Fortune Magazine’s So Called HENRYs are Getting It All Wrong

by David Ning · 26 comments

HENRYs are rich enough for most american standard

In the November issue of Fortune magazine is a featured article about the HENRYs (high earners, not rich yet). The writer argues that while they account for only 2.3% of the all American tax payers, they pay 17% of the total taxes paid. The author believes that it’s not fair that they pay a high amount of tax because they are hard working individual who aren’t even rich yet.

It’s a Matter of Choice and Everything Depends on Your Reference Point
The HENRYs are families with incomes of $200,000 to $500,000. According to the article, these people don’t buy a luxurious lifestyle and don’t spend a lot of money on extra stuff. On the other hand, the article claims that they are adamant on paying for child care and saving for private schools. They also spend on piano and swimming lessons.

For the HENRYs, these are absolute necessities but many of us probably believe that those are all luxuries. I can understand that child care is important but what about private school? Piano lessons?

Perhaps they believe that they aren’t rich, but if you ask me, someone who can afford a house, put $4,000 into their retirement savings, raise 2 private schoolers who have a baby sister supervising their piano lessons are considered rich.

If you are a HENRY and feel that you aren’t rich, the first thing you need to do is stop complaining. Then, realize that you can save even more money if you cut down some of your so called necessities. Putting away $4,000 is not shabby at all because one day, you will be living comfortably.

So keep working hard because no one is trying to punish you for your hard work. You are already much luckier than many of us.

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{ read the comments below or add one }

  • jim says:

    Non-Henry,
    I couldn’t agree with you more. You take one hell of a risk when you go to med school or law school that you’re actually going to make it thru, graduate with honors, get a good job, bust your a$$ working at that job just so you can survive and pay those astronomical school loans off. That’s the American way – take a risk and bust your a$$ making it pay off for you. People who have done that get exactly where you are coming from. People who haven’t will never understand.

  • Great post. As a financial advisor I see the impact of this on a regular basis. At the end of the day building wealth is all about choices and priorities.

  • Andrea says:

    Oh for heaven’s sake. I’m so tired of the non-rich defending the rich.

    • NON-HENRY says:

      Andrea-
      Yes, I AM defending the HENRYs, not the RICH. (HENRY = HIgh Earner, NOT RICH Yet.) I appreciate the contribution of hard work and, God forbid, EMPLOYMENT. You want a better financial situation? GET OUT THERE AND EARN IT; LIKE I AM, LIKE THEY DID. Go to college. Get a Degree. Serve in the Armed Forces. Get a job worthy of your skill/trade/craft.I did ALL four of the afoementioned; in a slightly different order. If I can, ANYONE can. By the way; THIS is why I’m tired of people complaining.

  • NON-HENRY says:

    I see…

    So what happens to those “Hard working, lucky” earners that are, yet again, taxed heavily? All we will be doing is hitting at the heart of most businesses; primarily small and medium-sied ones at that. By the way, those businesses make up a LARGE percentage of the economy.

    Here’s a novel idea… STOP EXCESSIVE GOVERMENT SPENDING. STOP THE 99 WEEK UNEMPLOYMENT EXTENSIONS. We have already spent close to a trillion dollars, and are about to pass ANOTHER $350 BILLION.

    .?.?.

    America will wake up out of the slumber because of necessity; aka no more free money. They will find more work; they will get different jobs based upon the economy. THEY WILL DO WHAT IT TAKES TO MAKE THEIR FAMILIES SURVIVE AND DO SO WITH INNOVATION, JUST AS AMERICA ALWAYS HAS. Where is it written in the Constitution that we should be given credits/gov’t rebates/BRIBES to buy houses and cars that we already cannot afford? (Yep; HENRY’s can’t afford them either; especially with the new Obama-Care).

    Although I am NOT a HENRY as of yet; we (and I AM going to incude myself in that group, nonetheless) work VERY HARD for our earnings. We went to school, served our great nation, have mouthes to feed/clothe, and/or made a great gamble with our lives to get our great reward. Let’s find another scape-goat, not the backbone of the economy.

    …In other words, FORBES HIT THE NAIL ON THE HEAD.

  • Perspective says:

    My wife and I are classic HENRYs. We’re both attorneys in our 30s, no kids, and a household income near $300k. Sounds great, huh? Aren’t we rich? Well, no actually, we have a negative net worth. We hope to be rich someday, but we’d like tax policy not to treat us rich now, because we’re not.

    We have nearly $200k in student loans combined. We are both from divorced below-middle-income families, so we had to work and borrow to get through undergrad and law school.

    We live in Orange County, CA and therefore have a nearly $600k mortgage on a townhouse.

    Our net worth today, is probably around -$100k, yet Obama and democrats want to tax us as if we’re rich living some grand lifestyle.

    I’m not complaining – just trying to place things in perspective when we start talking about progressivity of the tax code. I support a progressive tax code, just less progressive then the current one, and I support an aggressive estate tax. That’s the only way to truly collect fair taxes on people who are really rich – as defined by their balance sheets and not their income statements.

  • Abby says:

    It seems like a logical fallacy to say “I went to public school and came out fine” as an argument to public schools being adequate. A great number of them aren’t. I was fortunate enough to attend one of the top public high schools in the nation (beating out even many private schools), but I know for a fact that I was one of the lucky few. Even then, the sheer cost of living in the district was comparable, if not higher than the tuition of many private schools elsewhere. Choosing to live there was not a luxury– my parents saw it as a necessary investment.

    For those living in poorer neighborhoods, the public education system is simply not cutting it and private school may very well appear to be a necessity in these areas for parents who value education and self-enrichment. It’s a sad state of affairs when taxpayers feel that an education system they’re paying for is not up to snuff, so they feel that they must shell out more money for a private education.

  • I went to public school also and came out fine but it seems as though the schools in California aren’t as good as in Maryland where I grew up. Here in the bay area, you either have to shell out a million bucks for a house in a good school district or you go to private school. Many people opt for the latter. I don’t consider private school a discretionary expense in this case.

  • Jon Kepler says:

    Matthew, I wouldn’t necessarily say that Obama is more right wing than Stephen Harper (who I support, by the way).

    I think a lot of people are also missing one of the downsides to being a HENRY as opposed to actually rich: your income can still go to zero. When you’re rich, the assumption is that you’re almost untouchable. HENRYs still worry about unemployment, heath care bills, and more.

  • Henry Wannabe says:

    I almost wept reading about those poor, targeted HENRYs in our country. It’s GOT to be pretty tough for them to make ends meet, what with all the private school tuition and socking away a mere $4,000 per month in their retirement accounts on top of the nearly $1,000 per month children’s college fund.

    I mean, it’s just not right that they have to “starve themselves of luxuries” as the article pointed out. That’s just so….what’s the word?…..CRUEL.

    Oh those poor, poor, poor souls (figuratively poor, that is). And the terrible plight of that Selden family…it breaks my heart. They’re just two doctors trying to scratch out a modest living in a super-modest $750,000 home in the Charlotte suburbs and they have to….I can barely finish this sentence through my tears….that poor family (figuratively poor, that is) has to postpone their “pet project” to expand their playroom.

    My GOD, what has this world come to when a family of two doctors with a small playroom can’t even make it bigger when they want to?.?. They have to WAIT.. WAIT, I tell you. Ohhhh, the inhumanity of it all.

    • LaughOutLoud says:

      My perspective:

      From the outside looking in (the perspective of 95% of these posts) you just don’t understand what it is like to take out a million dollar business loan, put a second mortgage on a MODEST house, work 80 hours a week because you have a FAMILY and 44 employees counting on YOU, and then… AFTER 12 YEARS OF WORKING YOUR A$$ OFF, pay that loan off, buy that big house, put your kids in private school, take them on a EUROPE vacation that blows their minds, and provide them 100000 TIMES MORE than you or your wife ever had growing up. The last few years have been the most fulfilling and rejuvenating of my life, even with a modest 60 hrs a week of work (early riser).

      America was great because people used to get up and go to work, and then make it great. Like me. It was my risk, it was my a$$, and it was my hard work that bought that house and car. And you wonder why people like me don’t care what other people think — it’s because we heard it when we applied for that loan, heard it when we missed that sale, and heard it when we walked onto the car lot to buy that new car… “You can’t do that”.

      Guess what – I did. And if I listened to the thousand morons who would rather tell me why I couldn’t nail it — I’d be sitting where you are, in that Starbucks on free WiFi, complaining that some guy in a porsche just walked in with an ugly shirt on.

      I’m the one laughing out loud. Enjoy your starbucks.

  • Rick Vaughn says:

    Well if you are HENRY and not rich yet you certainly have no room to complain. Then again it’s all relative. I personally do not agree with this “Robin Hood” principle being thrown around. No one should ever be penalized for being successful. Good post Ning.

  • MoneyNing says:

    Andrea: Your comment was quite insight. No worries about writing it in between doing other things since we all do the same 😀

  • Andrea says:

    Goodness, my comment’s a mess – that’s what I get for writing it over the course of an hour and in between doing other things. 🙂 Sorry about that, Ning.

  • MoneyNing says:

    Arohan: Those are sensible choices and it’s very admirable for you to want to give your kids the best. I believe that many parents (mine included) sacrificed tremendously to give us the opportunity to succeed. I’m sure that with parents like you, your kids will prosper much better than others.

    CD Rates: No problem about disagreeing. Expressing our points of view is what makes our society great since we are always learn from each other.

    I’m not saying that high taxes are good at all. As someone who has decent salary and coming from Hong Kong (where 10-20% tax rates are common even for the wealthiest), I can never understand why our government can waste so much money every single year.

    All I’m saying is that like everyone else, America’s way of life has made decisions (some good, some bad). We should all embrace the country as a whole.

    On the school subject though, I think I feel private schools are unnecessary because my sister and I both went to public school and came out fine. It’s true that I haven’t been to any schools in the United States in recent days so perhaps it’s much worst than I thought. I also think that within the public system, there must be schools that are better than others. Perhaps you can look around instead of going the private school route? If there’s something I can do or help, just email me and we can probably chat.

  • Mathew says:

    1. Calvin: Is fast food really cheaper? My girlfriend and I spend ~80-90 a week on groceries and that will feed us for a week, nearly every meal. And we eat well. There is no chance two people could eat fast food for a week and spend less. The bigger the family, I would imagine the savings would multiply.

    2. A lot has to do with luck. Just think of the life you were born into. I know the road I took to where I am now was much easier than most. That’s why I’m ok with spreading the wealth.

    3. Anyone that thinks Obama is a socialist is a little out to lunch. In Canada, he’d be the most right wing candidate.

  • CD Rates Blog says:

    Boy, David, this is a fun one. I love posts that spark vigorous conversation. Well done…

    Matthew — I know the road I took as well. And my road included getting up at 3:30 in the morning, on two hours of sleep delivering newspapers. That was so my wife could be a stay at home mom and to rent a decent home (1000 sq. ft.). Then working 8:30AM to 6:30 or 7:30PM. My point is, it should be my decision how to spread my “wealth” around. I think I’ve worked hard enough to have earned the right to make it. Obama and crew want to make it for me and you. Somehow they know better. Just like they were smarter about Freddie and Fannie. Wait, they weren’t. :O)

    David, I hear the “I turned out fine” argument way to often. I don’t want my children to just turn out “fine”. I want them to excel in strength, courage, and devotion. I also want their education to be undergirded by the fundamentals of my faith. There is no public school that offers that. Also, for the most part you don’t get to pick your public school. There are choices when it comes to charter schools, but frankly I’m not a big fan of using public dollars for schools that should really be private. That is a whole different discussion though. I wouldn’t trade the world for the school my children are currently attending. But I do appreciate your thoughtfulness.

  • CD Rates Blog says:

    David, I’m usually right there with you, but I have to disagree in a couple of places here. First this nation is not great because decisions to have high taxes. Our taxes are high because the Gov’t is sticking its nose in places it doesn’t belong.

    Second, I don’t want to completely beat up on public education, but have you visited one recently. Especially, here in CA. They seem to have replaced the 3Rs with H,TG, Ls. Most public schools don’t seem to be much on education. I don’t believe Private school is a luxory. In many areas, it is a necessity. For our family, it means lots of sacrifices and late nights with a 2nd job.

    When it comes to Taxes, the problem is who knows best what to do with my money. Paying taxes for reasonable Gov’t is somewhat understandable, although this country use to get along without them. But when it comes to paying taxes to fund “art”, bail-outs, abortions, welfare, etc., I don’t agree.

    So yes someone making $250,000 or more should be thankful. Just as someone making $100,000 should be thankful. However, they are rightfully frustrated when the increase in taxes is due to the Gov’t wanting to increase social spending (medical, job programs, mortgage re-writing, etc.)

    And I don’t believe I should have to reduce my discreationary spending or retirement spending to cover an increase in taxes for things such as that.

  • Andrea says:

    Hard work and “luck” go hand in hand. Those who think they got to some success in their life on their own, without the help of others or some “right place at the right time” luck is, in my mind, a somewhat blind and self-centered example of our society’s entitlement culture.

    Those HENRY’s can choose not to put almost $50,000 a year into retirement. Others can’t. Appreciate what you have, thank those who helped, and give back to others who may be coming behind you.

    And while I realize that there are certainly places in the United States where $200,000 is not even close to being rich or even comfortable, I feel compelled back the cute acronym and go to the heart of this article and its clear political statement about taxes in the new administration (I assume it was written before the election), because I have to take issue …

    I am tired of the whining about Obama being a “socialist” for taking away money from hardworking Americans who make more than $250,000. As I wrote on my own blog, anyone who is paying taxes on $250,000 under Obama’s plan is 1) not really paying that much more, and 2) making a lot more than $250,000.

    I talked to one of my grandmother’s last night, someone who I can guarantee did not vote for Obama, and she said that a man who was working on her house said to her yesterday that now that Obama is in office, he doesn’t see the need to come into work. He’s just going to be a socialist and live off of everyone else. I asked her if he was making more than $250,000 and she said, “oh heavens no” and I replied that he sounded like a rather silly person who didn’t really want to succeed in the first place.

  • Arohan says:

    I agree with some of the commenters here. Better education and culture are not discretionary spending and I would not advise them to save money by foregoing these expenses (I am sure in their case they consider these to be investments in better future for their kids).

    Majority of the personal finance advisors tell people to focus on their retirements first and then worry about supporting their kids education (or college fund). Thinking goes that society will take care of the kids college (financial aid, etc) whereas one has to provide for their own retirement, what with the precarious nature of social security and all. While there is validity in this argument, I think these are decisions which are very personal in nature. From where I come (India), and indeed in most Asian cultures, parents would sacrifice greatly to ensure that their kids get the best possible education. Seeing my kids succeed in life brings me more joy than possibly having to work 5 more years in retirement and that is a tradeoff I am willing to make. Therefore, I can see why private schools can be viewed as a necessity (even though we are in no position to be classified as Henrys)

    The economic conditions prevailing today is bringing a new urgency to consider austere lifestyle but I think what needs to happen is refocusing our lives to what is important and discarding things that are not important. I have not bought any clothing for myself in the last 3 years as frankly what I already have is enough to last me another 5 years. But believe me, I am contributing to my kids college fund like crazy. We also cut out fast food so we can spend the money we save to buy fresher and more organic produce for the kids. And lastly, we saved up for five years before we decided to have kids as we want to provide them the best we can

  • MoneyNing says:

    Thank you for pointing out more sides of the coin. I’m not arguing that what they are doing is wrong. I just think it’s more of a choice of how they choose to spend their money.

    I believe that we all need to take the bad with the good. If they accept the opportunity to be successful from the nation’s prosperity, they should also accept the bad stuff (high taxes compared to many other countries) based on the very decisions that made this nation great.

    All I’m saying is that the same mindset was what made America great, so it’s very difficult to only embrace the ones that give you advantages and complain about the ones that don’t because it’s the mindset of the whole nation that made America great.

  • Dario says:

    Wow MoneyNing, I love your posts and your comments but someone needs to call the whambulance.

    Since when is spending money on your kid to better them not a necessity? They aren’t wasting it on clothes and nintendos, they are paying for an EDUCATION and CULTURE.

    Yeah they could save more and better themselves by hoarding money, but they would rather better their children and in turn benefit society. All they are asking is to let them make their own decisions on how to spend their money to benefit society instead of giving it to the government to benefit society (read: redistribute)

  • Heather says:

    Well said. I could not agree with you more.

  • MoneyNing says:

    Calvin: I don’t think everyone in that group is complaining. There will always be people who think nothing is enough however much they make.

    Mr ToughMoneyLove: I’m asking them to be appreciative of what they already have. Not everyone will have the same opportunities theese high earners have even if they have the same abilities and are just as hard working.

    While I’m not considered a HENRY, I’ve been quite fortunate so far in my life and I can tell you that luck has a lot to do with life.

  • If I understand your point, hard working high earners with moderate net worth should stop complaining about high taxes because they are “already much luckier than many of us.” If they are high earners because of hard work, what does luck have to do with it?

  • Calvin says:

    I read the same article. I can’t believe they are making $500,000 and complaining. Geez.

    We eat fast food because we have to, they eat fast food because they choose to. Enough said.

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