A HENRY (“high earner, not rich yet”) is in an interesting situation: they are typically white-collar professionals in high-paying careers, earning six-figure incomes, but often don’t feel “rich.” They may even be anxious about their financial situation and live paycheck to paycheck!
Shawn Tully first coined the acronym in a Fortune Magazine article back in 2003, and helped define the waves of young professionals who are climbing the corporate ladder to achieve financial freedom. These high-earning young professionals often attend top schools and land positions in lucrative professions such as medicine, law, technology, consulting, and finance.
I’ve always believed HENRYs are in the best position to accumulate wealth given the opportunities to use their high incomes as a wealth-building tool, transferable skills that can be used to create additional income streams, and the ability to self-educate and become financially literate. All HENRYs can achieve financial freedom, improve their health and relationships, and live their ideal lives.
A HENRY’s Struggle
While six-figure incomes sound nice on paper, jobs that are paying those salaries are going to be in HCOL cities, combined with high tax rates at the federal, state, and local levels that hit W2 employees the hardest. At the end of the day, even a multi-six-figure annual income will be a lot less than imagined once the paychecks hit the bank account.
Debt is another burden for HENRYs as many have taken out student loans to invest in their education which allowed them to secure high-paying careers in the first place. The trifecta of taxes, high living expenses, and debt is why many high earners feel like it’s difficult to save and invest.
US Federal Income Tax Rates
| Tax Rate | Single Filers | Married Filing Jointly |
| 10% | $0 – $11,600 | $0 – $23,200 |
| 12% | $11,600 – $47,150 | $23,200 – $94,300 |
| 22% | $47,150 – $100,525 | $94,300 – $201,050 |
| 24% | $100,525 – $191,950 | $201,050 – $383,900 |
| 32% | $191,950 – $243,725 | $383,900 – $487,450 |
| 35% | $243,725 – $609,350 | $487,450 – $731,200 |
| 37% | $609,350+ | $731,200+ |
Source: IRS
This is why HENRYs are often considered the “working rich.” Yes, HENRYs may earn more than the median household income, but to earn a high income, they need to generate enough value and profit for their employer and customers or else they would never be paid handsomely!
HENRYs have worked hard and persevered to get where they are today, but their high incomes depend on their careers, which require long hours, weekend work, high stress, and around-the-clock availability, making them more susceptible to burnout along with other physical and mental health issues. A layoff, permanent disability, or medical emergency may cut off their source of high income and ability to maintain their preferred lifestyle.
Lifestyle Inflation: The Biggest Enemy
Lifestyle inflation is simply when a person increases their lifestyle as their income rises and gets used to the new standard of living. Previous luxuries now become necessities and it becomes difficult to lower their lifestyle.
Some level of sustainable lifestyle inflation is expected and healthy because it will be a positive lifestyle improvement, increase happiness, and provide the motivation needed to continue your journey to financial freedom. The problem is being intentional and letting uncontrolled lifestyle creep dictate your tastes and habits. It is always easy to inflate your lifestyle, but painful to deflate your lifestyle. The secret for HENRYs is to be intentional about making sustainable lifestyle improvements.
I’ve seen countless high-earning, high-spending young professionals fall victim to uncontrolled lifestyle creep without them even realizing it. They are influenced by their peers and are tempted to upgrade their lifestyles with all of their disposable income and maintain a certain image in their social circles: high-rise apartments or big mortgages, international vacations, fine dining restaurants, luxury brands, and jewelry.
As they advance in their careers, achieve promotions, and earn more money, their social circles do the same, and their expectations and baseline spending increase every year and they find themselves not making any financial progress despite their growing incomes. It’s even worse if they are spending more than they earn and end up falling into credit card debt to fund their lifestyles.
This is how high-earners fall into the rat race, spending their entire working careers being dependent on their W2 income to maintain a lifestyle they have become accustomed to over the years and never achieving any level of financial freedom.
Every HENRY Can Achieve Financial Freedom
If you ask a HENRY where they fall in terms of social class, they will always say they are middle class, even though the median household income in America is roughly $75,000. Relative to the median household income, HENRYs appear to be doing well financially and lead comfortable lifestyles, however, their poor money habits often leave them dissatisfied with their financial progress. The average person may dismiss their struggles, causing HENRYs to keep their feelings quiet, unable to make a change to their lives.
This should not be the case! HENRYs are all well-positioned to become millionaires in their lives and achieve financial freedom. The most important step is being intentional and educated on good money habits, financial literacy, and protecting yourself once you progress along the journey.
At the start of your journey to financial freedom, your biggest asset is human capital (aka yourself). All HENRYs inherently possess skills, networks, ideas, and willpower in themselves that form the basis of their human capital.
Throughout your life, you will convert your human capital into financial capital (income) and as you grow older, you will deplete your human capital once you are unable to generate any more income. Until that point, it is crucial to save and invest a portion of the financial capital that will allow you to live a lifestyle that you are satisfied with once you no longer have the desire or ability to work.
You do not want to trade away your life energy and have nothing to show for it. We all have roughly the same amount of time to live, and at some point, you want to build up a financial nest egg that will produce enough income in return without having to utilize your own time and energy. This is the point where you have achieved complete financial freedom.
For most people, a high-paying career is the surest and proven way to become financially independent, while also giving you the optionality to start additional income streams on the side through business and investments using the skills, knowledge, and resources that you will cultivate throughout your career.
Best Wealth-Building Strategy For HENRYs
The best wealth-building strategy for HENRYs is focusing on both offense (making more money) and defense (saving and investing). While FIRE bloggers will focus on the defense side, there is a cap on how much you can save after accounting for all your necessary expenses. Everyone needs a place to live, food to eat, and basic utilities!
Playing offense, on the other hand, provides uncapped upside as there is an unlimited amount of income you can earn based on the value that you provide. The best strategy to build wealth is to focus on both sides and consistently increase income while controlling spending.
A high-paying career is essentially an insurance policy that provides you with a base level of income to take care of essential living costs, pay off student loans, discretionary spending for enjoyment, and build up savings and investments. When starting a new career, it may take some time to get into your stride, build relationships and knowledge within your industry, and become efficient at your job.
However, after a certain point when your career is up and running, you should focus on staying in the game. This way you can utilize your high income as a wealth-building tool.
Prioritize your physical and mental health, career development, and have a financial plan that automates your finances and pays yourself first. Any additional time and energy can be used to strengthen your relationships, have unique experiences, and create new sources of side income.
High earners should feel lucky to be in this position! Being a HENRY is only temporary, as we can all become rich with the opportunity we have in front of us.
Being A HENRY Is Temporary
A HENRY will feel rich after they can build a large enough financial nest egg and/or have additional income streams on top of their career income.
Once after-tax income streams can cover basic living expenses (shelter, food, transportation, insurance, clothing, etc.), you will truly feel more financially secure and can take on additional risks in your personal and professional life, without the fear of being able to cover basic needs.
Protect Your Financial Downside
One final word of advice: always protect your financial downside. Unforeseeable events can wipe out all progress you’ve made and set you back years in valuable time.
At the beginning of your financial journey, you will be most at risk since you have not had time to monetize your human capital. You may be burdened by student loan debt and have not accumulated any net worth. Once you secure a high-paying career, an individual long-term disability insurance (LTDI) policy is an absolute must.
White-collar HENRYs can get policies underwritten by the “Big Five” disability insurance companies and pay a modest annual premium (about 2-5% of the total covered income) to provide protection and ensure they will always have a baseline level of financial stability in the event of a disability. In addition, if you have dependents, it is a prudent idea to have a term life insurance policy and an appropriate health insurance policy based on your family’s circumstances.
Once you’ve achieved financial freedom and have all your expenses covered through the income from your financial nest egg, you’ll never want to risk that baseline level of financial freedom. Protect your financial nest egg through a liability insurance policy (known as an umbrella policy).
Never work for the same money twice.