Written by Nicole Ayub, Personal Finance Coach
Nicole Ayub's passion is to help people have a healthy relationship with their money & reach their financial goals. This led to her becoming a personal finance coach & launching her brand Wall Street Girl Next Door. She currently works on Wall Street where she sees her industry overlook the everyday person & not address people's emotional behaviors which drive their financial decisions.
A HENRY is a High Earner, Not Rich Yet, who makes a sizeable salary and lives paycheck-to-paycheck. HENRYS typically spend most of their pay on expenses and discretionary spending instead of wealth-building assets. Let's explore this further.
Who is a HENRY
A HENRY makes a high salary, usually six figures, and has a low net worth. Net worth is the total of all your assets minus liabilities or debts. They are known as the working rich because they would not have any assets to fall back on if they stopped working. HENRYS spend most of their salary on expenses, with little or no money left for saving or investing.
Lifestyle
HENRYS typically live a high-end lifestyle that drains their paycheck. They drive an expensive car but do not have any savings. They are guilty of lifestyle creep, where their lifestyle and expenses increase as they make more money, so they cannot accumulate wealth.
What to do:
Look at your expenses and see if you are maxing out your lifestyle.
Pay attention to your monthly recurring costs and see if there are areas you can cut down.
Ditch the luxury apartment for a more affordable option.
Replace the high car payment with a more moderate option. Car expenses included garages or additional costs to maintain your vehicle.
If you max out your lifestyle today instead of putting money towards retirement, you will work longer. Those are just the facts.
Spending
HENRYS have become the target for luxury brands because they will spend money on luxury bags, belts, clothing, shoes, and accessories. Luxury marketers believe HENRY'S desire for a luxury lifestyle will make them long-term buyers.
What to do: This mindset keeps HENRYS from accumulating wealth. Look at why you are buying these items instead of investing in your future. How much of your lifestyle is to "keep up with the Joneses" or for external validation?
Debt
Most HENRYS have high liabilities, including student loans, mortgages, auto loans, and credit cards. Constantly paying off debt can make it challenging to build wealth simultaneously.
What to do:
Paying off debt should be a priority.
Pay more than the monthly minimum payments.
Any extra income or bonuses should go towards paying down debt.
If you have credit card debt, look at your spending behavior and consider lifestyle shifts to avoid continuing to accumulate debt. Also, do not incur new debt until you have paid your outstanding liabilities.
Saving & investing
HENRYS have low to zero savings and investable assets. All their money is spent, with none left to save or invest in their future. The liabilities side of their balance sheet outweighs the assets, or they are breaking even. It is a cycle of money in, money out.
What to do: Take an in-depth look at your expenses. When you thoroughly review your expenses, you will see where there is room to reallocate money from expenses to savings and investing.
5 tips to avoid becoming a HENRY
Track your spending: No matter how much money you make, you need to track your spending. Even people who make six or seven figures can overspend. You always need to know where your money is going.
Automate your finances: The more you automate, the easier it will be to manage your finances and stay on track. You can automate money into your savings or investment accounts each month or from each paycheck.
Create financial goals: Goals give your money direction and provide you with something to work towards.
Stop living paycheck to paycheck: This means looking at your costs and lifestyle. Look at your expenses and see what areas you can shift from spending to saving.
Get support: Examining your spending habits and lifestyle can be difficult and overwhelming. Making changes and knowing which changes to make can be even more difficult. Having someone to guide and support you can make a huge difference.
What you do with your income is more important than how much your income is. It does not matter how much money you make; it matters what you do with it. Think about your future and not just today. HENRYS are the demographic of clients I work with one-on-one. Set up a free consultation if you would like support on breaking the paycheck-to-paycheck cycle.
Read more from Nicole Ayub
Nicole Ayub, Personal Finance Coach
Nicole Ayub's passion is to help people have a healthy relationship with their money & reach their financial goals. This led to her becoming a personal finance coach & launching her brand Wall Street Girl Next Door. She currently works on Wall Street where she sees her industry overlook the everyday person & not address people's emotional behaviors which drive their financial decisions. Nicole's goal is to bridge the gap for people who do not qualify for financial advising & give them the support and resources they need to make healthy financial decisions. Through this brand she is bringing awareness to people’s relationship with their money on an emotional & mental level so they can achieve financial freedom.
