How to know if you’re a HENRY (High Earner Not Rich Yet)
HENRYs have been labeled “the working rich” because no matter how much they earn, many continue to live paycheck-to-paycheck. They make good money, but by no means are they building wealth. We break down the reasons for this phenomenon and help you understand if you’re a member of the illustrious Club HENRY by detailing the most common recurring themes amongst High Earners who are Not Rich Yet.
If you’ve perused our website, you know we talk a lot about HENRY. No, we’re not fangirling over Henry Cavill (although damn, he’s good in The Witcher). We’re not obsessed with Henry Ford and his magical assembly line or with the great English conqueror, Henry V. We are, however, obsessed with a group of young professionals who have hopes of conquering their personal finances and assembling the life of their dreams. They are High Earners, but they’re Not Rich…Yet. We call them HENRYs.
As much as we talk about HENRYs, many people still come to us asking, “Do I fit the bill?” There’s a plethora of things that classify our clients as HENRYs, but if you’ve been wondering whether or not you fit into this illustrious group, the easiest way to find the answer is by examining your lifestyle. Before we dive into “The Secret Lives of HENRYs Everywhere” (which sounds like it would make for a good Netflix show) to see if you identify with their lifestyle, let’s begin by clarifying the two corresponding characteristics that make up the archetypal HENRY: HIGH EARNING, and NOT RICH YET.
What’s considered high earning?
The term HENRY was originally coined in a 2003 Fortune article to refer to families making between $250,000 and $500,000 per year. Since then, the classifications have shifted a bit. Today’s HENRYs are marked as individuals earning between $100,000 and $500,000 annually.
Most HENRYs are young professionals in their 30s who have taken one of several paths to reach their current level of income. First, they have moved up the corporate ladder of one large company or have jumped from firm to firm, marginally increasing their salary with each job change. Now they are reaping the financial rewards.
Two, they started a venture of their own, and after several years of merely surviving, they are now in a position to pay themselves healthy dividends.
Third, the side hustler. This person has spent the last ten years of their post-college life with one foot on both of the previously described paths. They worked a 9-5 job, but they also freelanced on the side, started a food truck, or gave golf lessons on the weekend. Even if their full-time role didn’t net them six figures, their side hustles certainly pushed them into HENRY status.
Despite their work-hard mentality, HENRYs are often left with a predicament at the end of each month. They make good money, but it feels as though they’re still living paycheck to paycheck. They’re high earners, but they’re not rich.
What’s considered rich?
Now more than ever, the qualification of what it takes to be “rich” is unclear. The price of many consumer goods has skyrocketed, rent and housing prices are already in the stratosphere, and the cost of living seems higher than ever. Someone who could put money down on a condo five years ago…might not be able to do so today. But that doesn’t inherently mean they’re less “rich”.
Rhetoric amongst “experts” today will lead you to believe that being rich is dependent upon a multitude of factors, such as where you live. Investopedia’s Will Kenton writes, “$250,000 may go a long way in Houston, but wouldn't provide anything like a lavish lifestyle in New York City.” And that’s true, your dollar goes a lot further in Texas than it does in New York State. But does that automatically mean that a high-earner in Houston is richer than an equally high-earner in New York City? No, and here’s why:
It’s not about how much money you make but how you manage that money as it comes in. Being rich has little to do with how far a dollar will go in your city, but how many dollars you have left over.
“Rich” is subjective. Because it means something different to each person. Being rich speaks more to what you can do with your money or how you feel about your personal finances than it does to how much money you have.
Are you a HENRY?
For that reason, admittance to Club HENRY is not solely based on one’s salary. HENRYs usually share several things in common. Experian’s Marianne Hayes notes that while they “may not be struggling to make ends meet, that doesn't mean they're financially thriving either.” When our clients first come to us, many of them ask similar questions, all of which are indicative of their lifestyle:
Why am I still living paycheck to paycheck?
I’m almost 40. How much money should I have saved?
I have money left over. What now?
Can I afford this?
What should I do with my end-of-year bonus?
The source of their confusion usually stems from one of two things: lifestyle creep, or naivete. Let’s dive into the two HENRY hallmarks:
Lifestyle Creep
We talk about Lifestyle Creep a lot at Stash Wealth. This is what happens when your lifestyle increases in lockstep with your income. It’s also the reason many clients come to us saying, “I’m still living paycheck-to-paycheck despite making $200,000 a year!” Every time they get a raise or bonus, they have a chance to break that paycheck-to-paycheck cycle.
But most HENRYs can’t avoid comparing themselves to the lavish lifestyles they see on Social Media. So instead of using the increase in their wealth to work towards financial wellness, they upgrade their lifestyle. They graduate from Uber X to Uber Black. They book more expensive seats on the plane. They eat out more. Obviously, they deserve to upgrade their lifestyle, and we encourage our clients to do just that. But it can’t be dollar for dollar. That’s the surefire way to ensure a High Earner remains….Not Rich Yet.
I Will Teach You to be Rich
Ramit Sethi, author of “I Will Teach You to Be Rich” and host of the Netflix series, “How To Get Rich” is all about cutting back on the things that you don’t truly value so that you can spend mercilessly on the things that matter most.
Someone making $75,000 a year may feel more confident in their ability to vacation in Bali without going into debt than someone making $150,000. In this example, which person is richer? We would argue that the person who enjoys their hard-earned money without feeling guilty is the “richer” of the two.
There are only two ways to build wealth and become “rich”: by increasing your income or by lowering your expenses. You have more control over the latter. So while we absolutely encourage you to strategize your career trajectory or pick up a side hustle, the most effective thing you can do is analyze your lifestyle and your spending habits.
You don’t know what you don’t know
The other common recurring theme amongst HENRYs is naivete. And it’s not their fault - no one teaches you this sh*t in school! Those who don’t suffer from lifestyle creep or from the paycheck-to-paycheck cycle often have the opposite problem: they don’t know what to do with the money they have left over. This can be equally as frustrating because when you don’t have a firm grasp on your money, you’re left merely wondering if you can afford to make certain purchases.
Let’s say you recently got a significant raise and after four months of keeping your same lifestyle, you now have several thousand dollars burning a hole in your pocket. To use our earlier example, you’ve been wanting to travel hack a summer vacation to Bali, and with this newfound surplus of cash, you know that you COULD. But the question remains: SHOULD you? Could that money be better spent elsewhere? Should you invest it? Should you set it aside for a down payment on a house?
These are questions that many HENRYs face, primarily because they simply don’t have the financial literacy to find the answers. That, or they haven’t taken the time to get into the nitty-gritty of what their goals are and how they intend to reach them. And who can blame them? They’re busy being a high-earner.
The point is: there’s no roadmap that leads you down the path to financial freedom. Life doesn’t come with the financial equivalent of Aladdin’s genie to answer all your questions and grant your wishes. At least, it didn’t. Then Stash Wealth was born. And “you ain’t never had a friend like (us)”.
Graduating to Rich status
You want season tickets. You want a couple’s trip to Lake Como. You want membership to an expensive gym, fancy gin, or a weekend in Aspen. You want preventative Botox. Not only do we get it, we don’t judge. Our goals-based investing approach enables our clients to “spend mercilessly” on the things that matter and save for the future. THAT’s what it means to be rich - to do the things you want while accumulating wealth. Because as much as you want a cloud sofa from Restoration Hardware, you also want to retire someday.
Before you have it all, you’ve gotta have a plan. A Stash Plan takes the guesswork out of living your best life and puts you on the path to spending your hard-earned money…guilt-free. No more internal debates over whether or not you should buy something, no more living paycheck to paycheck, and certainly no more time wondering how the hell you have money left over at the end of the month.
We strive to put our clients in a position where they can wake up one morning and realize, “I’m not a HENRY anymore. I’m rich.”
Stash Wealth provides financial plans designed to assist high earning young professionals build and manage their wealth.
Stash Wealth offers a pragmatic approach to financial planning and wealth management. Whether saving up for Tahiti or a Tesla, we help you achieve your short-term and long-term goals.
Written by Stash Wealth Staff Writer
Stash Wealth Staff Writers are knowledgeable about personal finance topics. Their objective is to unravel the complexities of finance trade jargon, products, and services in order to equip HENRYs with a sound understanding of financial matters.