Taking Your Savings One Step at a Time: A Guide for HENRYs

National Savings Day, celebrated October 12, is a reminder of how important it is to build a solid financial foundation. For High Earners Not Rich Yet (HENRYs), the path to financial security can seem both promising and challenging. Despite earning a high income, many HENRYs find themselves struggling to save due to high living costs, student loans, and lifestyle inflation. Here’s how you can approach your finances with a savings mindset and take your savings one step at a time.

Understanding the HENRY Lifestyle

Most HENRYs are 25 to 45 years old and have a household income of between $100,000 and $250,000 per year. Regardless of their actual income, HENRYs usually feel they are middle-class, not rich. Some are saddled with student debt. Some live in expensive urban areas. Some just want to maintain the lifestyle they earn.

Step 1: Assess Your Financial Situation

First, it’s a good idea to establish a comprehensive financial baseline. Sit down and write out your sources of income, your monthly obligations, your debts, and how much you save each month. A picture of where every dollar goes can be a powerful motivator for taking charge of your finances.

Step 2: Set Clear Savings Goals

When you have a clear long-term goal in mind, this can give you the will to stay the course on your short- and mid-term savings goals.

First, have three to six months’ worth of living expenses saved up in an emergency fund. This money is set aside for you in case something goes wrong.

Next, maximize your contributions to a 401(k) or IRA. This will also allow you to take advantage of any matching contributions from your employer.

Finally, consider those big-ticket items such as purchasing a house – or even a car – and plan to save a hefty down payment rather than having to borrow money at a higher interest rate.

Step 3: Automate Your Savings

The best way to make saving consistent is to automate it. To do this, have set amounts automatically transferred from your checking account into your savings account.

Step 4: Control Lifestyle Inflation

As you make more money, the temptation to spend a proportionate amount grows. Inflation in your lifestyle works against creating a nest egg. Separate needs from wants; carefully research larger expenses and make fewer impulse buys.

Step 5: Invest Wisely

Being able to save is something, but it can fall short of securing your family’s financial future. Investing helps your funds grow beyond the threat of inflation.

A diversified portfolio spread across vehicles like stocks, bonds and real estate will help to mitigate risk. A financial professional can work with you to develop a strategy that aligns with your investment timeline and level of risk aversion.

Step 6: Review and Adjust Regularly

Financial planning is not something you do just once. Your plan needs to evolve on a regular basis so you can continue to meet your goals.

Important Disclosures:

Content in this material is for educational and general information only and not intended to provide specific advice or recommendations for any individual.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

This article was prepared by WriterAccess.

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