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Meet the HENRYS: The Six-Figure Earners Who Don’t Feel Rich

When you’re a HENRY—high earner, not rich yet—a hefty salary isn’t enough to buy freedom from financial pressure

By CALLUM BORCHERS
Mon, Oct 7, 2024 11:09amGrey Clock 4 min

Fifteen years ago if you’d told April Little that she’d make $300,000 a year, she would have pictured a life free of financial stress.

“The white picket fence—I have the whole visual in my head,” says Little, 38 years old, a human-resources executive turned career coach in Rochester, N.Y. “I don’t want to sound ungrateful, but when I got to that proverbial mountaintop I realised there’s a lot of expenses. And I still don’t own a home.”

So go the plush-but-not-too-plush lives of the Americans who qualify as HENRY—high earner, not rich yet.

Little makes multiple six figures running her own business but carries $90,000 of college and grad-school debt. Child care and education for her three children would be so costly that she and her husband decided the better option was for him to leave his radio job to parent and home-school full time.

New census data show 14.4% of U.S. households bring in $200,000 or more a year, a near record. Yet the money doesn’t have the buying power those earners wish it did, partly due to the rising prices hammering us all and partly due to the supercharged costs of things like houses and cars. HENRYs describe feeling stuck on a hamster wheel—a nice one that other hamsters envy—but running in place nonetheless.

Oh come on, you’re thinking . You’re asking me to feel sympathy for Audi-driving, Chase Sapphire-loving, Whole Foods-shopping consultant types with kids in private school?

Well…not exactly. But what they’re feeling is a version of what a lot of Americans at every income level face—making more money but not feeling like there’s a surplus. The essence of being a HENRY is feeling a gap between what you have and what you think you need to be comfortable.

What these high earners consider essentials might be termed luxuries (or nonsense) by the rest of us, but it’s also true that it takes more money to feel rich these days. And their great fear is becoming a HENRE: high earner, not rich ever .

Short of expectations

Attorney Joshua Siegel doesn’t expect sympathy as he motors around Los Angeles in his Lexus SUV. He just figured at age 40, having risen to partner and chair of the transactional tax group at Albrecht Law, that he might be driving from a house he owns to a country club where he’s a member.

Instead, his occasional golf outings take him from his rental home to a public course. Raising three kids in one of the country’s most expensive cities has been a reality check, he says. He’s also realised that a lot of people with jobs like his come from wealthy families where trust funds and down-payment assistance give them financial head starts.

The son of an electrician and a dental assistant, Siegel is making his own way in the white-collar world.

“It really just feels like treading water,” he says.

Monique So, a 40-year-old financial consultant, says she and her husband, a software engineer, have a net worth in the mid-seven figures. But she likely won’t breathe easy until, or if, they accumulate an eight-figure net worth. Daycare for their 2-year-old takes a $30,000 bite out of their family budget.

“I have this scarcity mindset that is very common,” she says.

What it takes to feel rich

Caitlin Frederick, director of financial planning at Ullmann Wealth Partners in Jacksonville Beach, Fla., says many of her mid career clients are less affluent than their salaries suggest. She advises a lot of prototypical millennials who racked up student loans in hopes of vaulting into high-paying jobs. They delayed buying houses and starting families while climbing professional ladders.

The first part of their plans worked, she says. The degrees led to hefty incomes. Now that they’re having kids, shopping for real estate and wishing to upgrade their Camrys, they’re discovering that many of life’s major expenses shot up faster than the overall rate of inflation.

Lifestyle creep is a factor too, she says, noting clients who overspend on trips and restaurants.

“It is easy for people to just continue to increase their lifestyle every time they get a promotion,” Frederick says.

Then again, they watched their slightly older co-workers spend freely, and buy lake houses, too. The good life requires more money than it used to, she adds.

In 2009, the median home price was $220,900, according to the Federal Reserve, and a new car cost an average of $23,276, according to the Energy Department. Had prices increased at the rate of the consumer-price index, the average house would cost $322,000 today and a car would cost $34,000. Instead, the Fed reports an average house goes for $412,000 today, and a typical new car is $48,000, according to Kelley Blue Book.

The national going rate for a babysitter 15 years ago was $10.50 an hour, according to Care.com. Now it’s $18.38, 20% more than if the cost had tracked the consumer-price index.

Budget-conscious HENRYs tell me it’s often hard to find mid tier options in, well, anything, as companies push luxury versions of everything from high-end water bottles to $1,000-a-night hotel rooms .

Another big-ticket item

Another financial curveball comes up frequently in my conversations with high earners: school costs.

Nearly half of American private schools increased enrolment in the last academic year, according to the Cato Institute. Parents who originally planned to send their children to public school tell me they’ve gone private for reasons that include pandemic learning disruptions, public schools’ difficulty retaining good teachers and budget problems . Some say they’re convinced private schools are the only places their kids will thrive, though more than 80% of American kids attend public school.

Brad Gyger and his wife shuttle their three children around in a 2014 GMC Yukon with 130,000 miles—not exactly the late-model, luxury ride he expected to own as a three-time chief revenue officer in the tech sector. Then again, he didn’t anticipate annual private-school tuition payments roughly equivalent to the price of a new, fully loaded Cadillac Escalade.

Gyger, now an independent sales consultant in California, says he didn’t consider private education until a few years ago, when he and his wife concluded their oldest child would thrive in a more academically challenging environment. The school could also accommodate their second child’s learning needs. And how could they leave out the youngest?

Gyger, 46, says his family is fortunate to even have education options. The trade-off is living more modestly than his résumé might suggest.

He gave up gym and tennis-club memberships, opting to stay fit on the cheap by cycling and lifting dumbbells in his garage. And forget about upgrading from the home the couple bought in 2015.

“We’re probably never moving,” says Gyger. He hopes they’ll remodel the kitchen. Someday.



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Fed Cuts Rates Again, This Time by a Quarter Point

Powell says he has no intention of leaving Fed before his term expires

By NICK TIMIRAOS
Fri, Nov 8, 2024 4 min

US: The Federal Reserve approved a quarter-point interest-rate cut Thursday, the latest step to prevent large rate increases of the prior 2½ years from weakening the labour market as inflation eases.

The decision, coming the same week as the election of Donald Trump to a second presidential term, followed an initial cut of a half-point in September and will bring the benchmark federal-funds rate to a range between 4.5% and 4.75%. All 12 Fed voters backed the cut.

Officials have said those moves are warranted because they are more confident that inflation will return to the central bank’s target and because they believe rates are still high enough, even with the latest cuts, to dampen economic activity.

The move was expected. Stocks and Treasury yields were steady after the announcement.

“We are committed to maintaining our economy’s strength,” Fed Chair Jerome Powell said at a news conference. He said officials are confident that with an “appropriate recalibration of our policy stance,” inflation can continue heading lower with a solid economy.

Trump’s election victory this week has the potential to reshape the economic outlook, with presumed GOP majorities on both sides of Capitol Hill enabling a broad shift on taxes, spending, immigration and trade. Economists are divided over whether the mix of policies will boost or weaken growth and drive up prices.

The shift in the outlook, in turn, has fuelled questions on Wall Street over whether the Fed will alter its earlier expectation that rates could be steadily dialled lower over the coming year or two.

Powell said it was too soon to say how the next administration’s policies would reshape the economic outlook.

“We don’t guess, we don’t speculate, we don’t assume” what policies will get put into place, Powell said. “In the near term, the election will have no effects on our policy decisions.”

Powell also said he had no intention of leaving the Fed before his four-year term as chair expires in May 2026. “Not permitted under the law,” Powell said when asked if he believed the president could remove him or other Fed personnel from their positions before their term expires.

Since the Fed cut rates in September, longer-dated bond yields have climbed notably, meaning the cost to borrow for a mortgage or car loan has gone up. Yields have increased in large part because better economic data has led investors to reduce their worries about a recession, which could have triggered larger rate cuts.

But some analysts think the bond-market selloff may also reflect concerns by some investors about higher deficits or inflation in a second Trump administration.

Either way, the market has generated an unusual result: Borrowing costs rose after the Fed cut rates. The average 30-year mortgage rate has jumped since mid-September, to 6.8% this week from 6.1%, according to Freddie Mac.

Over a similar time frame, investors in interest-rate futures markets have steadily reduced their expectations over how much the Fed will cut rates over the next year or so. They now see the Fed cutting rates to around 3.6% by 2026, up from an estimated trough of 2.8% in September, according to Citi.

Officials are trying to bring rates back to a more “normal” or “neutral” setting that neither spurs nor slows growth. But they don’t know what constitutes a normal rate. Policies that boost economic activity or prices could also lead officials to conclude that they should maintain a moderately restrictive rate stance. That means they would hold rates somewhat higher than a normal or neutral level.

Before the 2008-09 financial crisis, many thought a neutral rate might be around 4%, but after the crisis and an extremely sluggish recovery, economists and Fed officials concluded the neutral rate might be closer to 2%.

Interest-rate projections that officials submitted in September show most of them expected that if the economy expanded solidly with inflation continuing to cool , they could cut rates to around 3.5% next year.

Inflation based on the Fed’s preferred index was 2.1% in September, from a year earlier. A separate measure of so-called core inflation that strips out volatile food and energy prices was 2.7%. The Fed targets 2% inflation over time.

Because officials don’t have much conviction over where the neutral rate sits, they are likely to be guided by how the economy performs in the months ahead. If inflation keeps slowing and the demand for workers looks soft, officials could conclude it makes sense to continue cutting rates along the path they envisioned in September.

“We’re going to move carefully as this goes on so we can increase the chances that we get it right,” Powell said. “We’re trying to steer between the risk of moving too quicky…or moving too slowly. We’re trying to be on a middle path.”

If inflation progress stalls or ebullient financial markets raise concerns that inflation might get stuck above their target, officials might face more reservations around continuing to cut rates at a steady, meeting-after-meeting clip.

The most immediate focus is whether the Fed will cut again at its upcoming meeting in December. In September, 19 participants were about evenly divided over whether to cut rates one or two more times this year. Nine of them penciled in no more than one cut in either November or December, while 10 penciled in two cuts.

“There’s a lot to learn between now and the December meeting,” said Diane Swonk, chief U.S. economist at KPMG. “They can’t leave the door wide open, but they can’t close the door either.”

Powell said Thursday it was too soon to rule anything “out or in” at that meeting. Slowing down the pace of rate cuts is “something we’re just beginning to think about,” he said. “We’re on a path to a more neutral stance. That has not changed at all since September. We’re just going to have to see where the data lead us.”

Even before the election result, recent data suggested that cutting again would be a finely balanced decision because inflation looks like it might end the year slightly above officials’ projection, while the unemployment rate has edged lower recently, said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.

The election result— which sent stock markets to new highs while raising the prospect of stronger growth, higher inflation and better labour-market outcomes—boosted the odds that the Fed forgoes a cut next month, he said.

“Those could present a strong case from a risk-management perspective to potentially skip that meeting,” said Luzzetti.

MOST POPULAR
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This stylish family home combines a classic palette and finishes with a flexible floorplan

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