Why a $150K salary can feel broke, and four moves to change it

0:00 If you make $150,000 per year, congratulations. You're officially in the top 10% of earners in America. You've made it. You're crushing it. You should be driving a nice car, living in a nice place, and stacking cash every single month. But you're not. Something feels off. You're making more money than you've ever had in your life, but somehow you still feel broke. Here's the thing. It's not your fault. You're not bad with money. You're not irresponsible. You didn't buy too many lattes. The truth is, you've been set up. The system, the tax code, the financial advice you've been given, the entire playbook you've been following, it's designed to extract wealth from people like you. I earners who work hard, they follow the rules, and never quite get ahead. I've sat across from hundreds of people just like you, doctors, engineers, tech workers, lawyers, making 150, 200, sometimes even $300,000 or more per year. And they all ask me the same question. Where is all my money going? So today, I'm going to show you exactly where it's going and more importantly, how to stop the bleeding. Here's what we're going to cover. First, I'm going to break down the exact math that shows you where your $150,000 actually goes dollar by dollar.

0:51 Then I'm going to explain why the tax code is literally designed against W2 employees like you. Then finally, I'm going to give you four concrete moves you can make this year to escape the trap. The last part is the one that most people completely miss. So stick around for that. Let's actually run the numbers because once you see this, you can't unsee it. You make $150,000 gross, and that's a number you told your parents when you got the job. That's a number that you see on LinkedIn. But here's what actually happens to that money before you ever see a dime. First is federal income tax. At $150,000, you're in the 24% marginal bracket. After accounting for the progressive rates and the $16,100 standard deduction, you're paying roughly 26 to $30,000 in federal taxes. Let's call it $28,000. Now, for the state income tax, this is going to obviously vary depending on what state you're in. So, let's say Texas, Florida, Nevada, you have zero. But California, you're looking at 9.3%. And if you're in New York City, that's nearly 12% combined. State and city tax. If you're in a high tax state, and most high-paying jobs are in high tax states, budget another 10 to $15,000. Let's call that $12,000. FICA taxes, Social Security, and Medicare. This one gets overlooked because it comes out automatically. 6.2% for Social Security up to $184,500 plus 1.5% for Medicare on everything.

1:54 That's about another $11,475 right there. And by the way, your employer pays another $7.65% on top of that. So that's money that could have been a part of your compensation. You added up $28,000 federal, $12,000 state, $1.5,000 FICA. That's $51,500 gone before you bought a single thing. Your $150,000 is now $98,500. But wait, we're not done. Your employer probably withholds for health insurance. If you're covering a family, that's easily $500 to $800 per month. Another $6,000 to $9,600 per year. Now maybe you're contributing to your 401k. But if you're maxing it out at $24,500 per year in 2026, that's another chunk that doesn't hit your checking account. After all mandatory deductions, your $150,000 salary become somewhere between $65 and $75,000 in actual take-home pay. That's roughly $5,500 to $6,200 hitting your bank account every month. Now, let's talk about the other side of the equation where that $5,500 to $6,200 per month actually goes. Let's talk about housing first. If you're making $150,000, you're probably not in a low cost of living area. Let's say you're in San Francisco, Austin, New York, Seattle, Denver, or LA. Places where the jobs are. Now, a decent two-bedroom apartment in those cities, it's going to cost you $2,500 to $4,000 per month. And if you live in a modest house with a mortgage, same range, maybe even more.

3:01 Let's be conservative and let's call it $3,000 including utilities. You already have $3,000 out of the $6,000, half your take pay on housing. Next is transportation. You got a good job, so you probably have a reasonable car, not a Ferrari, but maybe a $45,000 SUV or $35,000 sedan. That's a $500 to $700 car payment. insurance in a major city, that's another $150 to $250 per month. Include gas, maintenance, parking, another $200 to $300. Total, we're looking at $900 to $1,200 per month. Let's call it $1,000 bucks. If you're keeping track, we're at $4,000. You got $2,000 left. Now, let's talk about food. Groceries for the household, $600 to $800 per month if you're actually cooking, but you work long hours. You're tired, so you eat out. If you go to lunch near the office, that's $15 to$20 bucks. Dinner, that's another $30 to $50 if you're with someone. Day night, $100 plus. Realistically, you're spending $1,000 to $1,500 on food every single month. So, let's call that $1,200. Now, we're at $5,200 and you've got $800 left. And we haven't even talked about student loans. Most people making $150,000 went to school to get there.

3:56 The average student loan payment is $400 to $800 per month. And that's not including child care. If you have kids in a major metro area, that's $1,500 to $3,000 per month per child. Then we have the basics like phone bill, internet, subscriptions, gym memberships, clothes, haircuts, gifts, the random Amazon purchases, easily another $500 to $800 per month. You add this all up and you're at $6,000 to $8,000 in monthly expenses without doing anything extravagant. There's no exotic vacations here, no designer clothes, no bottle service. You're just living. And this is why $150,000 feels broke. You're not overspending. You're being extracted from both ends. The government takes half and the cost of living takes the rest. Now, here's where it gets really frustrating. Because while you're getting crushed by taxes, other people making the exact same income or even more are paying far less. Let me explain how the tax code actually works because nobody taught you this in school. The US tax code is over 70,000 pages long. 70,000 pages. You know how many of those pages were written to help W2 employees like you? Maybe a few hundred if that.

4:47 The standard deduction, the child tax credit, a handful of education credits, and that's essentially it. The rest was written for business owners, real estate investors, and people who understand how wealth actually works in this country. Let me give you a quick example. Let's say there's two people, both making $150,000 per year. Person A is a software engineer at a tech company, W2 employee. They get a paycheck twice a month and their only tax strategies are to max out their 401k, take the standard deduction, and maybe contribute to an HSA. The total tax bill comes out to around $40,000 when they include everything. Now, person B is a consultant who formed an escorp. They do the exact same work, maybe even for the same company as a contractor, but because they're structured as a business, they have access to an entirely different playbook. They can pay themselves a reasonable salary of $80,000 and take the remaining $70,000 as distributions, avoiding $10,710 in self-employment tax right there. They can deduct their home office, not just a tiny credit, but the actual square footage of their workspace as a percentage of their housing costs. They can deduct their phone, their internet, their computer equipment, their professional development, their travel to conferences, their business meals as well. They can set up a solo 401k and contribute up to $72,000 per year in tax divert savings. That's nearly three times what a regular 401k allows. They might even qualify for the qualified business income deduction. That's a 20% deduction on their business income just for being a pass through entity. And thanks to the One Big Beautiful Bill Act, that deduction is now permanent.

5:59 These two have the same income but completely different tax outcomes. Person A pays $40,000 in taxes and person B might pay $20,000 or less. That's a $20,000 difference every single year. And over a 20-year career, that's $400,000 plus all the investment growth that you missed out on. We're talking about a million dollar difference in lifetime wealth. They have the same income, but they have different rules. Here's something that nobody else taught you. The IRS recognizes three distinct types of income, and they're taxed completely differently. Type one is earn income. This is your W2 wages, your salary, your bonuses, money you get by trading your time for dollars. And it's taxed at the highest up to 37% federal plus state taxes plus FICO taxes. You can easily lose 40 to 50% of every additional dollar you earn to taxes. This is the income that most Americans have, and it's the worst kind from a tax perspective. Type two is portfolio income. This is capital gains and dividends from investments. If you hold an investment for more than a year, your gains are taxed at long-term capital gains rates, 0%, 15%, or 20% depending on your income. This is already way better than the 37% top rate on earned income. A married couple can have up to $98,900 in taxable income and pay zero federal tax on their long-term capital gains. The third type is passive income.

7:00 This is rental income, business income, where you're not materially participating, royalties, and certain investment returns. This is really where the magic happens. Passive income can often be offset with deductions, depreciation, and paper losses. Real estate investors can show negative income on their tax returns while actually putting cash in their pockets every month. They're making money and paying no taxes on it. So, really think about that. Same dollar amount, three completely different tax treatments. A dollar of W2 income might cost you 45 cents in taxes. A dollar of long-term capital gains might cost you 15 cents. But a dollar of properly structured passive income might cost you nothing. The wealthy understand this. They structure their finances to earn as little earned income as possible and as much passive and portfolio income as possible. The difference isn't about making more money. It's about making the right kind of money. Now, let me tell you why this is so personal for me. My parents came to this country from Korea with absolutely nothing. And I'm not exaggerating. They had a couple suitcases and a few hundred. They had no family connections. They didn't have any safety net. And they barely spoke the language. My mom and dad sacrificed everything so that their kids could have opportunities that they never had. And the thing is, they did everything right.

7:54 They worked hard, saved money, didn't spend frivolously. They trusted the system, and did what they were told. They built a good life. And I want to be clear about that. And I'm grateful for everything they provided. But they never built wealth. They never escaped the cycle of trading time for money. Into their 50s and even 60s, they were still worried about finances, still dependent on social security, and still stressed about whether they had enough. When I started my career, I followed the exact same playbook. I got the education, got the good job, got the salary increases, checked all the boxes, and I felt exactly what I described earlier. Making more money than my parents ever dreamed of, but somehow never getting ahead. Every single raise just meant more taxes, and every bonus disappeared into expenses. I was running faster and faster on a treadmill, but I was going nowhere. Then I started asking different questions. Instead of asking, "How do I make more money?" I started asking, "How do wealthy people actually operate?" And not what they say in interviews, not the feel-good stories, but what do they actually do with their money? How do they structure their income? How do they pay taxes? And where do they invest? And then I realized they're playing a completely different game with completely different rules and nobody had ever taught me those rules. But once I learned the rules and started applying them, everything changed. Today I built an 8 figureure net worth not by working more hours and not by some lucky break, but by understanding the system and working with it instead of against it.

8:55 Now everything I'm sharing today is just scratching the surface. This week I'm hosting a free live master class where we're going to go deeper on advanced tax strategies for high earners. We're going to be covering specific structures, specific deductions, and specific moves you can make this year to change your tax situation. It's live. if you can ask questions and we have cap attendants so I can actually help. The link is in the description. All right, let's get back to the escape plan. All right, so how do you actually escape the W2 trap? Let me give you four concrete moves you can start making right now. Move number one is to start a legitimate side business even if you keep your W2 job. This is the single most impactful thing you can do. A business, even a small one, unlocks an entirely different section of the tax code. Things you're already spending money on suddenly become potential deductions. I'm talking about home office, your phone and internet, your laptop you bought. It's depreciable or immediately deductible under section 179. the conference that you want to attend, that's deductible as well. Meals with potential clients or collaborators, 50% deductible. Now, I want to be very clear here. I'm not talking about manufacturing fake businesses or fake deductions. That's going to get you in trouble. I'm talking about legitimate businesses like consulting, e-commerce, real estate, etc. The business has to make money or at least have a genuine profit motive. But once you have that, you're playing a different game. The second move is to understand real estate. It's the most tax advantage asset class in America. I'm not saying to go buy a building tomorrow. I'm saying understand why wealthy people own so much real estate. And it's not just about appreciation. It's about the tax code. With real estate, you can depreciate the building over 27 12 or 39 years, even while still appreciating in

10:12 value. And that depreciation is going to offset your rental income, sometimes completely. [music] You can deduct mortgage interest, property taxes, insurance, repairs, property management, all of it. And you can also use a 1031 exchange to sell a property, go buy a bigger one, and defer all the capital gains taxes indefinitely. And if you or your spouse qualify as a real estate professional, which requires meeting certain hour thresholds, you can use real estate losses to offset other income, including W2 wages. There's a reason why every wealthy family owns real estate. It's not a coincidence. Comment the word RE below if you want me to do a deep dive video on real estate tax strategy specifically. Now, move number three is to maximize your tax advantage accounts, but do it strategically. You've heard about 401ks and IAS, but most people don't use them strategically. The first question is traditional or Roth. Traditional gives you a tax break today, Roth gives you taxfree growth forever. If you think tax rates are going to be going up in the future, and I do, Roth becomes more attractive, but it depends on your current situation. If you have a high deductible health plan, you have access to an HSA. The health savings account is the most powerful tax advantage account that exists. It has a triple tax advantage deduction going in taxree growth and then taxfree withdrawals for medical expenses. And after 65, you can withdraw for any reason without penalty.

11:12 For 2026, you can contribute $4,400 for individual coverage or $8750 for family coverage. If you have a business, look at a SE IRA or a solo 401k. The contribution limits are much higher up to $72,000 per year in 2026. That's money you're sheltering from taxes while it compounds for decades. The goal isn't just to contribute. is to contribute to the right accounts based on your specific tax situation and future expectations. The fourth move is to get a tax strategist and not just a tax preper. This might be the most important of all. Most people just use a tax preparer, someone who takes your W2, plugs numbers into a software, and then files your returns. Now, that's fine, but they're not helping you. They're just reporting what already happened. But a tax strategist is different. They're thinking about your situation 12 months in advance. They're looking at your income, your investments, your business, your life changes, and they're making recommendations before December 31st and not after. Should you accelerate income this year or push it to next year? Should you make a Roth conversion? Should you harvest some capital losses? Or should you form an escorp? Should you buy that equipment before year end for section 179 deduction? These are all questions that a tax strategist helps you answer. And the right answer can save you tens of thousands of dollars. I know what some of you are thinking. So, let me address it directly. Preston, I already have a CPA. Great. But when was the last time they called you in October to discuss strategy? If the answer is never, then you have a tax preparer, not a tax strategist. There's a big [music] difference. Well, I don't have time to start a business. Look, I totally get it. You're busy, but a consulting business based on your existing expertise can start with just a few hours per week. You don't need to quit your job. You don't need to build a huge company. You just need something

12:29 legitimate that opens up the business side of the tax code. Even $10,000 in side income with proper deductions can change your overall tax picture significantly. There's also people that say this is too complicated, and it is at first, don't get me wrong. That's why wealthy people have advisers. You don't need to become an expert in tax law. You just need to understand the concepts well enough to ask the right questions and find the right people to help you implement. That's what this video is about, and that's what the master class is going to go deeper on this week that I'm hosting. Now, a few warnings because I need you to do this right. Everything I've talked about is legal. These aren't loopholes. These aren't gray areas. These strategies are written into the tax code, often intentionally to incentivize certain behaviors like starting businesses, creating jobs, and investing in real estate and retirement. Well, there's a right way and a wrong way to implement them. Don't start a fake business just for deductions. The IRS has rules about hobby losses, and they will audit you if your business never makes money, and you're just using it to write off vacations. Don't overdeduct. You want to keep receipts, keep records. Every deduction needs documentation and a legitimate business purpose. And please don't listen to random people on the internet tell you about secret strategies. If something sounds too good to be true, it probably is, or it's illegal. This is about understanding the system and using the rules that already exist. You want to play the game and you want to play it right. Here's what I want you to understand as we wrap up. Making $150,000 and feeling broke isn't a personal failure. It's not because you're bad with money. It's not because you made poor choices. It's a system failure. A failure of education, a failure of transparency. It's a tax code and financial system designed by people who understand the rules for people who understand the rules. My parents worked

13:45 their entire lives and never learned these rules. They did everything society told them to do. Work hard, save money, trust the process, and they got exactly what the system gave them. a middle- class life, constant financial stress, and a retirement dependent on social security and hope. I refuse to let that be your story. I refuse to let that be my story. And that's why I make these videos because once you understand how the game works, you can't be taken advantage of. Once you see the rules, you can start playing by them. And once you start playing by them, wealth becomes something that you can build deliberately. Now, you know what you do with this information is up to you. Let me recap what we covered cuz we covered a lot. The first thing, $150,000 salary becomes a $65,000 to $75,000 takehome after all deductions. The government gets theirs first. The second thing, the tax code has 70,000 pages and almost none of them were written for W2 employees. You're playing a game with rules designed against you. Third, there's three income types: earn, portfolio, and passive. They're taxed completely differently. Wealthy people structure their finances to minimize earned income. And then fourth was your escape plan. Want to start a business?

14:34 Explore real estate, maximize tax advantage accounts strategically, and then get a tax strategist who thinks ahead. If you're serious about implementing these strategies, I want to invite you to my free life master class that's happening this week. We're going to go deep on advanced tax strategies for high earners, specific moves that can add over $100,000 or more to your net worth over time, and the strategies you can implement this year to change your financial trajectory. It's gonna be free, it's live, and I'm answering questions in real time. The link is in the description. Spots are limited, so register now if you want in. If this video helped you, hit subscribe and like this video as well. I put out videos every single week breaking down the wealth strategies that nobody teaches in school. And let me know in the comments below what strategies do you want me to cover next. Make sure to watch this video next that the algorithm recommends. and I'll see you in the next one.