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Being a HENRY (high earner, not rich yet) and what you should do about it

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HENRY stands for “high earner, not rich yet.”

The term HENRY was coined by Fortune over a decade ago. It includes families who earn between about $250,000 and $500,000 annually but feel far from “rich” after taking care of their living expenses, paying taxes, and making debt payments. They may have a small nest egg but haven’t yet reached the level of affluence they aspire to.

Most early-career physicians are HENRYs (high earner, not rich yet)

Most early-career physicians are HENRYs. We earn high salaries right off the bat after completing residency or fellowship. But most of us have a long way to go before we have what most people consider to be a net worth that qualifies as rich.

Many young physicians work long hours but feel they have little to show for it.

There’s nothing wrong with being a HENRY. It’s a great situation to be in.. as long as you understand how to make the best of it. You can be intentional about your finances in order to move yourself up and out of the “high earner, not rich yet” category.

Here are 6 tips to make the most of being a HENRY.

Paying down student loans doesn’t need to be a priority

There’s been a lot in the news recently about high student loan debt – not just for physicians, but for recent grads of all types.

Our debt is at the forefront of our minds beginning the moment we take out a student loan. By the time medical students graduate, it’s usually a large sum. It’s natural to want to get rid of this debt as quickly as possible once we’re earning an attending-level salary.

But we’re simultaneously told to invest.

Jim of The White Coat Investor states that some version of “Pay off debt or invest?” is the most common question he gets asked on his site.  The reason it gets asked so often is that there is no right answer. Even for a specific individual’s situation, the best answer is not always clear.

Those who truly hate debt or have a low-risk tolerance when it comes to investing should generally consider paying off loans before some types of investing. But others may fare better in the long run by investing broadly while making only minimum payments on their loans. This is because the interest rate of student loans tends to be lower than the interest earned from a smart investment portfolio.

HENRYs don’t need to let their student loans define their financial persona. Student debt is a good debt. It doesn’t need to be a burden and shouldn’t stop you from investing or from reasonable spending.

You’ll be taxed like crazy. Learn how to lessen the impact.

Tax laws don’t care how much money you have stashed away. We’re taxed mainly on our income. HENRYs, as high earners, are also highly taxed.

A glance at the federal income tax brackets shows that the upward end of a HENRY’s income could be taxed at over 30%. Taking steps to lower your taxable income can make a huge difference to your net worth in the long run. (While investment income is certainly taxable, this is less of immediate concern for HENRYs.)

You can learn what you need to know about taxes and put it into practice on your own. To be fair, though, taxes in the US are complicated. For many HENRYs, it’s absolutely worth hiring a professional to assist you with tax planning and help you find lawful ways to lower the amount of your income that is taxable.

Physicians who earn income outside of W-2 employment (which is many of us), need to pay close attention to what they’re paying in income tax. This includes those who earn income through consulting work and side gigs and those who get bonuses, for example.

Save like the dickens

The media is abuzz about millennials living paycheck to paycheck, despite being well-educated and holding down good jobs. Don’t be one of these millennials. This crowd is just a bunch of complainers who don’t want to budget or take responsibility for their own spending patterns.

Even a small bit of money saved from each paycheck is worthwhile. Even a small amount invested adds up due to compounding interest.

If you feel that you don’t have money to stash away after paying your basic living expenses, it’s time to scrutinize your budget and find ways to save. This flows right into the next point…

Don’t ignore the “NRY” component of HENRY

You’re not rich yet.

HENRYs are aspirers. There’s nothing wrong with aspiring to reach a higher level of affluence. But there is something wrong with consuming to show social status or prestige – especially when it holds you back from long-term financial freedom.

To the extent tolerable, live like a resident. This doesn’t mean you need to drink Bud Light instead of a delicious craft beer. Simply being cognizant of “needs” versus “wants” will impact your spending. Even if your paycheck puts you in a position to make a discretionary purchase, it’s important to consider the value that purchase adds to your life.

You’re a target for being taken advantage of

Living like a resident when you earn an attending salary can be especially challenging due to external pressure. HENRYs are targets of marketing for pricey professional services, luxury items, and even scams.

Physician HENRYs are doubly targeted since doctors are felt to be somewhat financially unsavvy.

You can combat this in many ways. Here are a few:

  • Avoid making purchase decisions on the spot. Sleep on it and think it over.
  • Don’t trust what someone else tells you about a product or service. Do your own research.
  • Get help when you don’t understand any financial situation that you’re in.

Set goals for your financial future

A HENRY has the potential to drop the N and the Y from HENRY and just be a “high earner, rich.” Setting personal or family objectives are the best way to not only make this happen but to make the most of it when it does happen.

Being rich is meaningless if it doesn’t either increase your happiness or assist you in achieving your goals.

2 thoughts on “Being a HENRY (high earner, not rich yet) and what you should do about it”

  1. HENRY’s should understand what is marital property and what is not. If you acquire student loans before you get married that is premarital property and in the event of divorce you still own all of that debt. As opposed to all of the income you acquire after marrying – that gets spit 50-50. With the high rate of divorce among physicians it may be wise to pay off debt before saving and investing.

    • Thank you for pointing this out! The period of being a HENRY often aligns with typical ages for getting married, so this should be a consideration.

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