What Is a HENRY (High Earner, Not Rich Yet)?

In today’s economy, a high salary doesn’t always equate to financial security. Many high earners, often referred to as HENRYs (High Earners, Not Rich Yet), find themselves living paycheck to paycheck despite their substantial incomes. Typically, HENRYs are younger professionals who earn between $100,000 and $500,000 annually but spend a significant portion of their earnings on expenses and discretionary purchases rather than on wealth-building investments.

What Are the Risks of Being a HENRY?

Being a HENRY comes with its own set of financial risks:

• Stalled Financial Goals: Saving for retirement, building an emergency fund, or paying down debt can be challenging if most of your income is spent on current expenses.
• Job Loss Impact: Without substantial assets, a job loss can have catastrophic effects on your financial stability.
• Lifestyle Creep: Increasing discretionary spending as income rises can lead to financial overextension and insecurity.

How Should HENRYs Manage Their Finances?

Despite the challenges, HENRYs have a unique opportunity to secure their financial future. Here are some strategies to help:

Refresh Your Budget

Start by tracking your expenses and eliminating wasteful spending. An effective budget should balance fun money with short- and long-term financial goals. The 50/30/20 rule is a great place to start.

Make a Plan to Pay Down Debt

Debt payments can take a significant bite out of your income. List all your account balances, minimum payments, and interest rates. Choose a debt repayment method that works best for you, such as the debt snowball or debt avalanche approach.

Build Your Emergency Fund

Aim to save three to six months’ worth of expenses in your emergency fund. This pool of cash can cover unexpected financial surprises, such as job disruptions or medical bills, and increase your net worth.

Bump Up Your Retirement Contributions

If you’re already contributing to a workplace retirement plan, consider increasing your contributions. Saving early and often is the best way to maximize compound interest.

Invest Beyond Your Retirement Accounts

While tax-advantaged retirement accounts are important, consider putting money into other investment vehicles, such as a regular brokerage account or health savings account (HSA). Those with a higher risk tolerance might also explore investments in cryptocurrency, real estate, or venture capital.

Connect with a Financial Advisor

High earners can benefit from working with an experienced financial advisor. An advisor can provide personalized investment and retirement planning advice, along with strategies for lowering your tax liability.

The Bottom Line

HENRYs may not be struggling to make ends meet, but that doesn’t mean they’re financially thriving. High earners face unique financial challenges, especially younger professionals who haven’t yet built substantial assets. The good news is that it’s never too late to start securing your financial future.

At O1ne Mortgage, we understand the unique financial needs of HENRYs. Whether you’re looking to buy a home, refinance, or need advice on managing your finances, we’re here to help. Call us today at 213-732-3074 for personalized mortgage services and financial guidance.