While penning my popular book on personal finance, "Buy This Not That", I realized many of you fall into the HENRY category. HENRY stands for "High Earner, Not Yet Rich", and it’s a term for those who earn a lot but aren’t quite wealthy yet. These folks typically rake in six-figure salaries and are pretty good at saving and investing. But despite their high earnings, they often feel less wealthy compared to others, which can cause some anxiety.
The term HENRY was first coined in 2003 by Shawn Tully in a Fortune article. It describes ambitious workers striving to climb the corporate ladder. These individuals usually have good education and work in high-paying sectors like tech, management consulting, investment banking, law, and medicine. Despite earning more than the average person, they often feel they’re not getting ahead, especially if they live in expensive cities.
HENRYs can be any age, but they’re usually under 40. They typically earn at least $100,000 a year, with many making multiple six figures.
There are two types of HENRYs: Coastal City HENRYs and Heartland City HENRYs. Coastal City HENRYs live in expensive coastal cities and earn between $150,000 and $300,000 a year. Despite their high income, they still need to be careful with their expenses. On the other hand, Heartland City HENRYs live in less expensive cities and earn between $100,000 and $200,000 individually or up to about $300,000 as a couple.
The biggest complaint from HENRYs is high taxes. Since their main income source is W2 income, they’re taxed at the highest marginal rates. This can be particularly frustrating if they don’t enjoy their jobs.
So, when does a HENRY start feeling rich? Eventually, as they accumulate more wealth, their anxiety about not feeling rich should start to fade. For Coastal City HENRYs, this usually happens when they achieve a net worth of $3 million. For Heartland City HENRYs, a net worth between $1 million and $2 million should provide the same relief.
Another indicator of feeling rich is when a HENRY’s after-tax passive investment income can cover their basic expenses. However, HENRYs often compare themselves to mega-millionaires and billionaires and wish they had more.
Despite their high earnings, HENRYs often spend more than the average person, which can lead to dissatisfaction with their financial progress. They often aspire for more expensive homes, cars, and schools for their children.
In conclusion, being a HENRY is not a bad thing. It puts you in a good position to achieve better things. As a Chinese proverb goes, "If the direction is correct, sooner or later you will get there!" So, if you’re a HENRY, keep working hard, saving, and investing, and you’ll eventually reach your financial goals.
