It occurred to me while writing my bestselling book that a good percentage of you are HENRYs. A HENRY is a “high earner, not yet rich” consumer who is on the path to financial freedom.
HENRYs mostly earn six-figure incomes who also save and invest aggressively. However, HENRYs often don’t feel rich compared to others. As a result, HENRYs are often a little anxious about their current status in society.
Nobody really feels sorry for HENRYs given their plentiful opportunities to make a fortune. Perhaps the only thing keeping a HENRY from achieving their lucrative destiny is grit.
Definition And Examples Of HENRYs
The acronym first originated in 2003 when it appeared in a Fortune article written by Shawn Tully. The definition of HENRY, “high earner, not rich yet” helped define the hoards of gung ho workers trying to climb the corporate ladder.
These workers often attend good schools and join industries such as technology, management consulting, investment banking, law, and medicine. As a result, they end up making more money than the average person. However, given many of these high-paying jobs are located in expensive cities, they often don’t feel like they are getting ahead.
HENRYs are usually under 40 years old, but can really be of any age. The older you are as a HENRY, the more financial help you probably need. In terms of income, HENRYs are often defined as making at least $100,000 a year.
Coastal City HENRY
HENRYs in expensive coastal cities often make between $150,000 – $300,000 a year. The dual-income household income range is generally between $200,000 – $500,000. Yet, even on this income level, they still have to carefully watch their expenses.
I once wrote a popular post entitled, Scraping By On $500,000 A Year: Why Some High Income Earners Can’t Escape The Rat Race. The couple with two children that is highlighted in the article is a classic example of a Coastal City HENRY. They have two six-figure jobs, two children in private school, a $1.8 million home, and not much cash flow leftover (~$7,000 a year). The 1,000+ comments are pretty entertaining.
Most Coastal City HENRYs are also likely pursuing a Fat FIRE lifestyle. After all, most people want to maintain their lifestyle in retirement. Living off a six-figure income while working for decades and then dropping down to a five-figure income in retirement isn’t ideal.
After some calculation and feedback from many Coastal City HENRY households, I believe a family of four in an expensive city needs to earn about $300,000 – $350,000 to live a relatively middle-class lifestyle. As such, this is the investment income range I’m consistently shooting to earn today.
Once a Coastal City HENRY earns more than $500,000 as a couple, they are entering what most Americans would consider rich. Today, an individual needs to earn more than $500,000 to achieve a top one percent income.
Heartland City HENRY
In contrast to a Coastal City HENRY, a Heartland City HENRY is someone who doesn’t live in an expensive coastal city like San Francisco, Los Angeles, San Diego, Seattle, New York, Boston, Washington D.C, and Miami. Philadelphia and Miami are still relatively cheap. But costs are going up.
A Heartland City HENRY individually earns between $100,000 – $200,000 or usually up to about $300,000 as a couple. After about $300,000, a Heartland City HENRY is considered rich, given the median house price often costs less than 3X the HENRY household income.
Thanks to positive demographics, technology, and lower taxes, the demand for real estate in heartland cities is going up. Therefore, Heartland City HENRYs might start feeling squeezed if their incomes aren’t going up even faster.
What HENRYs Complain About The Most
The #1 complaint by those who classify themselves as “high earners, not rich yet” is high taxes. Given HENRY’s main source of income is W2 income, they are taxed at the highest marginal rates possible. If a HENRY doesn’t particularly like their job, their dislike for taxes will be even higher.
For example, we learned in a previous post how Goldman Sachs analysts were absolutely miserable working 100-hour weeks. All of these analysts out of college are considered HENRYs. If they stick with banking for 10 years, they will likely be multi-millionaires. The main problem they face is lasting long enough to get rich.
A Coastal City HENRY is most at risk of paying more taxes under the Biden administration. Biden wants to raise taxes on individuals making over $400,000 and households making over $450,000.
Increasing taxes at these income levels seems reasonable to pay for all the increased government spending. However, try telling that to someone who hates their job and has a lot of student loan debt.
One of the reasons why I was happy to leave finance in 2012 was because I may have faced a 39.6% marginal tax bracket in 2013+. When you’re already exhausted, the last thing you want to do is pay more taxes. So instead of complaining, I chose to do something about my situation.
In comparison, Heartland City HENRYs are in better shape when it comes to taxes. Not only do they live in relatively lower-tax states, they aren’t making a high enough income to be subject to higher marginal federal tax rates.
Heartland cities should continue to attract people who hate taxes the most. You’ve already seem some very rich people such as Elon Musk and Larry Ellison relocate away from California due to high taxes and over-regulation. However, these two are obviously not HENRYs! They are two of the richest people in the world.
When Does A HENRY Finally Start Feeling Rich?
Sooner or later, the angst HENRYs feel about not feeling rich should begin to dissipate. The more wealth they accumulate, the more settled they will feel.
For Coastal City HENRYs, the first stage in feeling more settled is when they achieve a $3 million net worth. A minimum $3 million net worth provides the lifestyle and buying power of a $1 million net worth from decades ago. At this level, you have the option to take things down a notch or negotiate a severance, which provides peace of mind.
If you are a Heartland City HENRY, then a net worth between $1 million – $2 million should provide for the same type of relief. Although, you would have to remain in a heartland city to maintain such a level of comfort. Whereas a Coastal City HENRY has more flexible to relocate to increase their buying power.
The other indicator for when a HENRY can shed the monicker is when their after-tax passive investment income can cover their base level expenses: food, shelter, transportation, and clothing. Once the basics are covered, they should feel much better about their financial situation as well.
Any more income and wealth is just running up the score. However, a HENRY will sometimes look to the mega-millionaires and billionaires and wish they had more. It’s always comparing for more.
Perhaps what annoys a HENRY the most is seeing people who are less educated than them making more money. A good example is a HENRY slaving away at McKinsey & Co. while their high school friend who got C grades makes a fortune off cryptocurrency or a small business.
Below is a Wall Street Oasis forum comment that perfectly encapsulates how HENRYs feel about others less smart than them.
HENRYs Cause Their Own Problems
Although HENRYs work hard for their money, they also spend a lot more than the average person as well. It is partly due to poor spending habits that they find themselves dissatisfied with their financial progress.
Instead of being happy with their existing house, they want to upgrade to a forever home. Instead of being happy with a Toyota Highlander, they want to drive a Mercedes G550. Although a local public school is well-rated and free, a HENRY might opt to send their child to private school.
Given the types of spending choices HENRYs make, very few people care about their struggles. For all intents and purposes, they are leading very comfortable lives. HENRYs will also eventually be rich if they keep saving and investing. Therefore, HENRYs must keep their complaints to themselves by being stealth.
If you were to ask a typical HENRY whether they would classify themselves as poor, rich, or middle class, they will predominantly say middle class. This is despite the fact the median household income in America is roughly $70,000.
Below is a typical HENRY budget for a family of four making $400,000 living in an expensive city. Hopefully, Biden really does stick to raising taxes on married couples making over $450,000. If so, this couple is safe. If not, they will simply have to cut costs or work harder to get rich.
Mass Affluent Or Aspirational Class
Finally, HENRYs can also be considered part of the mass affluent or aspirational class. Those in the mass affluent or aspirational class are top 20% income-earners. They are highly coveted by any type of money management firm because these firms want to grow with their clients.
We all aspire to be fitter, richer, happier, and healthier. Therefore, being a HENRY should put you in a good position to achieve better things. I don’t think it’s a derogatory term by any means. In the meantime, try to be mindful of being a high earner. Not everybody can earn multiple six figures.
As one of my favorite Chinese proverbs goes, “If the direction is correct, sooner or later you will get there!”
Recommendation For Building Wealth
Stocks are very volatile compared to real estate. Therefore, if you want to dampen volatility, diversify your investments, and build wealth at the same time, invest in real estate. Real estate is my favorite asset class to build wealth.
The combination of rising rents and rising capital values is a very powerful wealth-builder. By the time I was 30, I had bought two properties in San Francisco and one property in Lake Tahoe. These properties now generate a significant amount of mostly passive income.
My favorite real estate investing platform is Fundrise. With over $2.5 billion in assets under management and over 210,000 investors, Fundrise is the leading, vertically integrated real estate platform today. Investors can invest in their diversified real estate funds with as little as $10.
Fundrise primarily focuses on single-family, multi-family, and build-to-rent properties in the Sunbelt. With lower valuations, higher yields, and strong demographic shifts, Fundrise investments are in the sweet spot of a positive long-term trend. Come check out what they have to offer.
For accredited investors who are able to invest $10,000 – $25,000 per deal, check out CrowdStreet. CrowdStreet has a direct-to-sponsor model where investors invest directly with the real estate sponsor, thereby improving efficiency and communication. Further, investors are not charged a fee to invest. Instead, the fee is borne by the sponsor.
There is a “fanning out” of the American population as remote workers look to save money. The global pandemic has helped accelerate this trend as many companies have permanently allowed their workers to work from home.
Reader Questions And Action
Readers, are you a HENRY? If so, do you feel angst about not yet being rich? What income and net worth levels do you consider captures most HENRYs? For more fun personal finance insights, sign up for my free weekly newsletter.
To read the best personal finance book, buy a hard copy of Buy This, Not That: How To Spend Your Way To Wealth And Freedom. It will help you achieve financial freedom sooner and help you make more optimal decisions to live a better life.