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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. In a prior blog, we wrote about some of the biggest financial problems a HENRY faces: The 4 Ds. To quickly summarize, they are: Debt, Direction, Discipline, and Digital Dangers
- 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.
So, now that we’ve covered some of the biggest financial problems a HENRY faces, How do we overcome them? Three Ps
Have a Plan, Be Patient, and Form a Financial Partnership
First, Have a written plan
- Only 30% of Americans have a long-term financial plan. “If you don’t have a plan, you’ll be part of someone else’s.” Terrence McKenna
- Start by writing out your long-term goals (5-10 year). Then, write out the big stepping stones (say, your 1-year goals) that will help you get there. Then write out the action steps to get you to those stepping stones. (breaking it down into quarters, months, and even weeks)
- Remember, “A goal without a plan is just a wish.”
Second, Be Patient
- Warren Buffett’s favorite holding period — forever — has few fans these days.
- The length of time that investors hold shares has been shrinking for decades but the trend has been exacerbated due to COVID-19. People have too much time on their hands, they have been given stimulus checks and told to stay at home. This is a recipe for disaster, and has caused people to become nervous about sitting on investments for too long. The average length of time shares spend in a portfolio hitting record lows this year as investors surf wild market swings for quick gains.
Third, form a financial partnership
- I often see young professionals partner with an inexperienced or wrong advisor. Perhaps they use a buddy they went to school with who took a 40 hour class that taught them how to sell a certain financial product such as whole life insurance. So, Be sure to check his or her credentials.
- Be sure to understand the financial advisor’s conflicts of interest. Many times brokers make money based off of transactions, so they are motivated for you to buy and sell, which can cause unnecessary expenses in your portfolio.
- There are many good financial advisors out there, and our firm, Intelligent Investing is a fee-only independent fiduciary firm. A fiduciary means we must do what is best for our clients at all times and strive to put you into a portfolio that matches your willingness to take on risk. Perhaps look for an advisor who does not sell any financial products such as insurance or annuities, and is incentivized to have your portfolio grow. Fear and Greed are everyone’s two biggest enemies when it comes to money, so ideally, look for a financial partner, who can provide a trustworthy lifelong human relationship and financial accountability.
Many HENRYs and millennials agonize over making decisions–such as choosing a financial advisor. However, they ignore the opportunity cost of our time. For instance, if you spend months thinking about whether to make a career change, you will have lost time that you could have spent actually building your new career. Instead, set a time limit for any decision you face and consider outsourcing to other professionals who are experts in their respective fields. You may enjoy running the numbers, but you need a financial accountability partner as a second pair of eyes to ensure you are on track.