Money seems to be in abundance. Everywhere I look, store shelves are empty, people are driving new cars, and I see RVs and boats littering the road. So, is everyone rich? Apparently, there is a lot of money flowing through people’s hands and wallets.
Why, then, do I keep hearing that most Americans will not have enough money to retire? I read that the average American is lucky to have $200,000 in retirement savings by age 65. Where the heck is all the money going?
There is a subset of high earners who are not rich. In fact, many of them live paycheck-to-paycheck. The media calls them HENRYs, or High Earners Not Rich Yet. I never heard this title until yesterday, but apparently, it has been around for a while.
What is Passive Income?
Anyhow, I want to explore this population of people and see if we help them become rich. My definition of wealth is having excess income versus expenses. Depending on how much I ramble on, I may need to split this into two articles.
HENRYs defined. I found an article about HENRYs on Investopedia. The summary is that this cohort of workers makes a substantial amount of money ($100,000-$500,000) but lives paycheck-to-paycheck.
Please read this article because it does a good job pointing out things that I have been writing about for over a year. My main takeaway is that these earners spend money on STUFF. I have written countless articles on why consumerism leaves Americans (and everyone else) in a bad position.
Three articles come to mind. Read these after you finish this if you feel that you are a HENRY.
1) “The Truth about Discretionary Income” discusses that your earned income job is for expenses. Once you pay expenses, all money should flow through investments. The money that your assets produce is then your discretionary income.
2) “Over-Budgeting 2: Low Expenses / High Income” tells us that the goal is to incur bare minimum expenses and achieve a super high income. We call the money leftover “cash flow,” and that goes into our investments.
3) “Defeat Toxic Consumerism” is about the path to reducing debt. Consumer debt is the worst because it is optional.
Why You Should Learn Creativity and Design
The danger of STUFF. Some of the things HENRYs spend money on are necessary; however, there is a lot of wasteful spending.
A) Student Loan Debt. There isn’t much you can do about student debt except pay it off. If you don’t have any yet, find a way to avoid it at all costs.
B) Expensive cars. I can’t believe people still buy new cars in this day and age.
C) Boats. If you are on the water 15 days a month, then maybe it is a good purchase. If not…
D) RVs. If you are on the road 15 days a month, then maybe it is a good purchase. If not…
E) Private schools. Financial education is the best education to give a child. Sadly schools don’t teach these important lessons. It is incumbent on the parents to teach their children passive income. Luckily, I have a small children’s book called “The Children’s First Book on Passive Income.” (Shameless plug).
What Limiting Beliefs Do You Have About Money?
F) Luxury items. The Investopedia article points to designer brands targeting HENRYs because they want to follow the behavior of the ultra-rich. If you don’t have millions of dollars in passive income, don’t buy luxury items.
G) Weddings/Parties. Want your friends to think you are rich? Have an expensive wedding, then suffer the financial consequences over ten years.
I’m sure there are many other things HENRYs spend money on, but let’s move on to more positive outlooks. The good thing about being a HENRY is that you have a high income. We just need to lower our expenses.
A word of caution. Just because you have a high income doesn’t mean that you are exempt from the passive income grind. The goal of our financial life is to have money coming in while we spend time with family and pursue things that interest us.
Having a high earned income job means just that—earned income. When we stop working, our earned income also stops. If we make $150,000/year in earned income, we want to make at least that in passive income.
The Business of Being Busy
To make $150,000/year in dividends, we will need $4.5 million in our portfolio (at a 4% yield). So, we need to achieve this before we retire. It is fun to play around, hang with friends, watch Netflix, and play tennis, but now is not the time.
With a high income, we have the means to start a meaningful dividend portfolio. Next, we need to diversify into real estate, royalties, automated business, and cryptocurrencies. I have a massive free book that covers all of these streams of income. The title is “Don’t Gamble With Retirement 3 + 4 (Free PDF).”
Mindset. Before you run off and start a blog, understand that your mindset is the most crucial part of converting yourself from a HENRY to FIRE (Financial Independent Retire Early). The hardest part will be breaking away from your social group.
Do Men Want to be Providers?
Sorry, as a HENRY, your friends and peers expect you to spend tons of money on the items mentioned above and your lifestyle. As someone who has no debt and $200,000 in investments, nothing is better than being financially secure. Eventually, this path leads to financial freedom, but security is still an excellent feeling before achieving FIRE.
Conclusion. This article was a quick introduction to the world of HENRYs. I was a HENRY before I learned about passive income two years ago. Now, I am forever grateful that my wife and I got on the right track and have reached the wealth accumulation phase together.
The good news is that you, too, can achieve financial greatness. I have tons of free resources—just click the FREE PDF link in the banner, and enjoy!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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