The High-Income Debt Trap: How to Avoid Being Snared

Are you a high earner who is living paycheck to paycheck? Do you make six figures but struggle to pay your bills? You've probably fallen into the high-income debt trap. Learn to tell if you've become a victim and find solutions for getting out of it here!

This article may contain references to some of our advertising partners. Should you click on these links, we may be compensated. For more about our advertising policies, read our full disclosure statement here.

“I’m thinking about finding a side job,” my buddy told me.

If this had been video and not instant messaging, there’s no way I would have been able to control the look on my face. Even through the typed words, I’m still not sure I suppressed the sound of my eyes rolling in my head.

“Why?!?” I asked him. “You make $125K a year.”

“I know, but we could use some extra money and I think it might help. Maybe I could find a way to work at home?”

“Dude, you don’t need more money. You need to stop spending everything you have!”

Thankfully, my friend and I can talk frankly about this kind of stuff. And while I don’t typically offer unsolicited financial advice, he did ask for it.

Ultimately, I broke it down for him like this: If you can’t afford to pay your bills with $125,000, is an extra hundred bucks a month really going to help? No. You’re just going to spend it all. You’ll have far greater results by making better use of the money you already have.

I’m still kind of surprised that he actually listened.

More Money is NOT the Solution

Unfortunately, this whole episode speaks to a larger problem… and it isn’t just with my friend. It’s something that is running rampant through our society.

We’ve forgotten what it means to make choices. Instead of setting up priorities, we end up buying everything we want, when we want it. We’ve simply forgotten how to tell ourselves “no.”

Worse, most people have no concept of how to stretch their dollars by spending less. Rather than taking care of the coins we already have, our never-ending push for more – more money, more crap, more everything – has us constantly searching for magic money-making bullets that don’t really exist.

You see, more money isn’t the solution. Without first changing our money habits, we may as well be bringing a bucket of water to a five-alarm fire. Quick fixes aren’t going to help.

And don’t think this just affects those of us who make less. This happens to high earners, too. Sometimes, it’s even worse.

Beware the High-Income Debt Trap

Time and time again I’ve seen families who make a very good incomes struggle to meet their bills. It’s definitely not because they don’t make enough money. It’s because they can’t control their spending and their debt.

We’ve talked before about how being a high earner only gives you the opportunity to be rich. In fact, it’s a golden opportunity that far too many people waste!

Unfortunately, far too many people never learn the basics of handling their money. So, like the poor man who suddenly hits the lottery, many high earners do the same thing – albeit on a smaller scale. They blow through every penny and end up living paycheck to paycheck, even though they’re pulling in six figures or more.

You see, when you earn a lot of money, it’s easier to gloss over the fundamental money mistakes that you’re making. Earning a lot of money makes it easy to overspend and fall into the debt trap.

Sure, you can afford that new car payment because you make $150,000. Yep, you can upgrade to the $500,000 home because you think you can cover that mortgage payment. Yes, just put those concert tickets and meals on the credit card and worry about paying it off later.

Instead of using this opportunity to get ahead, we end up spending our extra money on crap that we don’t really want and certainly don’t need. It’s death by a thousand yeses. We save nothing, we live paycheck to paycheck, and we’re no better off making $100K than the guy next door making $40K. It’s a wasted opportunity.

Worse, what happens when things go wrong? What happens when we lose that job… or our car breaks down… or we get a divorce… or our spouse gets sick and can’t work?

When we accumulate mountains of debt, even high earners can struggle. God forbid, if our income stream dries up, we’re still stuck owing that money – and that’s where we could find all kinds of problems.

How to Know You’ve Fallen Into the High-Income Debt Trap

Think you might have been snared by the high-income debt trap? Here’s how to tell:

You make plenty of money but struggle to meet your bills. – If you make plenty of money but can’t meet your expenses, you have fallen into the debt trap. This one isn’t just for high earners, either. If you’re making a middle-class wage (or above) and still struggling to meet your bills, you are living beyond your means and almost certainly have too much debt.

You’re looking for extra jobs even if you make six figures. – If you make six figures but are looking for extra work to meet your obligations, it’s past time to check your spending and consider your debt.

Your credit card balances are larger than your savings account balance. – Do you make a six-figure salary but don’t have enough cash saved to pay off your credit cards? You may have fallen into the trap. In fact, if you can’t pay off all of your debt (minus your mortgage and – possibly – student loans), you’ve probably fallen into the trap.

You constantly justify small purchases but can’t come up with cash to pay for things you really want. – Do you have the cash to cough up for a vacation? Could you buy tickets to a broadway show or sporting event without having to finance them with a credit card? If you’re a high earner but answered “no,” you’re almost certainly caught in the trap.

You make a good living but never have a penny to save at the end of the month. – If you’re a mid to high earner but have zero savings, you definitely have a spending problem. Chances are good, you’ve probably got a debt issue as well.

How to Get Back on Track and Avoid the Trap

So, how do you get back on track and avoid the high-income debt trap for good? All it takes are a few simple steps.

  • Have a Monthly Plan – Nobody likes the word “budget” (well, I do…), so let’s call it something different. Create a “monthly plan” that helps you decide what to do with your money. Our favorite type of monthly money plan is called a “Zero-Based Budget.” Essentially, you plan how you’ll spend (and save) every penny you make each month. By planning for every penny, you’ll end up spending with more purpose, reduce your impulse spending, and find money you didn’t even know you had.
  • Track Your Expenses – Once you have a plan, be sure to track what you’re spending so you know where you stand. Follow these simple tips to get started.
  • Cut Unnecessary (and Unwanted) Spending – When you have a plan and track your results, it becomes crystal clear where your money is going. Cut expenses that are unnecessary or no longer needed, and use that money to save or pay off debt.
  • Start a Debt Snowball – If you really want to get ahead, you need to pay off your debt. Using a debt snowball or debt avalanche to attack your debt helps keep you stay focused on your goals and pay off debt quickly. Follow the links to learn more.


Are you stuck in the high-income debt trap? What are you doing to get out? Fire away in the comments below!Are you a high earner who is living paycheck to paycheck? Do you make six figures but struggle to pay your bills? You've probably fallen into the high-income debt trap. Learn to tell if you've become a victim and find solutions for getting out of it here!


Similar Posts

Disclaimer: Comments, responses, and other user-generated content is not provided or commissioned by this site or our advertisers. Responses have not been reviewed, approved or otherwise endorsed by this website or our advertisers. It is not the responsibility of our advertisers or this website to ensure that all comments and/or questions are answered. Club Thrifty has partnered with CardRatings for our coverage of credit card products. Club Thrifty and CardRatings may receive a commission from card issuers.


  1. Greg, Another trap that I fell into was: Putting money in a 401K and avoiding the tax on that sum. I would max that out every year. Now every year I have started withdrawing that money, but geeze, the tax bill just stinks. Back when I was putting the money in, the taxes on that would not raised my tax bill to another level and I certainly had the income to have paid it then. I have no problem paying taxes on how that money grew, but it stinks now having to pay state and federal tax on it. It is nice that we now have Ross accounts but for someone in late 60’s or early 70’s, that tax bite stinks.

    1. Yes, the taxes on withdrawn money from tax-deferred accounts is something I did no consider when I was working and socking it away. I just focused on the tax benefits at the time, not the tax burden when taking it out. Now that I am not working, the tax burden when taking it out is much higher than expected. In retrospect, i should have put more of it in after-tax savings.
      I know if someone had pointed it out at the time I was working, i would not have believed it. But is is true.

  2. Yup, I know this quite well. I don’t earn $125k or anything crazy, but my husband and I combined earn 4X the local average annual salary. We’re doing quite well for ourselves. In these situations, it’s often cost-cutting, not income increases, that can produce more wealth. I still think both approaches are necessary to get out of debt, but they need to be optimized at the same time to really see a return on your work.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.