Is $100 a Lot of Money [An Unfiltered Response]

There’s something about a crisp $100 bill that symbolizes riches. You could open your wallet to four twenty-dollar bills and be satisfied. Yet, if you open your wallet to a single $100 bill, you immediately feel . . . wealthy. 

But are you? After all, what does $100 actually buy in the year 2022? That depends on who you are, where you are, and how you spend it. 

In the United States, whether $100 constitutes a “lot of money” is entirely dependent upon the consumer’s stage of life, geographic location, and the intended use of the money.

For example, a high-school senior in rural Montana will place much more value on $100 than will a wealthy business woman in Chicago will. And while $100 might buy a few months of toilet paper or nearly whole year worth of free Amazon deliveries, it will barely fill a full-sized SUV with gas for a day’s road trip. 

Is $100 a Lot of Money in the US?

Yes! And, no. 

While studies range widely, the 2020 Census numbers state that the median annual household income in the United States was $67,521.  By the numbers, this shakes out to $5,626.75 gross per month, and approximately $4,311 after taxes in states with a state income tax. Based on this income bracket, $100 comprises of less than 3% of the total monthly take home pay. 

Doesn’t seem like much, right? In fact, from this viewpoint, one might argue that $100 is not a lot of money to a person earning the average income in the United States. But . . . it’s not that simple. 

Money has time value, and $100 is certainly part of that equation. Future value versus the current value of money must be considered when evaluating any amount, even $100. But it’s not enough to merely consider the investment opportunities available to money – one must also examine the time value of $100 as it pertains to bills that must be paid monthly or the never-ending stream of daily living expenses. 

One more thing – keep in mind that about 689 million people worldwide live in poverty on about $1.90 per day. Any one of these people would consider $100 to be a fortune. 

Recommended Financial Geek Article: Is $1,000 Really a Lot of Money?

How Does $100 Rate Among Earners

Studies differ a bit, but it’s safe to say that the average cost of living for an individual is approximately $3,000-$5,000 per month, depending on geographic location and lifestyle, and while that might not even seem like a lot to sum – living comfortably off $3,000 a month is not a foreign thought for many Americans.

For a family of 2 or more, the numbers are obviously higher. When you look at it from a daily perspective of stretching $4,311 for 30-31 days, $100 takes on a whole different value. 

Plus, recall that this average income means that approximately half the country is living below that mark. A person making $20,000 per year will take home approximately $1,477 per month. Suddenly, $100 becomes a whopping 6% of their monthly budget. 

On the far side of the spectrum, $100 is not a lot of money, relatively speaking, for a person in the top 1% of the tax bracket, making more than $597,815 per year. Folks in this bracket are taxed at a percentage of 27.59%, letting them bring home an after tax monthly income of approximately $36,073 per month. $100 is a mere fraction, coming in at less than .002 of a percentage point. 

Who is Spending the $100

Let’s take a look at the high school senior in Montana. Suppose he works at his part-time job on the evenings and weekends and bring in about $250 a week, which after taxes is approximately $983.60 per month. He lives at home, so his parents still pay for his room and board, auto insurance, and clothes, and he was given an older, used pickup truck to drive. And of course, someone living at home with their parents likely won’t need to put away money into an emergency fund either.

All he pays for each month are his cell phone ($50), fuel ($200), and expenses such as food and entertainment which total $300.  At these numbers, he’s got approximately $433 remaining per month. $100 is a lot of money to him as it makes up 23% of the funds he has available for leisure, travel, investing, or major purchases. 

Moving across the country, how does $100 stack up in the life of our wealthy Chicago businesswoman?

She’s an executive at a Fortune 500 company and she grosses over $500,000 per year. Her partner is a highly sought after surgeon who also grosses several hundred thousand per year, and after taxes, together they bring in a net earnings of nearly $50,000 per month. 

After taking paying their monthly apartment rent (or mortgage), auto payments, insurance, retirement, food and entertainment, fitness expenses, and making investments, they still have several thousand dollars per month to spend. Walking into a fancy Chicago restaurant and spending $200 on a Sunday brunch is hardly noticeable to them. 

How is the $100 Being Spent

The wealthy Chicago couple understands that respecting money is key to earning more of it. They also understand that neither of them will be able to work forever, and eventually they will need a healthy retirement portfolio to continue their lifestyle after they both stop working. 

Rather than spend $200 on a nice brunch every Sunday, this couple only does this once a month, and the other $300-$400 they could have spent on brunch is put into an investment. This may be in the form of crypto, stocks, bonds, or sometimes even real estate investments.

How Far Does $100 Go When Invested? 

Well $100 invested every month for 30 years compounds up to nearly $150,000 while only investing a total of $36,000 (assuming an 8% annual return).

Or remember the earlier mention of the time value of money? $100 is a lot of money if it is invested into an interest bearing account and allowed to grow for a number of years. For example, if the high school senior were to take $100 of his $433 per month and invest it monthly for 20 years with an annual rate of 7% return, he would have invested $24,000, all of which would have been compounded, which would more then double the investment. 

The wealthy Chicago couple also knows this, and due to the surplus they have each month, they invest the maximum amount allowed annually to grow their money. While a nice brunch once a month goes down well, tempering one’s tastes and desires and putting that $100 into investments will allow the investor to continue having nice brunches long into their retirement. 

$100 Can Be a Lot of Money in the US

The key to the value of $100 remains in the “who” and “what” as far as spending it is concerned.

Your $100 is a lot of money at the dollar store in Nevada. However, it may only buy you 3-4 drinks within at the hottest club in New York. And if you invest it at a decent rate of return, it will one day be a lot more than $100. 

Wealthier individuals won’t miss $100 as much as someone who is scraping by making ends meet, but then again, the wealthy individuals had enough respect for money to work at growing what they had. 

Either way, when you open your wallet and see $100 in there, be proud and grateful. You’re rich compared to many people who will never see that much money in their lives. 

Thanks for reading folks!

Geek, out.