# Who Are High Earners, Not Rich Yet (HENRYs)? Definition and Financial Guide

![High Earners, Not Rich Yet (HENRYs): Individuals who currently have significant discretionary income and a strong chance of being wealthy in the future.](https://www.investopedia.com/thmb/-jJati2AfHs3FGCXNpSRGdQ_ErI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/high-earners-not-yet-rich-henrys-FINAL-f0ce5120df4d46bfaadddaa20c86e1fb.png)

*— Investopedia / Jiaqi Zhou*

> **Definition**
>
> This demographic group includes people who earn a high income of $250,000 to $500,000 per year but aren't wealthy yet.

## What Are High Earners, Not Rich Yet (HENRYs)?

High earners, not rich yet (HENRYs) refer to those earning substantial discretionary incomes—typically between $250,000 and $500,000—but lack the investments and savings to be considered truly wealthy. While they enjoy high earning potential, many HENRYs allocate most of their income to expenses like taxes, education, housing, and lifestyle, which complicates wealth accumulation.

The term HENRYs was coined in a 2003 _Fortune Magazine_ article written by Shawn Tully to refer to a segment of families earning between $250,000 and $500,000, but not having much left after taxes, schooling, housing, and family costs—not to mention saving for an affluent retirement.

The original article in which the "high earners, not rich yet (HENRYs)" term appeared discussed the [alternative minimum tax (AMT)](https://www.investopedia.com/terms/a/alternativeminimumtax.asp) and how hard it hits this group of people. The term has since been used to describe a younger demographic for the purposes of marketing products and services to them. 

### Key Takeaways

*   High Earners, Not Rich Yet (HENRYs) are individuals earning between $250,000 and $500,000 with significant income but limited wealth accumulation.
*   HENRYs face financial hurdles such as high living costs, taxes, and debt, which prevent them from building substantial savings and investments.
*   Luxury brands target HENRYs as a prime demographic for their aspirational purchasing power and potential future wealth.
*   Strategies for HENRYs to transition to true wealth include reducing debt, increasing tax-efficient saving, and diversifying investments.
*   Despite earning high incomes, many HENRYs struggle with high expenses, underscoring the importance of financial planning and investment.

## Grasping the Financial Journey of HENRYs

The HENRYs segment of the population was a hotly debated topic during the U.S. presidential race of 2008. The Democratic party often classified households earning over $250,000 as the "rich" and "wealthiest Americans". One problem with this classification is that it does not distinguish the [cost of living](https://www.investopedia.com/terms/c/cost-of-living.asp) in different areas in the U.S.

For example, $250,000 may go a long way in Houston, but it wouldn't provide anything like a lavish lifestyle in New York City. These high earners are expected to have much of the same lifestyle as wealthier compatriots, but they do so by sacrificing their ability to amass wealth.

Many professionals, including lawyers, doctors, dentists, and so on, have the potential to be HENRYs due to the income range for their professions. The fact that much of their future wealth is projected off of a six-figure income rather than income-generating assets makes the HENRYs the "working rich", meaning they won't be as rich if they stop working. More of a HENRYs earnings go into costs than go into wealth-building investments, leaving them feeling like they are more like regular people working paycheck-to-paycheck than the wealthy 1% in America. 

## Why HENRYs Appeal to Luxury Marketers

​The 2008 election has come and gone, but the term HENRYs has stuck around as a useful way to identify a demographic that is on its way to wealth but not quite there. Marketers see a lot of potential in this transitional phase where a future rich person is still adapting to a rapid increase in disposable income.

The transition is seen as the prime opportunity for a [luxury brand](https://www.investopedia.com/terms/l/luxury-item.asp) or service to insert itself into the HENRYs lifestyle and begin creating [loyalty](https://www.investopedia.com/terms/b/brand-loyalty.asp) that will continue into the future. As there are more HENRYs in the world than ultra-wealthy folks, there is a deeper market there, even if the product or services are marked down a bit in price.

Marketers think HENRYs are likely to buy aspirationally, purchasing items they hope to fully afford in the future. This segment's incomes make up about 40% of household spending, which makes a good business case for companies to market to them.

Brands like Tag Heuer and [Louis Vuitton](https://www.investopedia.com/stock-analysis/2011/lvmh-3-ways-to-own-lvmuy-ipd-stt-eea-db1023.aspx), once for society's elite, now target HENRYs with new marketing strategies. They use advertising centered around HENRYs' core values: uniqueness and identity. They also use popular, well-liked celebrities and athletes to position their brand, promote its appeal, and communicate a message about status.

Many HENRYs enjoy luxury goods for status and often show them off on social media. As a result, Louis Vuitton, Tag Heuer, and other luxury brands incorporate social media advertising and the use of social media influencers into their marketing strategies.

## Investment Guidance for Aspiring Wealthy HENRYs

Better spending habits, increased savings, diversified investments, and tax benefits can help them move from "not rich yet" to "wealthy."

### Maximizing Tax Benefits for HENRYs

Because HENRYs are high-wage earners, they typically pay the most in taxes on income. HENRYs should explore deductions and credits that reduce their tax obligations; less money for taxes means more money for investing.

One way to lessen the burden is to contribute to a retirement account, such as an individual retirement account ([IRA](https://www.investopedia.com/terms/i/ira.asp)). Alternatively, contributions to a [401(k)](https://www.investopedia.com/terms/1/401kplan.asp) reduce taxable income as long as contributions are made to a traditional 401(k). Unlike an IRA, these contributions are made with pre-tax dollars, thereby reducing the total amount of taxable income the employer reports. For example, if a HENRY, earning $200,000 per year, contributes $15,000 per year to a 401(k), the taxable income reported will be $185,000. HENRYs benefit dually from a reduction in taxes and an increase in savings and investments.

> **Fast Fact**
>
> Contribution limits for 401(k)s and IRAs change annually. Be sure you know the limit and adjust for the year as you're making your automated contribution designations.

## Effective Debt Reduction Tactics for HENRYs

One roadblock preventing HENRYs from reaching their full rich potential is the accumulation of debt. Most of the burden comes from educational costs, mortgages, auto loans, and credit card debt. Large debt can erode earnings, limiting what can be invested and saved.

To reduce [credit card debt](https://www.investopedia.com/terms/c/credit-card-debt.asp), HENRYs can pay more than the minimum amount due and limit the use of the cards. Paying more than the minimum due will reduce the balance faster and the amount of interest applied. Limiting or discontinuing the use of credit cards can reduce the HENRYs' overall debt and prevent more debt from accumulating.

Applying this strategy to other debt can also have the same effect of quickly reducing debt and freeing up income for savings and investments. For example, paying more than the required amount on student loans can reduce the debt quickly, as well as accrued interest. Furthermore, consolidating student loans can reduce the monthly obligation and save money with a lower interest rate and payment.

### $80,000

The average amount of a HENRY's student loan debt.

### Strategies for Diversifying Investments

Whereas reducing debt is, perhaps, the first step towards wealth, investing is the way to build it. After reducing debt, HENRYs will have more disposable income to invest. Retirement savings accounts are popular investment vehicles for their tax benefits and investment options. For example, 401(k)s allow the HENRY to benefit from employer matching, various investment options, and pre-taxed invested dollars, which reduce reportable taxable income.

Investing in real estate can generate profits that contribute to wealth accumulation. If personal monthly rent or mortgage obligations are not large, the HENRY may be able to pursue real estate investments to generate streams of income; that income can be reinvested into other vehicles for growth. Likewise, the HENRY can invest in real estate investment trusts ([REIT](https://www.investopedia.com/terms/r/reit.asp)) for growth and to avoid the responsibilities associated with owning and managing investment real estate properties.

HENRYs can enlist the services of a professional wealth or investment advisor to select investments suitable to their risk tolerance and investment goals. Developing and following a plan can help them move from being a wealthy prospect to being a tycoon.

## Who Qualifies As a HENRY?

There are no universal rules for qualifying as a HENRY, but most analysts will describe individuals with income between $250,000 and $500,000 with minimal savings as HENRYs.

## How Do I Become a HENRY?

Becoming a HENRY entails prioritizing your career to deliver a high paying job. A HENRY will have just started out investing, not necessarily having put aside money for a long time. Therefore, to become a HENRY, focus more on your job, career development, and changes to your working income.

## What Is a HENRY Millennial?

Similar to a traditional "HENRY", a millennial HENRY are those in the their 30's earning a six-figure salary. These individuals, especially if they live in a high cost of living area, may leave them struggling to make ends meet or pay current bills despite having a very large income.

## The Bottom Line

High Earners, [Not Rich Yet](https://www.investopedia.com/signs-you-are-rich-8773791) (HENRYs) refers to individuals with significant incomes between $250,000 and $500,000, who have not yet accumulated substantial wealth due to high expenses in areas like education and housing. Consequently, they often have limited savings and investments, hindering their path to financial prosperity.

> **Article Sources**
>
> 1.  AU Journal of Management. "[The Rise of HENRYs](https://aujm.au.edu/index.php/aujm/article/view/194/142)," Page 17.
>     
> 2.  The Wall Street Journal. "[Is $250,000 a Year Wealthy? Only if You're a Democrat](https://www.wsj.com/articles/BL-WHB-3689)."
>     
> 3.  Missouri Economic Research & Information Center. "[Cost of Living Data Series](https://meric.mo.gov/data/cost-living-data-series)."
>     
> 4.  Bournemouth University. "[Meet the HENRYs: A Hybrid Focus Group Study of Conspicuous Luxury Consumption in the Social Media Context: Abstract](http://eprints.bournemouth.ac.uk/29423/)."
>     
> 5.  Unity Marketing. "[Meet the HENRYs and the Brands They Love](https://unitymarketingonline.com/meet-the-henrys-and-the-brands-they-love/)."
>     
> 6.  Business Insider. "'[High Earner, Not Rich Yet": How to Tell If You're a 'HENRY' Based on your Salary, Savings, and Lifestyle](https://www.businessinsider.com/typical-millennial-henry-earnings-savings-debt-2020-1)."