Many people dream of becoming entrepreneurs, and often the biggest...
Letting technology do the heavy lifting for certain monotonous tasks...
Financial reporting often appears to be a routine...
Financial operations encompass the systems and processes that...
Learn practical tips to help you take control of your finances
February 13, 2024
Are you among the growing group of people in the US with a high household income yet find your savings stagnant year after year?
Believe it or not, there’s a name for that: HENRY (High Earners, Not Rich Yet), which refers to individuals with a high income but low net worth.
Despite their substantial income, HENRYs often need help to build wealth. Much of their earnings go towards consumer spending, education, and housing, leaving little for retirement and investments.
But because you currently have little savings or investment, it doesn’t mean it has to stay that way forever. HENRYs can employ various strategies, like reducing debt and boosting retirement contributions, to enhance their financial standing and build wealth.
The first step to changing your financial habits is understanding what they are. Start by assessing your current situation. This enables you to make informed decisions regarding saving, spending, and investing to meet your goals.
Identifying spending patterns may reveal areas of overspending, such as lavish living, frequent nights out, or indulgent hobbies. Once you recognize these areas, redirect funds toward priorities like student loan repayment, emergency savings, or retirement contributions.
Remember, the goal isn’t just to cut back or watch numbers grow but to achieve your aspirations — buying a house, funding a wedding, or paying off debt. Setting clear, achievable goals helps create a roadmap for the future and keeps you motivated.
Talk to us about how Escalon’s essential business services can help your startup focus on its core activities.
Many HENRYs allocate a sizable portion of their income to daily expenses, hindering savings growth. Cutting expenses is crucial to bolster your net worth. In this regard, consider to:
Increasing your income is critical to growing your net worth over time. This includes more than raises — think freelance gigs or side hustles. Extra income speeds up debt repayment and reduces the need for borrowing. Second jobs, freelancing, online sales, or part-time businesses are familiar sources. Even a tiny extra income weekly accelerates financial goals. Opportunities abound; find what suits you best.
Reducing existing debt is one of the simplest ways to improve your net worth. List your current debts, corresponding interest rates, and other outstanding liabilities.
Once you’ve compiled this list, prioritize paying off debts with the highest interest rates first.
Life is unpredictable, so planning is essential. Ensure you maintain an emergency fund, ideally three to six months of living expenses or around $20,000, alongside comprehensive insurance. This financial buffer will help minimize the impact of unexpected events and prevent reliance on high-interest credit cards.
After setting aside an emergency fund, don’t leave the rest of your savings in a basic savings account. Opt for interest-bearing accounts or investments to make your money work for you. Compound interest can significantly boost your net worth over time.
The more you save and the sooner you start, the greater your net worth will likely be. To stay proactive, establish regular contributions to retirement and investment accounts, making saving and investing a consistent part of your routine.
Though HENRYs aren’t financially struggling, they aren’t thriving either. They encounter distinct financial challenges, particularly younger workers who need substantial assets. The bright side? It’s always possible to start securing your financial future.
Want to know more about ways to take control of your finances? Since 2006, Escalon has helped thousands of startups get off the ground with our back-office solutions for accounting, bookkeeping, taxes, HR, payroll, insurance, and recruiting — and we can help yours, too. Talk to an expert today.
Our team is made up of seasoned professionals who bring years of industry experience to the table. You gain a trusted advisor who understands your business inside out.
Say goodbye to the hassles of hiring, training and managing in-house finance teams. You will never have to worry about unexpected leave of absence or retraining new employees.
Whether you’re a small business or a global powerhouse, our solutions scale with your needs. We eliminate inefficiencies, reduce costs and help you focus on growing your business.
Financial reporting often appears to be a routine exercise, but for small businesses, it can be the difference between reactive...
Financial operations encompass the systems and processes that govern every monetary aspect of a business—from managing payables and receivables to...
For many small business owners, running payroll is a time-intensive chore that requires meticulous calculation, familiarity with tax codes, and...
Managing your business’s finances can often feel like juggling too many tasks at once, especially when you’re trying to keep...
Small business owners often grapple with tax obligations that can swallow a large portion of their profits if not managed...
Human Resources (HR) might feel like an afterthought for many small business owners juggling day-to-day demands, yet it has a...
Artificial intelligence (AI) isn’t just for tech giants anymore—it’s increasingly accessible to small and mid-sized businesses seeking a competitive edge...
Setting up a payroll system is an essential step that helps small business owners pay their employees accurately and on...
While small businesses must handle day-to-day tasks—like managing payroll or closing monthly books—long-term planning is the compass that keeps them...