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First of all, nobody likes to be labeled, and there are always exceptions to the rule, but HENRY is an acronym that stands for High Earner Not Rich Yet (coined by Fortune in 2003). HENRYs are young doctors, lawyers, engineers, or other top-earning professionals who have a high salary but don’t have time to manage investments. They are in the process or have finished paying off student loans and are beginning to accumulate a nest egg. They may have a young family and are becoming an expert in their professional field. Essentially HENRYs are young professionals who have a high salary but don’t have time to manage investments.
A couple of quick stats: Many HENRYs are Millennials who like control and technology, and make up the largest generation. They have the highest number of billionaires and are digital do-it-yourselfers. 25% aren’t sure how their retirement savings are invested, and 80% are concerned Social Security won’t be there for them when they retire.
People make money in many ways, but often don’t know what to do with it after they’ve made it. Some of the biggest financial problems a HENRY faces: The 4 Ds
The 4 Ds- Debt, Direction, Discipline, and Digital Dangers
First, they have insurmountable Debt–
- The Federal Reserve estimates that Americans owe more than $1.7 trillion in student loans. In addition to student loans, HENRYs face ridiculous rents, or are living with their parents, as they have a hard time saving up enough for a down payment on a home. In addition, they can’t afford enough insurance for a health or disability event.
Second, they lack Direction–
- 63% of Americans are living paycheck to paycheck, and if faced with a $500 emergency, 8 out of 10 couldn’t cover the cost. As a result, HENRYs haven’t created an Emergency Fund, a Budget, or retirement plan.
Third, they lack Discipline–
- They often are unsure where to get sound financial advice and they are too busy developing their own career. They don’t have time, nor the accountability they need to keep them on the right path.
- Instead of talking about their latest hot stocks at the water cooler as in prior generations, they are in Reddit chatrooms or Social media feeds convincing each other they know more about a company’s stock than anyone. This overconfidence bias will eventually get them into trouble.
Fourth, They face Digital Dangers–
- We live in a digital world that is instantaneous. HENRYs prefer paying by digital wallets, and are comfortable throwing money at cryptocurrencies like Bitcoin. They like the recent high returns of Bitcoin, and they think they are a long way off from retirement so they can afford to take some risks. They remember their parents complaining about the 2008 housing crisis which was the result of bankers and brokers playing fast and loose with “safe investments like stocks and houses.”
- We are now seeing a repeat of those behavioral mistakes. By eliminating transaction fees, HENRYs are on the Robinhood app convinced that their stock, Bitcoin, or options purchases can only go up.
- In the short run, they may be right as they gamble, but in the long-run, the house always wins.
- Sometimes HENRYs fool themselves into thinking they can just “Google” their financial or investment questions. Unfortunately, it’s not that easy. Market conditions and economic forecasts change constantly. Technology can beat humans at computations, but I also believe it is best to receive wisdom from a human who understands investor behavior and who leverages integrated technologies.