I was reading an article about High Earners, Not Rich Yet, and it really stood out to me because of how common it is becoming. These are individuals or couples that earn well over $100,000 per year, but aren’t considered rich yet by today’s standards (having a net worth, excluding primary residence, of over $1,000,000). Also, many of them rely on salary for income, and with the job market the way it has been, they have been changing their habits over the last few years.
Examples of HENRYs
A common example of a HENRY is a doctor. After medical school, doctors can make well over $100,000, with starting salaries in the $150,000 range. However, medical school has usually left them burdened with debt – upwards of $200,000 depending on where they went to school. Even more so, once in practice, they have high costs to do business – insurance can be a huge expense.
Think about this: You earn $150,000 per year, or roughly $12,500 per month. However, after taxes, that is going to be more like $8,500 per month.
However, your monthly student loan payments will cost you about $2,000. Now, you’re down to bringing home only $6,500 per month.
And unless you are planning on working for a big HMO (which also comes with a lower salary), you will need to pay for your own malpractice insurance. Depending on your specialty, you could pay at least $10,000 per year, or upwards of $70,000 per year if you’re an OB/GYN. Even at $10,000 per year, that is an additional $833 per month.
By the time the costs of doing business are taken into consideration, a doctor may well only bring home about $5,600 per month, which is the equivalent of someone making $80,000 per year.
The Future Looks Better
However, HENRYs are only not rich now. In about 10-15 years, once their debts are paid and they are making more, HENRYs will start having the ability to amass savings much faster. This is why rich doctors and lawyers always tend to be older individuals – in their 40s or higher. However, the same is usually true for people of every industry, not just doctors and lawyers.
The power of compounding works for high earners and low earners – the trick is to save now and enjoy the rewards later.
Do you know HENRY? Do you think everyone has the potential to be rich later in life?
About Robert
The good thing is, doctors, depending on their specialty make much more than $100,000 a year.
I have a friend in NYC, after two specialities will start at about $450,000. The thing is, he’s 35, so kind of late. However, his parents paid for all his tuition, so he will be sitting pretty!
I’m all about being a low income earner now
S
If you start getting into some crazy specialties, your costs also go up tremendously. Surgeons and anesthesiologists can easily pay in excess of $150,000 per year in insurance costs alone!
I know a number of HENRYs, and none have amassed a lot of savings because of lifestyle inflation. They spend a lot, in short. They live in high cost-of-living areas, take frequent overseas and Hawaiian trips, ignore cost in choosing where their kids will go to school, remodel the house every few years, etc. We know one couple who live in the Twin Cities, Minnesota (a relatively modest cost-of-living metro) and bring in $300k+ per year but somehow don’t save! I’ve always been curious to ‘get under the hood’ of their budget and see where it all goes!
I’ve been amazed at the same thing – I know a HENRY that makes about $200,000 per year, and yet rents a home, and complains about never having money. However, he buys a fancy car every couple of years and shops like crazy.
I think the hurdle many high-income earners face is the lifestyle inflation associated with those professions. While the student loan debt and insurance weigh them down, their bigger problem is the fancy lifestyles, nice cars, and large houses that are expected when you work that type of job.
Yes, but that is a choice as well. You can buy a modest car, a modest house, and still live very well.
I just don’t have the patience to wait that long. 35 years old and just finishing shchool… :\
I hope to be completely debt free by age 40 (mortgage included) and will have lived a whole lotta life by then.
Now don’t get me wrong, I appreciate all the doctors out there, I’m just saying there’s a reason I didn’t go down that path……and that reason is that I hate needles!
I didn’t want to be a doctor for a similar reason. What I found interesting is that they are living pretty mild lives until they get past all of the debt. Then there is exponential growth later in life.
I do NOT actually think that just anyone can be rich, but I think people who make six figures just out of school are able to recover more quickly from any foolish youthful mistakes.
I personally don’t know any HENRYs but I can see how it would happen. They also tend to live inflated lifestyles that they think they should be able to live with their income and that leads to less savings. Hopefully more HENRYs start saving though and get out of their class!
Gosh I hope I can be a HENRY soon, or just skip that stage and be rich
I don’t know any HENRYs, although now that some of my friends have transitioned to their medical residencies I suppose they’ll become HENRYs in a few years. My college friends who didn’t go to grad school generally became engineers, and they have nice salaries but not astronomical. I guess I aspire to be a HENRY (at least for our household) after we finish school, but of course moving through that stage and having a high net worth eventually. I’m considering this low-earning period of our life to be teaching us lots of lessons so that when our income increases our lifestyle doesn’t inflate egregiously.