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 grows.
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 earners.
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.
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High earner not rich yet, 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.
Only productive 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 wealth.
What’s killing your wealth?
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 do it.
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 you miserable
Comparison will make you feel miserable nearly every time – unless you compare yourself to someone in a worse position than you.
Facebook, Instagram, 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 bleeding
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 crappy 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?
Stabilise your foundations
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 can concentrate.
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 protection?
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 redundant.
Start building 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 round.
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 friend.
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 probably is.
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.
Are you tired of living paycheque to paycheque? Never able to save? Sick of being in debt? High earner but not rich yet?
Are you confused about money and all the financial options out there? Feel like you will never be able to save enough for a house, career change or retirement?
Would you like to?
- Be Debt-free
- Be confident in your money management skills and choices.
- Never have to worry about money again.
- Be building your wealth towards your most important goals – like making work optional one day!
Let us help you make the most of your money now while building a financially free future.
Our financial coaching will give you the support, guidance and accountability you need to succeed with money.
Start building your ideal life now because waiting will only make it more expensive and painful to achieve.
Plan, build, and enjoy your money now.
Contact me here for a free chat about what options you might have for making money work for you.
What tips and tricks do you have for building your wealth?