HENRYs, or High Earners Not Rich Yet, are attractive candidates for financial planning. Are you doing your best to maximize your efforts?
Despite their lack of accumulated wealth, HENRYs earn high discretionary incomes, which they sometimes spend unwisely. The Gardner Group can help you turn that discretionary income into a sustainable foundation for a solid legacy. While you might feel like you are a poster-child for HENRYs, it’s important to remember your financial pain points, as well as your upside potential, before we can start making a difference.
Equifax defines HENRYs as:
- 55 years old or younger
- With an income of over $100,000
- Having investable assets of less than $1 million
Furthermore, IXI Services’ data suggests that HENRYs make up 13 percent of U.S. households, have an average income of $136,000, an average of $214,000 in assets and spend an average of $68,000 annually.
Studies have also pointed out that HENRYs are spending more money on real estate than they are investing. This isn’t necessarily a bad thing, but coupled with the fact that they tend to focus on “keeping up with the Joneses,” this can be dangerous. HENRYs also tend to buy real estate in metropolitan areas, which increases their cost of living and tends to misallocate their discretionary income. Sure, leveling up can be exciting, but it can also be stressful when paying down student debt, pre-funding a child’s education, and managing possible income fluctuations from one year to the next.
The Gardner Group can help HENRYs by pointing out the crucial factors that they might be overlooking. Educating them on how to attain financial wellness while maintaining the lifestyle they’ve grown accustomed to (or something close to it).
Create a budget.
This obvious first step may seem overwhelming. Seeing how income, expenses, and goals all interact with each other is often eye-opening for clients and helps bring people back to reality.
Pay yourself first.
Although putting money away in an emergency fund and making regular contributions to retirement accounts might not seem like the most glamorous thing to do with your money, it’s one of the wisest. Compound interest is a powerful thing, and the earlier contributions begin, the earlier financial freedom in your golden years can begin!
Develop an estate plan.
Make sure you have at least a simple will and medical directives drawn up. Having a few difficult conversations now and properly planning for what nobody likes talking about (a premature death scenario) will have a major impact on the legacy you’re leaving behind. And it will prevent some of the emotional and logistical problems that might otherwise burden your heirs.
Don’t try to do it all at once.
Getting that performance-based bonus or that annual raise is definitely a confidence booster and makes you feel like you can have it all. This isn’t true. Set realistic and smart goals. For example, real estate can be an excellent investment, but buying an overpriced property in an expensive city early on, might actually prevent you from achieving your bigger, ultimate goals down the road, like retiring. What HENRYs might not realize is that the Joneses probably carry a crippling amount of credit card debt and will have to continue working much longer than planned.
While these four things might seem simple, educating all HENRYs on the basics will provide them with the foundations they need to follow sound financial advice, make the right decisions, and achieve financial wellness.
If you or any of your HENRY-Friends need help on these issues, please call The Gardner Group today!