The Half Raise Rule: How to Avoid Living Paycheck to Paycheck on a Six-Figure Salary


written by oz chen

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If you think earning a six-figure salary is the gateway to financial security, think again.

More than half of six-figure earners live paycheck to paycheck, according to a recent LendingClub study. What gives?

It’s the insidious creep of lifestyle inflation that gets people.

Many assume that 6 figures is rich and can’t imagine blowing through it all. So I’ll illustrate with a lifestyle example.

Say hi to Arbor, a recent engineering grad. Their stats:

  • Salary: $75,000/year (at the high end of average grad salaries).
  • Shared apartment: $850/month
  • Lifestyle: keeps used car, goes out to eat once a week

Let’s say Arbor is #blessed and within a short couple years, they land a job that pays exactly $100,000.

They’ve made it! And…the spending starts.

Enter the six figure lifestyle
Arbor is tired of living with roommates who don’t know how to load the dishwasher. They get themselves a one-bedroom in the nice part of town for $2500/month.

The old clunker also doesn’t suit Arbor anymore. They lease a new car, $5000 down and $500/month. (Also about average).

Let’s crunch the numbers:

  • New apartment costs $19,800 more per year, and the car at least $11000 in the first year of leasing, for a total of $30,800 in increased costs.
  • Result: this six figure earner is now $5800 poorer than when they were making “only” $75,000.

This doesn’t account for any other lifestyle costs like dining out or travel.
And…that’s in the 1st year alone.

It’s tough for most people to downgrade their lifestyle. All of society points to more consumption, so the incentive is to try to make more and spend more.

That is lifestyle inflation. That is “keeping up with the Joneses” and “being in the rat race.”

The question isn’t how much you make. It’s how much can you keep?

The Half Raise Rule

If you’re making six figures, live a five-figure lifestyle. Make sure that there’s enough of a gap between your income and expenses, so you can save for the future and invest in your long-term financial security.

Now, I know what you’re thinking. “But Oz, I deserve to enjoy the fruits of my labor. Why can’t I upgrade my lifestyle?”

And you’re right, you absolutely can. But the key is to make the rate of inflation slow and controlled.

Here’s an arbitrary technique called the Half Raise Rule: if you get any additional money, limit additional spending to half of that.

  • If you earn 20% more, spend 10% more at most.
  • If you get a sudden $10,000 windfall, immediately save/invest at least $5000. The rest is for your other goals.

You can definitely be more aggressive if you want to buy your future self freedom. This is just one way of ensuring that you can upgrade your lifestyle without becoming broke.

If you can’t manage to be get ahead on a 6 figure income, then I’m here to help with rewrite your money story. Check out money coaching to destroy debt, start investing and accelerate your path to financial freedom.


You may have heard of the surprising fact that lottery winners…

  • Are more likely to declare bankruptcy within three to five years than the average American (MIT Press)
  • Nearly one-third of winners eventually declare bankruptcy, and that is likely due to the lack of a plan. (CNBC)

Everyone says they’ll handle money better than these examples:

“I wouldn’t do that; if I won that much money I’d be responsible.”

But have you ever heard that “if you can’t manage $10,000, you can’t manage $1 million?”

It’s not a far cry from someone living paycheck to paycheck on a 6 figure income.

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