They’re workin’ 9-to-5 and then some. They have good incomes, but also high expenses. And they’re one of the most valuable demographics in today’s economy. 💰

I’m talking about the HENRYs: High Earners, Not Rich Yet. HENRY is an acronym first coined by editor Shawn Tully in a 2003 article for Fortune magazine, and originally referred to households with an annual income of $250,000 to $500,000 per year that still faced financial difficulty due to the rising costs of childcare and rent.

In more recent years, though, the HENRY has also been frequently skewered. HENRYs bemoan not being able to save, despite buying ritzy health club memberships, designer clothes and other expensive toys. So which is it? And how are these professionals, who might choose to save less for the future in order to enjoy life in the present, dealing with it all?

Whatever your opinion might be, the HENRY is one of the most talked-about and targeted demographics in modern society.

Here are some of the typical qualities of a HENRY, along with how to start being one responsibly.

Who Qualifies As a HENRY (High Earner Not Rich Yet)?

Imagine earning a six-figure income yet feeling like you’re living paycheck to paycheck. This is the world of the HENRY – high income, high expenses – and it’s becoming increasingly common.

HENRYs typically earn around $100,000 to $250,000 annually, well above the average American salary. But don’t be fooled by the high income. HENRYs are not considered wealthy because they lack accumulated assets. Their substantial earnings swiftly go into living expenses instead of wealth-building investments, contributing to a “hamster wheel” lifestyle. HENRYs are sometimes referred to as “the working rich.”

In some cases, HENRYs invested in extensive education to increase their earning potential, resulting in high student loan debt. And many HENRYs, now in middle age, are homeowners and/or parents. Usually, most or all of their income comes from W-2 employment, which can result in career inflexibility. Numb to all the stresses of life, HENRYs often spend heavily to feel good or keep up a certain lifestyle.

Fortunately, HENRYs do comparatively earn great money, which means they have the potential to transition from “high earner not rich yet” to wealth-building machines – without sacrificing lifestyle.

Characteristics of HENRYs

Despite having a six-figure income, HENRYs may sometimes feel anxious about their financial situation and social status compared to their peers. This underlines the need for HENRYs to develop better spending habits and cultivate confidence with how they’re using their resources.

Here are some of the typical challenges HENRYs deal with.

High Cost of Living

Living in a high-cost urban area comes with its own set of challenges. For coastal city HENRYs, maintaining a middle-class lifestyle can sometimes require a household income in the multiple six figures. In cities like these, even a $250,000 income does not provide a lavish lifestyle, but rather a middle-class one, demonstrating the squeeze of the high cost of living.

This high cost of living significantly impacts HENRYs’ ability to save and invest, leading to a feeling of just getting by. It can sometimes feel like your high income is being whittled down by living costs rather than wealth-building.

Debt Management

Debt is another significant hurdle for HENRYs. Typical debts include:

• Student loans.
• A mortgage.
• Auto loans.
• Credit card debt.

Such debts can significantly erode earnings, making it more difficult for HENRYs to build wealth. For example, the average student loan debt for people making over $97,000 a year is just over $52,000, according to the Education Data Initiative, a nonprofit think tank.

Effective debt management strategies like budgeting and generating extra income can help. You’ll be able to allocate more disposable income towards investing in various vehicles like retirement accounts and real estate, which contributes to wealth accumulation. It’s all about making the right moves and changing spending habits.

Aspirational Spending

Aspirational spending habits, driven by societal expectations and luxury marketing, can negatively affect HENRYs’ wealth-building efforts. Despite appearing to be the ‘working rich’, HENRYs often struggle to save and invest for long-term financial security due to high consumption that matches their earnings.

The Fear of Missing Out (FOMO) drives some HENRYs to aspire and spend on luxurious experiences and goods, influenced heavily by peer lifestyles and societal expectations. And we get it: It’s fun to buy stuff, particularly when you have a lot of debt and are nowhere close to paying it off.

As such, many upscale brands employ marketing strategies specifically designed to appeal to HENRYs, focusing on core values like uniqueness and identity and leveraging celebrities to resonate with more affluent consumers. This lifestyle creep is a temptation that HENRYs must suppress or remove altogether to transition towards wealth accumulation.

Criticisms of HENRYs

People love to skewer the typical HENRY, and the criticisms are fair. But not all HENRYs are in the same situation.

It Perpetuates Bad Financial Habits

By qualifying and normalizing the HENRY lifestyle, some financial experts worry that we further normalize living beyond our means. Millions of Americans are off track in their retirement savings, and since personal finance is often stigmatized, people might be tempted to hide or ignore their financial situation rather than confront it and get honest with themselves.

“Can You Just Be Happy With Less?”

For some HENRYs, living in or near a city is necessary because that is where their high-pay job is based. With child care becoming increasingly expensive, parents may need to be high earners in order to raise several children comfortably, and cities often present a quandary: Live in the less expensive suburbs and embrace a draining commute, or live in the metro area for better life balance and eat the extra cost.

Financial Tips for HENRYs

HENRYs can improve their financial standing and transition to wealth by adopting strategies that focus on reducing debt, increasing savings, and strategically diversifying their investments.

Prioritize Your Financial Goals

Step one is to get honest with yourself, see where your current numbers are at and prioritize your goals.

Clear financial goals are imperative for HENRYs to effectively prioritize their financial planning and make the transition to wealth accumulation. You cannot manage what you cannot see, so rip the Band-Aid off and take a real look at your numbers and cash flow.

Then, start taking baby steps in the right direction.

Save and Budget Your Money

HENRYs have a decent amount of money coming in. Saving and budgeting that money is key.

Budgeting apps can help HENRYs track expenses in real time and set financial goals, making it easier to manage and optimize their budget for wealth accumulation. By carefully tracking their spending, identifying areas for cost-cutting and preventing lifestyle creep, HENRYs can free up more funds to direct toward savings opportunities.

Contribute to tax-advantaged retirement accounts like IRAs and 401(k)s to help yourself reduce taxable income while also enhancing the potential for long-term gains via investments and compound interest.

Reduce Unnecessary Expenses

Okay, technically we already covered this in the budgeting section, but it bears repeating. High expenses are typically public enemy No. 1 for HENRYs.

Get those expenses down! Common categories that have room for trimming include:

• Housing.
• Dining out.
• Leisure activities.
• Subscriptions, including payments for things like insurance and utilities.

By cutting back on these expenses, HENRYs can free up extra cash in the bank account.

Make Extra Money

Can’t trim any further? Instead of being miserable, push the top-line income number up instead.

Thanks to the proliferation of the side hustle, there are now many ways to make extra money in today’s digital economy. In some cases, you can get paid to do work you’re already doing or that takes very little additional effort.

Ways to make money

• Participate in focus groups.
• Deliver groceries.
• Pick up pet sitting.
• Sell unused gift cards.
• Sprinkle in freelance work.
• Deliver food.

Diversify Your Investments

If you’re moving and grooving on all of the action items above, and have a decent amount of money in your investment accounts, consider exploring other investment opportunities outside of your 401(k) or IRA.

HENRYs can take greater control over their investment choices and have more flexibility in terms of liquidity and withdrawal options by investing in:

• Taxable brokerage accounts that include stocks, ETFs and/or index funds.
• Rental property or real estate investment trusts (REITs).
• Companies or participation in venture capital/private equity efforts.

Also learn your way around early retirement strategies. It might be smart to look into Roth conversion ladders or a mega backdoor Roth IRA to access your nest egg sooner.

Consider a Financial Advisor If You Keep Avoiding Your Numbers

Financial advisors are an investment, and technically you could do most or all of what they offer on your own time. But do you have the time and attention? Have you actually taken care of your books, your estate plan, and your automated investments? A financial advisor might help you stay accountable.

Financial advisors can assist HENRYs in:

• Setting measurable and achievable financial goals.
• Creating a clear pathway toward financial independence.
• Selecting investments suitable to their risk tolerance and investment goals.
• Ensuring their wealth grows and is protected over time.

Continuously Learn and Adapt

I saved the best tip for last – keep educating yourself!

The personal finance landscape evolves often. Staying on top of it all requires continuous learning and adaptability. Continuous learning allows HENRYs to stay informed about financial market trends and investment opportunities, which are essential for adapting investment strategies.

Also build a network of both like-minded individuals and quality sources of information so you can refine their wealth-building strategies.

Frequently Asked Questions

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

HENRY refers to individuals who earn significant salaries – typically $100,000 to $250,000 a year or more – but are underutilizing these funds when it comes to building wealth due to high expenses. These individuals are sometimes called the “working rich.”

What Net Worth Is Considered Rich?

It depends on your definition of rich. To be in the top 10% of net worth in the United States, you need $854,900, per Federal Reserve data. To be in the top 2%, you need a net worth of $2.47 million.

Who Is Considered a High Income Earner?

A high income earner is typically considered to be someone who earns between $100,000 and $500,000 annually, or over $500,000 to be in the top 1% of the wealthiest households in the US. This definition may vary based on the source, but generally falls within these income ranges.

What Challenges Do HENRYs Face?

HENRYs face challenges including high living expenses, debt and aspirational spending driven by societal expectations and luxury marketing. These challenges can make it difficult for them to build wealth for the future.

The Takeaway

Personal finance is a journey of self-awareness, discipline and informed decision-making. Remember, it’s not just about how much money you earn, but also how you manage it. ◆

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