The problem with Henrys: young high-earners with an enviable lifestyle

Hannah McQueen is a financial adviser, chartered accountant fellow, best-selling personal finance author and the founder of enable.me – financial strategy & coaching.

OPINION: The finance world is full of acronyms, some helpful, some bewildering and some a little tongue-in-cheek.

You might have heard of Dinkys – those with Double Incomes, No Kids Yet. You might even have heard of Kippers – Kids in Parents’ Pockets Eroding Retirement Savings. But have you heard of Henrys?

Henrys are High Earners, Not Rich Yet, and they’re a fascinating but troubling cohort.

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A writer for Fortune magazine coined the term, which describes those who earn high incomes of US$100,000 to US$250,000 – but who spend all of it, and then some. They have little savings, and think of themselves as middle class, even though they earn considerably above middle incomes. They tend to be young or youngish, let’s say under the age of 45.

The rapid growth in their incomes has been surpassed by lifestyle creep, meaning that as their salaries rose, their spending more than kept pace. In fact, so much so that they tend to have high debts via credit cards to boot.

In the US, it’s estimated that Henrys account for less than 20 per cent of households, but 40 per cent of spending. They’re a target customer of high-end retailers who sell status symbols of wealth – but the rub is that they’re not actually wealthy. In fact, I’d argue they have a decidedly precarious existence.

They’re not a group that gets much sympathetic airtime in the media, as they appear to be people who should be able to look after themselves. But they are problematic.

They’ve opted to live for today over provisioning for tomorrow, rationalising that there is plenty of time to focus on that later.

The flaw in Henrys’ assumptions is that their incomes will continue to rise at the same pace forever, so they’ll always be fine. But that’s almost never the case.

If they’re unable or unwilling to turn their current good fortune into long-term wealth, when their income drops or dries up, the party stops.

One of my golden rules of financial success is to never let opportunity pass you by. If you happen to have the trump card of high income, learn how to play it to your advantage, because no window of opportunity stays open forever.

Whether you are a HENRY, or you know a HENRY, we need to call out where the HENRY mindset will eventually land them – and that’s smack bang in the middle of a financial reckoning.

Taking charge

So, what can be done? Well, if you were to stage an intervention with the HENRY in your life, here are some options.

• If they’re as motivated by wealth as their Chanel handbags or fancy cars would suggest, show them what could be achieved if they decided to actually grow wealth rather than just spend money. They’re unlikely to be motivated by the traditional advice of spending less or saving more – so instead, show them what big hairy goals could be achieved with the right strategy, mindset and follow through. If they aren’t on the property ladder, could we get a plan to get them on in the next six months, or buy investment properties of their own. Henrys are by no means stupid, but you have to give them a reason to try that really excites them. Creating a reason to try – and mapping a way to actually get there – is a powerful motivator.
• If they’re motivated by fear, show them what sort of situation they could quickly find themselves in if their income was to be disrupted. Show them what financial security might look like, and how that could help them sleep well at night.
• Open your own books – this is especially true if you’re a parent to a Henry. If you haven’t discussed your own finances with them before, now is the time. How did you get into your current position – could they learn from your mistakes, or replicate your successes?
• Charge board – if your adult child is working and still living at home, make sure they are paying a fair portion of board. Otherwise, they are learning Henry tendencies – the fundamentals being they can spend everything they earn on themselves. If you’re not charging them anything because you want to be generous to your kids or give them a head start, consider if you are going about this the right way.

Henrys are not a lost cause, perhaps just a bit lost on their financial journey – but it’s never too late to change the destination.

This article is informational only and should not be considered independent financial advice.