Before You Get To Six Figures — Figure This Out First: A Guide To Smart Money Management

Think six figures will solve your money problems? Think again. Here's what you need to figure out before the money starts rolling in.

When I jumped from earning $10.71 an hour to over six figures, it felt like I’d made it. I sorta did. But no one tells you that more money doesn’t magically fix money problems. In fact, without a solid money management system, it can create even bigger challenges. For me, I was scared to spend my money because the job I got before I was barely making enough money and couldn’t save for an emergency that was a layoff. Yes, that layoff gave me leverage but it still lingered. 

The truth is, making more money is great, but it’s not “cute” if you’re still messing it up.

You’ve probably seen those viral posts on social media where people say they make $100K or more but don’t feel it in their day-to-day lives. Sometimes it’s lifestyle creep (when you spend more as you earn more). Other times, it’s inflation creeping in. Both are different problems with different solutions.

[I talked bout how to budget your new money (or even if your new job pays less) here. ]

So, what’s the key? Understand your money now. Figure out your means, and build a money management system that works before the “more” comes. Here’s how you can start:

Step 1: Do The Mindset Shift First

Your past money habits can shape how you manage your future wealth.
When I hit six figures, I quickly learned that just earning more doesn’t automatically lead to more financial stability. The way you think about money now will impact how you manage it as your income increases. It’s not just about lifestyle creep—where you end up spending more as you earn more. It’s about your mindset. If you view money solely as something to spend, it’ll be hard to transition to using it as a tool to grow your wealth.

Here’s why the mindset shift is essential:

• Old habits die hard: If you’ve been living paycheck-to-paycheck or making impulsive purchases, those habits won’t just disappear when you make more money. You need to actively work on seeing money as a tool for building wealth.

• Focus on long-term goals: Instead of spending money on temporary comforts, shift your mindset to think about how each dollar can help you reach your financial goals—whether that’s building an emergency fund, investing, or paying down debt.

• Wealth-building mindset: With a wealth-building mindset, your focus will be on saving, investing, and creating systems for your money to work for you, rather than treating it as something to simply spend.

My personal story:
When I hit six figures, I was excited about the possibilities. But old habits from when I wasn’t earning as much crept in. I’d been used to stretching my money just to get by. At first, I didn’t change my spending habits much—thinking that more income would solve everything. But soon, I realized it wasn’t the income that needed to change; it was how I thought about money. The shift had to come from within.

So, what do you do?
Start by visualizing your money as a tool that helps you achieve your bigger goals, rather than something that should be spent without much thought. Begin to plan, save, and invest like someone who is actively building wealth. Your financial mindset is the foundation for your success at any income level. I talked about this over on “The Metas” not too long ago.

Step 2: Understand Your Means

The notion of “live below your means” is something that a lot of people say, but even more people don’t know what that means (for them and their wallet).

Start with where you are now, so you can know where you're going.
Before you start thinking about asking for a raise or managing a higher income, you need to really know what’s going on with your money today. I’m talking about your income, your spending, and your saving. Sounds simple, right? But a lot of people skip this step—and it’s key.

Doing this now, with the income you have, will not only help you budget better, but it will also give you clarity on what "more" looks like for you. It helps you figure out how much more you need to earn to reach your goals and how much you should be asking for when the time comes. It’s like laying the foundation for your future while building the house today.

Here’s where to start:

• How much am I bringing in monthly?
  Get clear on exactly how much money you’re working with. Know your paycheck, side hustle income, or anything else that’s coming in. You can’t budget properly if you don’t know this.

• What am I spending on bills, subscriptions, and everyday expenses?
  Look at your monthly expenses—rent, utilities, Netflix, food, all of it. Sometimes we don’t realize where the money’s going until we really look at it.

• Am I saving anything consistently?
  Are you putting away even a little bit each month? If not, now’s the time to make it a priority. Saving regularly is the key to building wealth in the future.

Why this is important:

Understanding your means isn’t just about doing math—it’s about getting real with yourself. When you have a clear picture of where your money is coming from and where it’s going, you can make better choices with it. This is the baseline you need to grow your wealth and manage your money better as your income increases.

Step 3: Build A Money Management System

Making six figures won’t matter if you don’t know how to handle it.
That’s why setting up a money management system before you earn more is crucial. If you’re not already budgeting and managing your money well, getting a bigger paycheck won’t automatically solve things. Having a system in place will help you keep your financial life organized and make sure you’re ready for the increase when it comes.

Here’s what you need to focus on:

• Budgeting:
  Build a spending plan that works for you. A budget isn’t about restricting yourself—it’s about telling your money where to go instead of wondering where it went. Once you have a plan, it’s way easier to stick to it.

• Separate Your Accounts:
  Use different accounts for different purposes: one for bills, one for spending, and one for saving. This helps you keep things organized. Automate as much as you can so your money flows smoothly without you having to think about it.

• Track Your Progress:
  Check-in with your budget regularly and make adjustments if needed. Things change, and that’s okay. The key is to stay on top of it so you don’t get caught off guard.

Step 4: Know Your Financial Gaps

Before you start earning more, figure out what's missing in your current financial situation.
Knowing where you stand now helps you make smarter choices when more money starts coming in. If you’re not clear on your financial gaps, you might end up spending in the wrong places or missing opportunities. Identifying these gaps now will allow you to use every dollar wisely once you start making more.

Here’s what to ask yourself:

• Do I have debt I need to pay down?
  Be honest with yourself. If you have debt hanging over your head, paying it down should be a priority.

• Is my emergency fund where it should be?
  If you don’t have an emergency fund or it’s not big enough, now’s the time to build it up. You’ll be glad you did when life throws a curveball.

• Am I missing out on opportunities to invest?
  Are you putting money aside for the future? If not, now’s the time to start looking into investment options that fit your goals.

• What are my financial goals?
  It’s important to know where you’re heading. Are you saving for a home, a vacation, or retirement? Having clear financial goals will help you prioritize what’s most important, making it easier to decide where to focus your efforts when more money comes in.

Knowing these gaps helps you focus your energy on what really matters. When you start making more money, you’ll already have a clear plan for where it should go.

Step 5: Plan For The “More”

Let’s get real—what will you do with more money when it comes?
Whether you’re planning to pay off debt, save for a big goal, or invest, having a plan is crucial. But also, understand what "more" money looks like for you. It’s not just about having a higher paycheck; it’s about managing that money wisely and making sure it works for you. More money could mean more opportunities, but it could also mean more responsibilities. The key is knowing exactly how you’ll handle it before it arrives.

Here’s something else to keep in mind: more money means more responsibility. Hitting six figures, for example, can push you into a higher tax bracket, which changes the way you need to budget. Being prepared for this change will make things much easier when the time comes. Think about the impact on your tax planning, as well as your spending and saving goals.

Here are a few things to budget for:

• Taxes taken out of your paycheck:
  When you earn more, the taxman takes a bigger cut. Make sure you're factoring this into your budget, so you're not blindsided by a smaller paycheck than you expected.

• Saving for tax payments if you’re self-employed:
  If you’re working for yourself, you’ll need to set aside money for taxes. Unlike regular employees, self-employed individuals often pay quarterly taxes, so it’s important to plan for those payments.

• Knowing what deductions you qualify for (and which ones you don’t):
  Understanding the deductions you can claim (and which ones aren’t available to you) will help you manage your finances more effectively. This is where consulting a tax professional can really pay off.

• Consulting with a tax professional to manage your income strategically:
  A tax professional can help you plan ahead to minimize your tax burden. This can save you a lot of money in the long run and ensure that you’re making the most of your earnings.

Understanding these aspects now will make the transition to earning more seamless—and less stressful. By preparing for the financial responsibilities that come with more income, you’ll be in a much stronger position to make it work for you. You can envision the more, but understanding how that value impacts your wallet is key. 

Step 6: Start Investing Early

Don’t wait to make “enough” money to invest.
You don’t need to wait until you’re making six figures to start investing. Even $10 or $20 a month into an IRA or brokerage account can get you in the game. The key is consistency. Time in the market is way more powerful than trying to time the market. Starting small now sets you up for bigger returns later, and as your income grows, you can bump up your investments.

Set your investing goals and know your risk tolerance.
Before you dive in, take a minute to think about your goals. Are you investing for retirement, a major purchase, or just to build wealth over time? Once you have your goal in mind, think about how much risk you’re comfortable with. This will help you decide what type of investments to choose, so you’re not putting your money in things that make you uncomfortable.

Start small and build your foundation.
The beauty of investing is that you don’t need a lot of money to get started. You can start with $10 or $20 a month. Even those small amounts can grow over time, especially if you’re consistent. Fractional shares let you buy parts of stocks or ETFs even when you don’t have the full price of a share, so you’re not missing out. This allows you to build your foundation without feeling overwhelmed.

As your income increases, you can gradually increase the amount you’re investing. This way, investing becomes part of your financial routine—just like paying bills—allowing you to invest more as you earn more.

Leverage ETFs and Index Funds.
Investing in ETFs or Index Funds is a great way to start because they provide instant diversification. You’re not just putting your money into one stock, but rather spreading it across multiple companies, which helps reduce your risk. This way, even small investments are working hard for you.

By starting small and making investing a regular habit, you’ll be setting yourself up for success. The earlier you start, the more you’ll have to work for you when it’s time to reap the benefits.

Step 7: Build An Emergency Fund You Can Lean On

Starting with $1,000 is a great goal.
For many, $1,000 is a huge accomplishment and a solid foundation to build on. But as you continue to grow your savings, aim for 3-6 months of living expenses. Having this larger cushion can make life’s unexpected moments—like a medical emergency, car repairs, or job loss—much less stressful. The goal is to have enough saved up so you can breathe easier, no matter what happens.

Start with one month of expenses.
The key is to build up your emergency fund step by step. Begin by saving for one month of living expenses in a High-Yield Savings Account (HYSA). This way, your money grows faster than it would in a regular savings account. Once you hit that one-month goal, you can begin working toward the 3-6 month range. The more you save, the faster you’ll get there.

Have a plan for when the emergency happens.
It’s not just about having the money saved up; you also need a plan for how to use it if an emergency does arise. Think about how you’ll access your emergency fund and when it makes sense to use it. That way, if the unexpected happens, you’ll feel ready to take action without second-guessing yourself.

By building up your emergency fund and knowing how to use it when the time comes, you’ll create a strong financial cushion that can help you weather life’s storms with more confidence.

Step 8: Create A Plan For Debt And Credit

Know your credit score, and interest rates – and have a debt payoff strategy.
Debt can feel like a weight on your shoulders, but the sooner you take control of it, the sooner you can start building wealth. High-interest debt is stealing from your future, and it’s time to put a stop to that. Your credit score plays a big role in your financial health, so keeping it in good shape while paying off debt is essential.

Start by knowing exactly where you stand with your credit score and the interest rates on your debts. This will give you a clearer picture of what you’re up against and help you prioritize which debts to tackle first.

Use a debt payoff strategy.
There are two popular ways to pay off debt: the Debt Snowball and the Debt Avalanche.

• Debt Snowball: Focus on paying off the smallest debt first, regardless of the interest rate. Once that’s gone, move on to the next smallest. It’s all about building momentum and feeling those wins along the way.

• Debt Avalanche: Prioritize paying off the high-interest debt first. Once that’s paid off, move to the next highest interest rate. This method will save you more money on interest in the long run, but it can take longer to see that first big win.

Pick the method that works best for you—there’s no one-size-fits-all. The key is to have a strategy and stick with it. Start small by focusing on one debt at a time, and as your income grows, you can speed up your progress.

Keep up with your payments while building your savings.
You don’t have to wait until all your debt is paid off to start saving or investing. Building your emergency fund or investing small amounts can help give you the cushion and motivation to keep tackling your debt. Start where you are, and as your wallet grows, your debt payoff plan can speed up too. Each payment you make brings you closer to financial freedom.

Let’s Close This Up..

Even if six figures feels far off right now, the truth is—building your money management system now is exactly what will set you up for success later. The earlier you start, the better prepared you’ll be to handle both the opportunities and the challenges that come with earning more. It's not about waiting until you have more money—it’s about getting ready to handle it when it comes.

Starting today helps you avoid the pitfalls many face when they finally hit those big financial milestones. Think of it as laying down a strong foundation for the future. The work you do now makes all the difference when it comes time to make smarter choices with more money.

Need help getting started?
I’ve got you covered! Grab my freebie What’s The Budget when you sign up for my newsletter. It’s packed with easy-to-use tools to help you identify your financial gaps, build a spending plan that works, and get yourself set up for long-term success. Whether you’re just starting out or already in the game, this resource will help you move in the right direction.

Don’t wait for "more"—start right now and take control of your financial future. The sooner you get a handle on your money, the sooner you’ll be ready for everything that’s coming your way.