A newish phrase has been coined called HENRY’s high earner not rich yet. This describes people, more recently Millennials, on high salaries but don’t seem to have much to show for it yet. They have the potential to be wealthy but as yet haven’t managed it.
What is a high salary?
In the case of
Henrys, the high salary means something in the range of 6 figures so £100k
plus. In theory, this is a high income that should result in a fair amount of
discretionary income. If you’re earning this sort of money early in your career,
then it would appear that you could become very wealthy as your career
Henry families could
see household incomes of £200k+ but again still feel broke. One or both
partners with significant income but still unable to build real wealth.
Although tagged at six
figures depending on where you started from, your location and expectations,
you could, of course, feel like a high earner on lower salaries.
What is the average UK salary?
The average household
income in the UK is around £35k in 2019. Now, this can be a bit skewed by
higher incomes predominantly in London, but this is still a massive way off six
figures. So a six-figure salary is way above the average. Once you earn over £75k
or more in the UK, you are in the top 5 per cent of
Now if you are earning this sort of money early on
in a career, imagine what you might be making at the top of your profession — serious
money. But imagine if you are making serious money and still more or less
broke. One or two paychecks away from disaster.
If this is the case, even with a significant salary,
you are still very vulnerable to any downward change in your finances.
I’m a high earner I’m broke; why?
Well, it’s probably several
things but certainly to do with spending most if not all of what you earn on
stuff. It might be excellent quality stuff, you might like the thing/s, but it’s
still just stuff.
It could be expensive
houses, cars, gadgets, clothes and going out. Maybe it’s costly necessities,
food, child care, travel or home comforts.
All of this stuff is
probably not adding to your wealth. It’s just adding to the things you have
that, cost you money to look after or lose value over time.
assets, those that earn you an income and or go up in value over time add to
your wealth. Shares, investing in the great companies of the world or physical
property. Both of these have a track record, with temporary dips, of creating
Failing to plan is
planning to fail. Without a vision of a future life, you will live day by day. Spending
what you can when you can. Even a straightforward plan for the next few weeks,
months and years ahead would start to focus your mind on what you will need to
In the next few
months – well every month forever will be day to day costs, rent, food, travel,
everyday bills and going out for avocado on toast, etc.
In the next year or
two, you will likely also have higher costs coming, moving house, a holiday or
two. Maybe even bigger desires like houses, weddings and or kids.
Without a plan, all
or any of these can come along like one-car crash after another. Destroying any
wealth or savings you have built up.
Have you got a very
leaky bucket?. Are your finances
full of holes? Do you even know where your money is going today? If you don’t,
it probably won’t be surprising to realise some of your money is just being
wasted. But that money is leaving your accounts for things you never even knew
you had. Old subscriptions to various things, magazines, gyms, this or that
social club and numerous screaming channels (how much TV can you watch!)
FOMO is making
Comparison will make
you feel miserable nearly every time – unless you compare yourself to someone
in a worse position than you.
friends reunited, etc. has meant that we can see the highlight reels of all our
friends, work colleagues, random people we have met and exes.
The internet, emails,
and social media have meant that with our permission, we can be bombarded with
stuff/guff all the time.
Can you cut the
cord/screen to get outside and do something less boring instead?
JOMO: the Joy Of Missing Out.
The joy of missing
out is going to be a new craze. Well, it might be, but I haven’t joined in yet.
What would happen if
you missed out on all that stuff? If you didn’t go out every week, didn’t go on
those expensive holidays? My life would be miserable; I hear you say.
Well, it might not be
that bad. Remember if you didn’t spend your money on these things you could
save more….and then spend that on what you really value sometime in the near
How to stop the
Start tracking your
finances right now. Just use an app to make it easy. Set up a few categories
and off you go seeing in real-time what’s going on.
Review and cancel
what you no longer use or is clearly a waste of your money.
Think about what you want to do with any crapy debt. This is debt with
no upside. It’s not connected to an appreciating asset, it’s expensive, and you
keep adding to it through more stuff. This is often debt or credit on store
cards, loans or finance on things like cars. All of these things could well be
draining you of a significant amount of your hard-earned money.
Figure out what, where, and how much this debt is. Even a simple
spreadsheet will help you see what the picture is. Make sure you make the
minimum payments and then devise a plan what you want to do with the rest, i.e.
ask yourself how long you want to keep paying this debt?
Once you are tracking your finances, you can start to make sure more
money is coming in than going out. This is the critical foundation of getting
on top of your finances.
Automate all your payments for rent, utilities, debts, etc. so that you
Think about what safety nets you have in place if things go wrong.
Do you need to have any insurance in place? Is anyone dependent on
you or your current income? If you do have dependents, then you need to think
about how they will manage without your income.
Do you get any insurance through your work, if so what for and how much?
Might this require any top-up insurances, life, critical illness or income
Build an emergency fund. Something like 3-6 months’ expenses. This will
help you ride out any significant shocks to your finances, like being made
your pillars of wealth
Pay yourself first. This can often seem like a strange concept. But Who
actually gets paid first when you get paid? Is it Netflix, your credit card and
the local pub? When do you get paid? Probably after everyone else has taken
their cut of your money.
Set up a direct debit to save some money as soon as you get paid. You
are paying yourself first. Then spend what is left. Not the other way
Once you have paid yourself first – you can start to think about saving
and investing for the longer term.
Make sure you are maximising your tax allowances such as investments
inside tax-efficient rappers (ISA’s and pensions). Invest in things that have
always worked not just which are hot right now. The great companies of the
world and physical property. Making sure that you are aware of the risks and
opportunities and that the ride can be rocky. The long term trend is your
View whatever the latest fade or get rich quick scheme is with extreme
caution. You know the get rich quick schemes that pop up on youtube all the
time. You need to know what looks too good to be true so that you know it
Investing in your self-education, especially how to earn, manage and
invest your money will pay you massive compound interest in the future. The
more you can develop your knowledge, the more you will have a chance of earning,
keeping and growing your money.
Plan for the future
learn and understand
what builds long term wealth. It’s not just a large salary its also wise use of
your money and investing in assets that grow in value and produce an income
over the long term. It’s not copying what everyone else is doing. Remember the
Jones are probably broke.
Realise that you’re
probably going to live for a long time. What sort of life do you want to have
when you don’t want to or can’t work anymore?
Begin with the end in
mind. What type of life do you want to retire to? I am guessing a comfortable
and dignified one with opportunities for travel, hobbies, and adventures. And
not just sat at home watching TV as you have no money to do anything.
It’s going to be ok if you take action now
You are not alone. Many people have money worries at some point no matter what their income is. The key is to start taking small steps every day to understand what’s coming in and going out. Figuring out where your money is going and if this is where you want it to go. If not, what could you change, alter, pivot away from? With this information, you can now start to put your money towards short, medium and long term goals.
Three actions to change your high earner not rich yet status
- Get control of your income and outgoings – track what is happening.
- Stop the leaking away of your money – cut out the waste.
- Plan for what you really want and how to get it – write it down.
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What tips and tricks do you have for building your wealth?