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?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.