Let’s Talk About H.E.N.R.Y.

Also known as a High Earning Not Rich Yet person, H.E.N.R.Y.s tend to earn at least six-figure salaries. With the presence of the University of Arkansas for Medical Sciences (UAMS), along with several hospitals, clinics and doctors’ offices, it’s more likely than not that a H.E.N.R.Y. in Central Arkansas is a medical professional.

Despite their economic influence, many H.E.N.R.Y.s in the medical field lack a firm foundation of financial literacy because of the time demands of their professional education and training. According to the National Institutes of Health, only 9% of resident physicians and 12.5% of attending physicians report having formal financial education. 

H.E.N.R.Y.s can really benefit from the guidance and financial coaching we at Arvest give to our clients, starting with the first page in most financial planners’ playbooks: emphasis on the benefits of saving. 

In the case of H.E.N.R.Y.s, they tend to focus more on discretionary spending than wealth building. Depending on lifestyle, their household expenses can be three times or more than the typical household because as their salaries grow, they fall victim to “lifestyle inflation,” the industry term for “the more we earn, the more we spend.” 

Lifestyle inflation can often result in people living beyond their means, at the detriment of creating savings that could be accessed during a financial emergency or shifts in the economy. 

The lack of a savings safety net makes these high earners more vulnerable to unexpected expenses. This in turn can lead to more reliance on credit card debt that further strains financial stability. 

We’ve been advising clients at all wealth levels to consider CDs (certificates of deposit) and money market accounts as foundational savings solutions. 

Both traditional and high-yield money markets are a great first step into savings. Despite the Federal Reserve’s most recent rate cuts that have slightly reduced annual percentage yields (APY), money market accounts typically have higher interest rates than traditional savings accounts that have averaged less than half a percent. Another great thing about money markets is that they offer the ability to keep assets liquid. 

While high-yield money market accounts can have a higher APY than traditional money market accounts, the difference can typically come down to minimum balances, fees, and other considerations attached to the account. It’s important to find the right account that best fits your financial needs. For H.E.N.R.Y.s, the high-yield money market may make more sense if they have the minimum balance to take advantage of a higher APY.

Competitive rates for short-term CDs (six to 12 months) have hovered around 4% APY, while longer-term CDs (two years or more) are about 3.5%. Locking in a CD can be a great option if you’re not concerned about having access to the money before the maturity date without early withdrawal fees. As with money market accounts, look for the right CD account that suits you and your financial needs. 

When working with clients who are transitioning to a higher level of income, such as newly graduated professionals, it is recommended they establish savings habits before including the additional income into their overall spending picture. Building good savings habits early will help prevent the likelihood of financial stress in the future. 

H.E.N.R.Y. or not, we should all consider working with a banking adviser to focus on:

Creating better spending habits

 Reviewing and taking advantage of investment opportunities

 Building retirement savings and long-term financial security

 Reducing debt

It’s never too late to develop new habits to secure your financial future. Successfully managing your personal finances can help you make the most out of your financial situation and help you weather turbulent economic conditions ahead.