If you’re someone who’s on a high income but struggling to build any kind of real wealth (or even a positive net worth), you may well be a HENRY. The acronym stands for High Earner, Not Rich Yet, and covers a lot of young people who live in urban areas, work high income jobs, and have student debt to deal with.
Research has found that many high earners have very little in terms of savings, and 18% of people earning six figures have no savings at all. While that may seem shocking to those on a lower income, it’s easy to see why many people — especially fairly recent graduates with lots of debt and high outgoings — struggle to save money, even on a generous salary.
Here are some really common reasons some people get stuck in HENRY syndrome for longer than they should.
They Don’t Understand Their Initial Job Offer
If you’ve been living on a next-to-nothing income through four+ years of college, that initial salary sounds like a lot, especially when it’s presented to you, usually in its pre-tax, pre-other-deductions form, along with all the other perks and benefits you now have access to.
Take some time to calculate what your actual take-home paycheck will be, after state and federal taxes, 401k contributions, deductions for medical, dental and other plans, and anything else that will be deducted from your salary before you even see it.
And don’t stop there. Immediately deduct any monthly expenses that will apply no matter what, like student loan and other debt repayments.
At this point you finally have your actual income in front of you. It may still be a high-ish number, but it’s probably significantly less than you thought.
They Lack a Workable Budget
When you have your actual income in front of you, it’s time to make a budget. Remember that to build any kind of positive net worth you’ll need your expenses to come in well below that figure. Sounds obvious, doesn’t it, but some high earners start spending everything they earn almost from day one.
This often starts with accommodation. Many HENRYs live in big cities, and they get the most expensive apartment they can afford, in the best area they can afford, not leaving enough money aside for any kind of saving or investing.
It’s really worthwhile thinking in terms of the most affordable housing situation that will work for you, rather than the best you can stretch to, at least until student debt is paid down. And the same goes for many other areas of your day-to-day budgeting.
They Compare Themselves to Those Ahead of Them
Suddenly you’re not hanging out with other college kids, but with other grown-ass adults who may be a lot further along in terms of career, wealth-building, and paying off that student debt. It’s tempting to want to live like them, dress like them, and vacation like them. To drive a similar car, and live in a similar area.
But you’re not them. You’re probably on a lower salary and in a more precarious position in terms of job security. Learn to keep your own counsel and plan according to your budget, not theirs.
Maybe even have a conversation with them about finances if there’s a way to do that without overstepping boundaries. You may find that they lived cheap for the first five or ten years out of college and only adopted their current lifestyle after a big promotion or other windfall.
You may also find they never really got out of HENRY syndrome, which is what you’re trying to avoid.
They Don’t Have a Plan
Urban living is expensive as a young single person who wants to live the big city life, eat out a lot, enjoy the nightlife and generally live it up. But one thing to consider is it actually tends to get even more expensive at later life stages.
Family houses in commutable suburbs, weddings, childcare and private schools are all things that can really add to your financial outgoings over time.
Long-term HENRYs are often those who didn’t think too much about the future and didn’t build a strong financial foundation before jumping into even more expensive life stages, like parenthood.
Make time at the start of your career, and at least once a year going forward, to assess your finances, re-set financial goals and look at what you can be doing to beat the high-income-no-net-worth trap going forward.
Frequently Asked Questions
What does HENRY mean in personal finance?
HENRY stands for High Earner, Not Rich Yet, a term coined by journalist Shawn Tully in Fortune magazine in 2003. It describes people with high incomes who have not yet built much savings or net worth, often because of high living costs, student debt, and lifestyle spending. Many new graduates in well-paid jobs fall into this group early in their careers.
Why do high earners often struggle to save money?
Spending tends to rise along with income, a pattern often called lifestyle creep, so a bigger paycheck can disappear into rent, cars, and dining out. High earners also often live in expensive cities and carry student loans, which leaves less room than the salary suggests. Without a budget that keeps expenses well below take-home pay, there is little left to save or invest.
How do I figure out my take-home pay from a job offer?
Start with the gross salary, then subtract federal, state, and local income taxes, Social Security and Medicare taxes, and any pre-tax deductions such as retirement contributions and health insurance premiums. Then subtract fixed obligations like student loan payments to see what is truly available for housing and everything else. Online paycheck calculators can give a reasonable estimate before you accept an offer or sign a lease.
Should new graduates pay off student loans or start investing first?
It depends on your interest rates and benefits, but many people try to do both. A common approach is to contribute enough to an employer retirement plan to capture any match, build a basic emergency fund, and then direct extra money toward the highest-interest debt. A financial advisor can help you weigh the tradeoffs for your specific loans and goals.
About the author
Contributing Writer, Wealthtender
Karen Banes is a freelance writer specializing in entrepreneurship, parenting and lifestyle. She writes articles, website content, ebooks and the occasional award winning short story. Her work has appeared in a range of publications both online and off, including The Washington Post, Life Info Magazine, Transitions Abroad, Brave New Traveler, Natural Parenting Group, and Copia Magazine.
Karen provides copy editing and proofreading services, as well as content creation services, at her website KarenBanes.com.