Are you a High Earner, Not Rich Yet (HENRY)? Here’s what you need to know

We’re not talking about your uncle, or that guy in the IT department. HENRY stands for ‘high earner, not rich yet’. They’re a band of people who have good salaries but still don’t quite qualify as 'textbook rich'. So, what does that look like, and what can we learn from them?

Wait, who’s HENRY?

The term ‘HENRY’ was coined by Shawn Tully in a Fortune magazine article back in 2003. This cohort of people referred to Americans who had generous take-home salaries – with household incomes valued then at $250,000 to $500,000 per year. In the UK, the term is used for people who earn over £100,000. Their trouble? Many of these households still found themselves scraping the bottom of their bank accounts each month, thanks to high childcare costs, bills and tax payments.

Despite being high earners, and casually referred to as ‘rich’ in the US, they were, in fact, never likely to reach genuine wealth. After all, true wealth is where you own more than you owe, and this positive balance accumulates.

What does HENRY mean today?

After the initial article, the term was stretched and applied to another segment of society. Namely, millennials with 6-figure incomes, who also come up empty at the end of each month. For this group, some of these expenses are genuinely due to relatively increased costs – for example, student debt or mortgages – while other outlay is perhaps a sign of living beyond one's means – buying luxury goods and 'keeping up with the Joneses'.

Why HENRY is just like me and you

Yes, HENRYs are high earners – 6 figures at least. But despite that, they’re still close to empty by the month’s end. Just like many people with lower incomes, HENRYs have little savings or liquid assets. That means, if a HENRY suddenly lost their job, and therefore, their income, they could be in trouble. This is the same story for many of us who aren’t earning salaries of £100k and up.

While some HENRYs do invest, they may potentially be drawn to fad investment strategies or assets with higher risk such as cryptocurrencies or NFTs – with the goal of making money in the short term. This rarely pays off, meaning that if they need more cash quickly, anyone investing in this way could find themselves having to withdraw their money from these markets at a loss. Or they may have investments that are not very liquid: real estate, cars, watches, trainers and wine, for example, which can take longer to convert to cash.

So, what should HENRY do?

For HENRYs, their relatively high income gives them more potential to save and invest their money (because they have more coming in), and savings and investments could be one route to increasing their wealth. If they're not doing so already, they may need to start practising some good money habits. Putting these 'good habits for HENRYs’ into action could help them earn the money they need to lead a more comfortable lifestyle.

And if it’s good enough for them, shouldn't it be good enough for the rest of us too? Here are the HENRY habits that both HENRY and we could follow to head in the direction of a bigger financial buffer.

HENRY habit 1 – be smart with taxes

Many of us view taxes as simply inevitable. And generally speaking, they are, but there are still things we can do to approach taxes efficiently.

To (legally) reduce your potential tax liability, you could, where possible, take advantage of tax-friendly schemes. First up, if you’re employed, you can pay into a workplace pension (or a personal pension if you’re self-employed). Many employers will add to your contribution (yep – free money), and the money arrives in these accounts without being taxed – so you get to hold on to more of it. It can be a great way to invest for your retirement, reduce your overall tax contribution and help you to avoid the '60% tax trap' (Opens in new window) for those who earn £100,000–£125,140.

ISAs can also be a tax-smart savings or investment tool. Any growth within the ISA is tax-free, which could be another way to reduce your overall tax contribution.

HENRY habit 2 – reduce your debt

Reducing debt by proactively paying it down can be a great way to increase your disposable cash long term. That means paying more than the minimum, consolidating debts where possible and completely avoiding picking up new loans or credit lines.

You’ll pay less in interest and fees over time, and avoiding new debt may help you avoid being seduced by expensive emblems of wealth, like flashy cars and designer goods. Also, if your mortgage is up for renewal, and with interest rates going down, you might want to look at remortgaging so you can borrow at a lower rate.

HENRY habit 3 – diversify investments

Investing can be a great way to make your money work if you have spare money after paying for your essentials and keeping some extra money for emergencies. Yes, HENRYs may have more money, but more of us could consider putting cash aside for investments. Whether it’s allocating more for retirement in a pension or ISA, or investing in real estate or stocks and shares, investing can help you to accrue income in addition to earning money at work.

Many HENRYs might enlist the help of wealth managers, to give advice or even to do the grunt work. This could also be a good investment if you’re dedicated to building your wealth and leaving HENRY in the dust.

Introducing Nutmeg

Introducing Nutmeg, the digital wealth manager that's part of the Chase family. You can now open an account with Nutmeg (Opens in new window) and keep an eye on your investments through the Chase app – so you can see everything in one place.

Nutmeg also offers free guidance (Opens in new window) or paid financial advice (Opens in new window) to help get you towards longer term wealth accumulation goals.

Recommended reading

• A guide to different investment types
• Should you save or invest?
• Invest like a pro

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Disclaimer: The Hub is intended as a knowledge portal to provide information on a range of topics, including financial products. Articles may reference products and services that Chase UK does not currently offer. This article is for information only and does not constitute financial advice. As with all investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you invest. Tax rules vary by individual status and may change. For personalised advice tailored to your specific situation please consult with a qualified tax adviser or financial planner. If you are unsure if a pension is right for you, please seek financial advice. Nutmeg provides 'restricted advice', which means they will only make investment recommendations on the products and services that they offer.