You Might Be a HENRY

High earners — who generally earn between $250,000 and $500,000 a year — are frequently labeled as HENRYs (High Earners, Not Rich Yet). Despite substantial incomes, many HENRYs struggle to accumulate meaningful wealth because their earnings are consumed by high expenses like housing, childcare, taxes, and debt. In response, they often find themselves living paycheck to paycheck with little left for retirement or investments.

If this sounds like you, read on.

Who Falls into the HENRY Category?

The term HENRY dates back to a Fortune article that described households earning six-figure incomes but lacking substantial net worth. Today, surveys show that Gen Z HENRYs make an average of $565,000 yet still struggle to afford homeownership or find financial stability, especially in high-cost regions. HENRYs often juggle student debt, expansive living costs, and lifestyle inflation.

Common Financial Challenges Facing HENRYs

• Lifestyle inflation: As income increases, spending rises to match, which can damage potential savings.
• Significant debt: High balances on student loans, mortgages, and credit cards keep available funds low.
• Elevated living costs: Housing, childcare, education, taxes in expensive regions, etc., can overwhelm income.
• Low investment rates: Many HENRYs have limited savings in retirement or brokerage accounts and limited assets compared to their earnings.

Strategies to Help HENRYs Transition to Wealth

To make real progress, HENRYs should apply targeted tactics:

• Track and reign in spending: You can’t manage what you don’t measure. Look into areas where expenses have grown unnecessarily and cut back.
• Automate saving and investing: Set up automatic transfers to retirement and investment accounts before spending temptations hit. Pay yourself first and live on the rest.
• Max out tax-advantaged accounts: Fully fund workplace plans and IRAs and consider options like backdoor Roths or Solo 401(k)s.
• Eliminate high-interest debt: Prioritize paying off credit card and student loan debts.
• Diversify investments: Build a resilient portfolio across stocks, bonds, real estate, and other asset classes.
• Consider relocating: If you can work remotely, moving to lower-cost areas can vastly improve your savings rate.
• Engage a financial advisor: Professional (read: fiduciary) financial advisors can be a huge help to maximize tax efficiency, investment strategies, and reach financial goals sooner.

Why Wealth Is Still Within Reach for HENRYs

Although constrained by expenses, HENRYs have strong potential to build wealth with disciplined financial habits. Evidence shows that many HENRYs are only a few shifts away from significant net worth growth.

Automate investments, control expenses, and leverage professional advice. High earners can close that gap between high income and lasting wealth.