Meet “HENRY”

Henry is actually a woman in this case. I will always accept the androgynous name and don’t feel inclined to call her Henrietta. 😉 She has a solid salary earning job in marketing and lives in New York. She is smart and did well right out of the gate. She started with earnings of $200,000 after obtaining her masters degree in 2010 and currently earns $380,000, salary and annual bonus included. She has about $230,000 in her 401k and about $30,000 in a high yield savings account.

HENRY refers to High Earner, Not Rich Yet, coined by Fortune Magazine writer in the early 2000s.

Henry has always rented due to the high cost of real estate in the NYC area. Due to the higher cost of living, she also hasn’t deferred much to the 401k plan available to her. She took advantage of the company match, saving about 3% annually to retirement funds. Taxes eat up a good portion of her take home pay. There is very little left over at month-end to save to post tax accounts.

To the lower and middle class, her lifestyle would seem rather lavish. She lives in a nice apartment in an up and coming area. She dines out, gets personal services like manicures and massages regularly, travels when desired and likes to collect art. She is now in her early thirties, considering marriage and a family, but has very little savings relative to her earnings. She also carries a few debt balances – credit cards and a lingering student loan balance from graduate school.

Do you know HENRY? Likely, this type of earner has adjusted their lifestyle as earnings have increased and lacks financial guidance and the tools to build wealth.

A few steps HENRY can take now:

  • Work with an accountant to find ways to defer/save on taxes. This should allow for more deferrals to retirement accounts and free up some cash flow to save post tax.
  • Create a plan to pay down debt.
    • Sora Finance is a great tool that can help see total liabilities, credit score, and debt to income ratio. It is a private way to search loan products, consolidate loans and determine what they call as Total upside potential, which “represents the asset growth opportunity achieved by refinancing eligible loans and reinvesting monthly savings at a conservative 6% annual return”.
  • Work with a CFP ® to develop a savings plan.

With proper guidance and some discipline, HENRYs can enjoy a comfortable lifestyle while also saving for their future. By setting goals, becoming more aware of the big picture and instilling positive habits, they can become wealth builders and improve overall financial well-being.

Brandon Cabaniss, CFP®

This material is provided as a courtesy and for educational purposes only.  Please consult your investment professional, legal or tax advisor for specific information pertaining to your situation.