From HENRY to Wealthy: A Guide for High Earners that Aren’t Rich Yet

How to Stop Being a HENRY

Many people who’ve recently stepped into a significantly higher income find themselves in uncharted financial waters. You may be considered a “HENRY” (High Earner, Not Rich Yet), and regardless of whether you’re a doctor, attorney, tech professional, or entrepreneur, the sudden jump from a modest income to a substantial salary brings challenges only those who’ve walked this path can fully appreciate.

You may feel a quiet pressure most can’t see: catching up after years of education or career-building, the weight of student loans, the desire to live the lifestyle you envision with your success. You might wonder why, despite earning more, you still don’t feel truly secure.

Moving beyond this stage requires defining what wealth means to you and recognizing the adjustments, big or small, that can turn high income into lasting stability and peace of mind. You don’t have to go it alone, and you certainly aren’t the first to feel this way. With thoughtful guidance and a little perspective, you’ll be surprised at how much progress you can make, and how much more satisfying your financial journey can become.

Understanding the HENRY Dilemma

Who is a HENRY?

High Income: Typically earn a salary between $250k and $500k, but their wealth hasn’t yet accumulated.

Delayed Earnings: Years of education mean a late start to wealth accumulation

Student Debt: Loans can be substantial, significantly impacting early ability to save and invest.

Lifestyle Pressures: Temptations to “catch up” quickly lead to big purchases and high monthly living expenses.

Relatively Young: Typically in their 30s or early 40s, still in the early stages of wealth accumulation.

Imagine you’re a practicing physician in Boston earning $320,000 a year. After accounting for federal, state, and city taxes, mortgage payments in a city where median home prices are among the nation’s highest, and ongoing repayment of $200,000 in medical school debt, you may find much of your paycheck already spoken for. Add in childcare costs, professional dues, and living expenses, and suddenly there’s less discretionary income left for saving or investing than you might expect given your salary.

This is common among HENRYs, and, as a result, building wealth takes much longer than expected.

On top of that, HENRYs also represent a key market for luxury brands, reflecting a desire to enjoy the rewards of success. But when lifestyle spending consistently outpaces savings, it can quietly delay financial progress and make the transition from high income to true wealth more difficult.

Step 1: Tackle Debt Strategically

Refinance Loans

Refinancing allows you to replace an existing loan with a new one at a lower interest rate, thereby reducing your overall interest cost. This may be an option if your credit has improved, your income has grown, or market conditions have shifted in your favor.

Benefits:

• Potentially much lower monthly payments and/or faster payoff.
• Opportunity to consolidate multiple loans into one, simplifying payments.

Cautions:

• Refinancing federal loans into private loans may forfeit protections such as income-driven repayment, deferment, and forgiveness programs.
• Consider total repayment cost and fees.

Accelerate Payments Using Bonuses and Raises

Allocate windfalls (bonuses, tax refunds) and salary increases to pay down loan principal faster.

Why It Helps:

• Early payments reduce principal, so less interest accrues in the future.
• It shortens the loan term, freeing up cash flow for investing or other goals sooner.

Tactics:

Schedule extra payments immediately upon receiving a bonus or raise to avoid lifestyle inflation.

Specify that extra payments go toward principal, not just advancing future payments.

Even small, regular additional payments can significantly cut interest and loan duration over time.

Weigh Public vs. Private Loans: Impact on Forgiveness and Flexibility

Public (Federal) Loans

Advantages: Access to income-driven repayment plans, hardship deferment/forbearance, and unique loan forgiveness programs such as Public Service Loan Forgiveness (PSLF).

Flexibility: Option to adjust payments based on income, temporary relief during financial shocks.

Private Loans

Characteristics: Typically have less flexible terms, fewer consumer protections, and are not eligible for government forgiveness programs.

Potential Upside: Private loans may offer lower rates, especially after refinancing, but without the safety nets.

Step 2: Prioritize and Diversify Investments

Max Out Retirement Plans: Take advantage of 401(k), 403(b), and IRA options. Consider making nondeductible IRA contributions and potentially convert to a Roth IRA with minimal tax impact.

Open a Taxable Brokerage Account: Invest in low-cost, diversified funds outside of your retirement accounts.

Automate: Make contributions automatic to build consistency.

Step 3: Protect What You’re Building

As your income and assets grow, safeguarding them becomes essential. The right blend of disability, life, umbrella and liability insurance ensures that unexpected events like illness or legal issues won’t undermine your financial progress or future security.

Disability Insurance: Protects your income by replacing a portion of your earnings if illness or injury prevents you from working.

Term Life Insurance: Provides financial support to your dependents through a lump sum payment if you pass away during the coverage period.

Umbrella Insurance: Provides additional liability protection beyond the limits of your standard personal or business insurance policies. It helps shield your broader assets from large, unexpected claims or lawsuits, such as accidents or property damage, that exceed your base coverage.

Professional Liability Insurance: Focuses specifically on protecting you against claims related to your professional services.

Step 4: Guard Against Lifestyle Inflation

Set a Budget

Prioritize diverting a portion of your increased earnings to savings and investment accounts before considering lifestyle upgrades and luxury purchases. Allocate funds with clear goals for essentials, long-term growth, and reasonable discretionary spending.

Review Spending Periodically

Regularly track your expenses to stay aware of how your money is used. Make a habit of distinguishing between true needs and wants to avoid lifestyle creep and keep your key financial priorities in focus.

Step 5: Pursue Long-Term, Tax-Efficient Wealth

Building lasting wealth starts with defining what “rich” means to you. Set clear net worth or investment income goals to guide your plans. Once you have clear goals, collaborate with qualified advisors to implement tax-efficient strategies, including asset location, tax-loss harvesting, and planned charitable giving. These tactics are designed to maximize what you keep after taxes and support portfolio growth.

Step 6: Embrace the Behavioral Side of Money

Financial progress relies as much on disciplined habits as on investment  knowledge.  It can be particularly hard to stick to your plan and stay invested when the market swings. Even the best investors can let fear take over their decision making, when, in the long run, it may be best to stick to your plan. Having a financial advisor as a partner, listening to and understanding your ambitions and worries, can help keep you on track to reaching your goals, even when markets are volatile.

Step 7: Build Your Financial Team

As your financial situation becomes more complex, assembling an expert support team is essential. Partner with a financial advisor, ideally with experience in your field, for tailored, objective guidance. A skilled tax professional will help you navigate high-income compensation, investments, and shifting tax laws. Work with an attorney to ensure your estate plan, contracts, and asset protections are comprehensive and aligned with your needs. With a trusted team, you’ll be well-positioned to grow and safeguard your wealth for the long term.

Example Financial Priorities Table