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The trials and tribulations of HENRY life

  • 4 min read
  • 19 Aug 2022
HENRY - high earner, not rich yet

The world of finance and tax sure does love its acronyms – think FOREX (foreign exchange), CGT (Capital Gains Tax) or even DINK (dual income no kids). But have you ever heard of a HENRY?

This latest acronym is taking the tax world by storm…well, sort of. 

But it’s not just the term that’s becoming more common, the number of real-life HENRYs is increasing across the globe, especially in the UK.  

And while this lifestyle sounds great, it’s really not all it lives up to be. In this blog, we’ll explain everything there is to know about the trials and tribulations of the life of a HENRY, helping you to find out whether or not you’re one of them…

Hang on… what’s a HENRY?

Let’s start by explaining what the term means – HENRY stands for ‘High Earner Not Rich Yet.’ 

It’s used to describe someone who makes over £100k, but who doesn’t have any wealth saved up. It can refer to a certain type of worker: think a young millennial who has a big six-figure salary (maybe as a junior lawyer), but who doesn’t have much left after taxes, bills and personal expenses.

The rapid growth in a HENRY’s income has been surpassed by their lifestyle, meaning that as their salary increased, so too have their spending habits. It’s not surprising then, to find out that a lot of HENRYs also tend to have high credit card debts.

Where does the term come from?

The term HENRY was coined in 2013 by a writer from the US magazine Fortune, who described this type of worker as having: “a higher than average income, little to no savings, and low material wealth.”

Is there anything good about the HENRY lifestyle?

Not a lot, no…

On paper, the lavish lifestyle that so many HENRYs lead might sound appealing, but the reality is very, very different.

HENRYs might be able to afford status symbols of wealth – think Gucci handbags, luxury holidays to Ibiza or a flashy (ish) car – but the truth is that they’re not actually wealthy. They may be able to drop £1,000 on a bottle of champagne and post a picture of it on Instagram, but they don’t have £1,000 saved up in the bank if you catch our drift.

Their lack of actual wealth is usually down to how much they’re taxed, and how little they save. HENRYs are classed as high earners (£100,000+), which means they have to pay higher tax rates to reflect the amount of income they’re receiving.

And that is the main issue with being a HENRY – living for the moment over preparing for the future, assuming that their incomes will continue to rise at the same pace forever. Unfortunately, as soon as the income dries up, a HENRY’s party will come to an abrupt end without any savings in place for the future.

How to tell if you’re a HENRY

Worried you might be a HENRY? Here’s how you can tell:

  • Earning £100,00k+ a year*
  • You have a lavish lifestyle
  • Living paycheck to paycheck
  • Having little saved or few (if any) investments in place
  • Bonus: you’re a millennial

Answered yes to everything? Then you might be a HENRY!

* = There is a slight difference between a UK HENRY and a US HENRY. In the States, a HENRY is someone who earns between $100K and $250K (minimum) a year, rather than the £100,000 figure.

Okay, so how do I stop being a HENRY?

So you think you might be a HENRY…well, the good news is that you have plenty of time to change your spending habits and start saving for the future.

Here are a few small changes you can make that will go a long, long way to helping you ditch the HENRY status.

Focus on long-term saving

The first thing you can do is to build up an emergency ‘rainy day’ fund. This should roughly be the equivalent of at least 3 months worth of your expenses (rent, utility bills, etc). Put this money in a savings account or ISA with a high-interest rate – these small savings will add up!

After this, focus on putting a regular sum of money from each paycheck into either a savings account or an investment. This will help you, in the long run, to build up wealth for your retirement or, in the short term, put a deposit down on a house.

Make the most of the allowances available to high earners

One of the main benefits of being a high earner is that there are a few allowances available to you to help you reduce your tax exposure. 

Make the most of the personal savings allowance, the dividend allowance, and the capital gains tax allowance. Not forgetting that higher-rate taxpayers also get 40% tax relief on any pension contributions they make.

Are you a HENRY who needs help with their savings and tax?

Being a HENRY can make it difficult to plan your expenses, save for the future, and work out what tax you need to pay! If you’re a HENRY and have a tax-based problem, get in touch with us for some simple, one-off tax advice from our accredited accountants. You can learn more here.

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