Why so many people making $100,000 a year don't feel rich

Shortly after graduating from college in 2013, I landed my first grown-up job in journalism, interning at a personal finance magazine in Washington, D.C. I didn't know much about the material but I had to learn quickly, since the gig paid just $12 an hour, a wage I supplemented by waiting tables.

Soon I got hired at that magazine full-time, and throughout my 20s used its money lessons to save, stretch and invest a salary that didn't exceed $50,000 until my seventh year in. If I could just get to $70,000, I remember thinking, I could stop having to think about money all the time.

And if I could get to $100,000, I figured, I'd be rich, or at least comfortable, which is how rich people say "rich."  

Yet the reality for people who make six figures is less rosy than I always assumed. Over half of Americans earning more than $100,000 a year live paycheck-to-paycheck, according to a recent report from PYMNTS and LendingClub.

"When I graduated from college, I thought I was going to make a lot more. Fast forward six or so years later to where I am now, making a little over six figures, and it doesn't feel like I imagined," says Jesse Whitsit, a certified financial planner and portfolio manager at Morgan Stanley in Hauppage, New York. "I thought I'd be saving a lot more than I truly am right now."

Earning more than $100,000 per year would put you well ahead of the median American household, which brings in $74,784 as of 2021. Assuming you're an individual without dependents, that salary would qualify you as upper class, according to three different definitions (Brookings, Urban Institute and Pew Research).

The fact that it's so common for people in the U.S. to make six figures, technically be "upper class," and yet still feel precarious is not just a case of big spenders mismanaging their money. The cost of living in coastal cities like D.C., where a lot of high-paying jobs are located, can feel staggering. So can the burden of student loans, which workers often need to take out to qualify for high-paying jobs in the first place. 

And that's before you consider inflation.

According to data from the Bureau of Labor Statistics, you'd have to earn about $129,000 today to have the same purchasing power that a salary of $100,000 had just a decade ago. That's because, between 2013 and now, the dollar had average annual inflation of about 2.6%, or a cumulative rate of about 29%. 

How far your dollar goes depends in large part on your cost of living, which varies depending on factors such as lifestyle, household size and, especially, location. You don't have to be an economist to know that earning $100,000 in New York City is different than earning $100,000 in Memphis, Tennessee.

The difference may be even more stark than you imagine. Because Tennessee doesn't tax earned income, a Memphis resident earning $100,000 takes home $74,515 after federal and state taxes, according to analysis by SmartAsset. And because the city's cost of living is 14% below the national average, on an adjusted basis, that feels like $86,444.

Thanks to a combination of federal, state and local taxes, along with a sky-high cost of living, a $100,000 salary in New York City is worth more like $35,791, SmartAsset found.

Another reason someone making six figures might not feel rich is lifestyle creep, the phenomenon by which your non-essential expenses tend to rise with your income. It's hard to avoid, says Brad Klontz, a CFP and financial psychology professor at Creighton University.

"We have survived as a species via social comparison. We are wired to be paying very close attention to status within a group," he says. "Since most Americans save very little and overspend, you have to go against biological programming to avoid doing that."

That can lead to people erasing the potential for extra savings in one fell swoop, says Whitsit. "People get a $10,000 raise and think they can go out and buy a boat," he says. "I advise clients to wait six months after a salary increase or a nice bonus before buying anything big."

Often, though, people fall into the salary creep trap without realizing it. Deciding unconsciously that you can afford to take Ubers everywhere instead of the bus isn't quite as ostentatious a transportation expense as a boat, but it can cost you dearly too.

"The only way to stop it is to be conscious of it happening," Klontz says. "It comes down to the simple concept of paying yourself first." That means determining how much money you need to save as a percentage of your income to reach your goals and setting that money aside before any discretionary spending.

"Once you set that money aside, I'm not so worried about lifestyle inflation," Klontz says.

If you're already saving a high percentage of your income, it could be keeping you from feeling more flush. Maybe you only had the means to save a few bucks here and there when you were earning a lower salary, but are now making six figures and socking away 20%.

It's a good problem to have. Because you may not feel rich now, but if you're regularly investing, you're on your way to building wealth, says Ramit Sethi, a self-made millionaire and star of Netflix's "How to Get Rich."

"The most underrated money habit is being very patient," he told CNBC Make It. "Real wealth creation takes time."

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