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

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James DeLapa and his wife in San Diego, and together they earn mid six-figures at their 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 in a fire-risk area, their owners 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 motions, 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 es in Texas, grosses more than $35,000 each month but isn’t able to enough money for the future. “On paper, it looks 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 growth, and covering everything for my two teenage boys. ”When earning more doesn’t feel enoughEd Silversmith, a certified financial planner in Pittsford, New York, refers to clients these as HENRYs, which stands for “High Earners, Not Rich Yet. ” In the U. , nearly 1 in 7 households made $200,000 or more in 2023, according to the U

Some people in this category have high-earning jobs that require years of schooling and student loans, leaving them feeling 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 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 numbersModeling 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 jections,” Adams says

Understand your spendingSpending is only a blem 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 commising 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 the day care the kids go to,’” Silversmith says

Right-size emergency fundsLarger-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

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’ mentalityBuild your financial plan around your base salary and be conservative 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 mindIn the end, you have to 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. “If it fits in their career that they can work to 70, but they’re going to do all the things they want to do and they can do it when their kids are young,” Schultz says, “I have no blem with that. ” the authorKate Ashford, CSA®Kate Ashford is a writer, spokesperson, and certified senior advisor (CSA)® at NerdWallet specializing in debt and personal finance topics