawals.)

Supplementing your 401(k) with an IRA increases your tax advantages and provides another layer to your retirement planning. “If you’re early in your career, one of the smartest moves is to use Roth accounts (like a Roth IRA or Roth 401(k)),” Kautzmann said. “These let you put in money that you have already paid taxes on. The benefit is huge: when you retire (after age 59½), you can withdraw both your contributions and all the investment growth completely tax-free.”

Use a High-Yield Savings Account

When you’re earning more, the additional income may sit idle in your checking account or a linked savings account that doesn’t earn much interest. A high-yield savings account (HYSA) ensures that your idle cash works harder for you without adding on risk or sacrificing accessibility.

Typically, a HYSA is used for your emergency fund (ideally three to six months’ worth of expenses), but you can also save for life’s big milestones, such as a down payment for a home or a wedding. These accounts are particularly beneficial during times of high interest rates, but even if rates are low, HYSAs provide you with a safe, flexible way to store your cash while earning a return.

Add a CD to Lock in Savings

A certificate of deposit (CD) is ideal for money you don’t need for a while and want to keep safe. Unlike a savings account, CDs require you to lock up your money for a fixed amount of time, such as three months, nine months, or one year.

The longer you lock it up, the higher the interest rate the CD pays. CDs often charge a fee or penalty to access the money before it matures, which can remove the temptation to spend the money on unnecessary items.

Open a Brokerage Account

Once you’ve filled your retirement buckets and are earning interest on your savings, opening a brokerage account is a smart way to truly build wealth. Unlike a 401(k) or IRA, there are no limits, no early withdrawal penalties, and almost unlimited investment choices, including stocks, bonds, commodities, derivatives, and exchange-traded funds (ETFs).

The one trade-off is that you don’t get the same tax benefits. Gains are taxable, longer-term ones less so.

“A good rule of thumb is to build an emergency fund first (three to six months of expenses), then focus on retirement accounts, and only after that look into investing in a taxable brokerage account,” Kautzmann said.

A brokerage account goes beyond basic and smart personal finance and into the realm of greater possibilities.

“A simple but powerful strategy is dollar-cost averaging (DCA). This means committing to invest a certain amount of money at regular intervals (like every paycheck or every month), no matter whether the market is up or down,” Kautzmann said. “Over time, this evens out the ups and downs of the market and helps take emotion out of investing.”

Principles To Keep in Mind

Making six figures doesn’t mean you forget about the basics. When you start earning additional income, remember these principles:

Avoid Lifestyle Creep

“A common pitfall is lifestyle creep. This happens when people start spending more just because they are earning more,” Kautzmann said. “Over time, lifestyle creep can erase the financial benefits of a higher salary.” With more money in the bank, it’s tempting to want to splurge by buying new clothes, getting a bigger apartment, or taking more vacations, but the best way to be financially secure is to keep expenses relatively the same as your income grows.

Automate Your Savings

Think of saving as a bill you pay yourself. The less you need to do this manually, the less choice you have in deciding whether to spend or save.

Keep Debt in Check

Not all debt is bad, but if you’re spending more than you’re making each month and relying on credit cards to carry you over, the high interest rates will eat your savings.

Diversify

Having your money in retirement accounts, savings accounts, and investment accounts helps spread out the risk and gives you flexibility when you need it.

The Bottom Line

Reaching six figures is an accomplishment, but the real win comes when you put those additional earnings to work. By saving strategically, investing for the long-term, and planning for retirement, you can turn a higher income into lasting financial security.