By Surabhi Ashok
HENRYs, or High Earners, Not Rich Yet are people who earn between $250,000 and $500,000 but don’t have much discretionary income left after paying for taxes, housing, etc. They have the potential to gain accumulated wealth if they start to put aside more of their working money towards investments and savings rather than expenses.
Calling individuals who earn more than $250,000 as the “wealthiest Americans” is misleading as it doesn’t take into account their respective costs of living. For instance, people in Texas can live a more lavish lifestyle than those who live in New York City with the same amount of money.
The term “HENRY” was first seen in a 2003 Fortune article by Shawn Tully about the alternative minimum tax (AMT) that particularly affected people who earned between $250,000 to $500,000.
One way a HENRY can increase their wealth is by learning how to offset large debts. A good rule of thumb is to pay more than the minimum amount for every deadline, so that the debt is reduced more quickly, and a growing amount of accrued interest is avoided. This applies to both credit card statements as well as student loan payments.
Once their debt is reduced, the next step is to contribute to a retirement account or a 401(k). A 401(k) not only reduces the amount of an individual’s taxable income but also consistently adds to one’s savings.
Investing in real estate is another avenue to generate profit, as it opens up multiple streams of income that can be reinvested. Asking a professional advisor in regard to risk and growth could also be very beneficial in creating a financial plan.
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