Are You a HENRY?

(NerdWallet) - No, we’re not asking your name. And we promise we’re not trying to offend you.

HENRY isn’t an insult; it’s a nickname given to a certain demographic in the personal finance world. If you earn a decent income, but feel like you aren’t building enough wealth, you might be a HENRY.

What is a HENRY?

HENRY is an acronym that stands for “High Earner, Not Rich Yet.” But what does it mean to be high earning? The definition varies depending on who you ask.

We sifted through Reddit forums to get a pulse check on what users say about HENRYs. People post anonymously, so we cannot confirm their individual experiences or circumstances.

Over on Reddit in the r/HENRYfinance subreddit, HENRYs are defined as “people who earn high incomes, usually between $250,000 to $500,000, but have not saved or invested enough to be considered rich.”

Net worth is another key number to consider.

Trevor Ausen, a certified financial planner in Minneapolis, Minnesota, says that HENRYs often have “somewhere between negative net worth, thanks to student loans or early career costs, to around $1 million in assets.”

Having an income or net worth above these figures tips the scales toward “rich.”

Who is the typical HENRY?

HENRYs are often business professionals, doctors, lawyers or tech employees with equity compensation, Ausen says.

Many live in places like New York or the Bay Area, he adds, where it can be hard to accumulate wealth even with a high salary due to the high cost of living. They’re usually in their 20s, 30s or 40s.

In some cases, HENRYs are also the first in their families to earn a higher income. That can come with added pressure to provide financial support for relatives and create generational wealth.

How do you know if you’re a HENRY?

Now that you know what a HENRY is, let’s see if you fit the bill.

“If you’re earning well but still feel like you’re just getting by financially, you might be a HENRY,” Flavio Landivar, a CFP in Miami, Florida, said in an email interview.

You might be a HENRY if you:

• Earn an above-average income (typically in the low to mid six-figure range).
• Live in a high-cost area.
• Spend most of your income on costs such as housing, student loans, child care and discretionary expenses.
• Don’t feel financially secure.

But not all HENRYs are the same.

While many have trouble building wealth because student loans or living expenses eat up their income, others are saving aggressively, Ausen says.

“They've only been high earning for a short amount of time, and just have not had the time to really build up those assets and save enough where they can be considered rich,” he says.

Ausen says his HENRY clients generally have too much cash. After maxing out their 401(k)s or other retirement accounts, they aren’t putting their extra money to work in an investment account.

If you’re parking a lot of cash in a general savings or checking account, that’s a sign you might be a HENRY.

“While there certainly is an argument for how much emergency fund, essentially, someone should have, after a certain point, it starts to become not as efficient as it could be,” Ausen says.

What do HENRYs care about?

Like most people, HENRYs want more money and greater financial freedom. Online discussions in r/HENRYfinance and other forums often focus on lifestyle creep, career growth, investment options and strategies for minimizing tax burdens.

HENRYs are also looking for quick guidance and reassurance that they’re on the right track.

“These young professionals may be settling into their careers, gaining responsibilities and have less leisure time than they used to,” Yesenia Realejo, a CFP with Tobias Financial Advisors in Plantation, Florida, said in an email interview.

“They may be starting families, buying homes, saving for their children's college. With so much on their plates, they may find that they're saving, but have no planned financial direction.”

Is being a HENRY good or bad?

If you’re a HENRY, you may feel stuck. It might seem like you aren’t making enough progress toward your financial goals.

But it’s important to emphasize the “Y” in HENRY. You’re not rich yet — that doesn’t mean you’ll never be rich.

“With smart planning, managing expenses and focusing on long-term goals, HENRYs have a great opportunity to build real wealth down the road,” Landivar said.

“Without that focus, though, it’s easy to stay stuck living paycheck to paycheck despite a high income."

Start by making, or revisiting, your financial plan. If you’re not sure where to begin, consider getting help from a financial advisor. Getting rich may happen sooner than you think.