If You Make a 6 Figure Income and Don't Feel Rich, You Can Be 'HENRY'

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If You Make a 6 Figure Income and Don't Feel Rich, You Can Be 'HENRY'

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You may be wondering how someone earning a quarter of a million dollars a year wouldn't be considered rich, but there is a new socioeconomic class known as “HENRY.” And if you are a person with a paying job, who is not yet rich for whatever reason, you can be one.

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Read on for a closer look at the HENRYs, what the name means and the unique opportunities and challenges this group may face.

HENRY is short for “High Earners, Not Rich yet.” The term was introduced in a 2003 “Fortune Magazine” article by Shawn Tully, and is intended to describe people who earn high incomes but still struggle to build wealth due to high costs.

The paradoxical financial dynamics of people who are considered wealthy but who do not receive the benefits often associated with wealth accumulation.

HENRYs often earn significant salaries but cannot hold on to their large sums. Despite their incredible earning potential, a large portion of their income is eaten up by taxes, student loan debt, housing costs and other essentials. The HENRYs have little or no savings and are poor, a position that leaves little room for investing to build wealth.

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There is no official checklist for being considered a HENRY, but the term is often used for anyone with an income between $250,000 and $500,000 but little savings and investments.

Even if they have started investing, they don't have the time or opportunity to accumulate a large amount of their wealth.

Lifestyle, of course, plays a role in the selection of HENRY. You can live beyond your means regardless of your budget, and the HENRYs are no different.

Many luxury brands saw HENRY as a promising market segment and aggressively pursued their brands. High-end luxury goods such as designer handbags, jewelry and specially priced wristwatches are top sellers at HENRY. Although they may not be technically rich, their discretionary income can support a premium purchase, even if it may not be the smartest investment.

The HENRYs have been called the “working rich,” and their wealth primarily comes from income rather than investments in stocks, real estate or other accumulated assets.

It is this reliance on income that puts many HENRYs at greater risk: If they were to stop working for any reason, their changed financial situation would likely not keep up with their lifestyle or expenses.

High-paying jobs such as those held by doctors, lawyers and engineers are full of HENRYs. These jobs often have great earning potential, but those opportunities depend on their ability to keep the job.

And the HENRYs should go where the money is. A major challenge for many people in this group is the high cost of living in certain areas, usually those with a high demand for regular HENRY activities.

This can have a long and dramatic impact on their financial standing. For example, an income of $250,000 would go a long way in most parts of the country, but it might come in the middle in places like New York City.

It is this disparity in the cost of living that makes it difficult to understand what it means to be rich in different parts of the country.

Despite the challenges HENRY faced, there are ways to live from high income to high income.

Like anyone looking to build wealth, reducing debt levels, increasing tax-advantaged contributions to retirement and optimizing long-term investments is a clear path to HENRY's ill-gotten wealth.

For those who are living the life of HENRY, it is wise to pay attention to unnecessary expenses, especially luxury purchases. Instead of that Tag Heuer watch or Louis Vuitton bag, the HENRYs should put their money into savings and investments that will pay off in the long run.

It is worth noting that the challenges faced by HENRY may not be easily overcome with simple advice on how to put down designer bags.

Despite earning $250,000 a year or more, the accumulation of real wealth often eludes this group because of the debt created by the high cost of education required to get the high-paying jobs the HENRYs hold, the high cost of living in urban areas. The high demand for such roles and other costs are unavoidable.

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This article appeared on GOBankingRates.com: If You're Making a 6-Figure Income and Don't Feel Rich, You Could Be 'HENRY'

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