How is it that some millennials making six figures still feel broke? This cohort, who are known as "Henrys," typically earn over $100,000, are largely millennials, and struggle to balance their saving and spending habits. Henrys fall victim to lifestyle creep, preferring a comfortable, often expensive lifestyle that leaves them behind when it comes to building wealth. But their situation is also indicative of an economy that seems bright on that outside but is dull on the inside: They are part of a generation that is facing an affordability crisis, and $100,000 is no longer what it used to be. Visit Business Insider's homepage for more stories.
Some millennials feel their six-figure paychecks are stretching thin. As first reported by Melkorka Licea for the New York Post in October, they are known as "Henrys." The acronym — short for "high earner, not rich yet" — was invented by Shawn Tully in a 2003 Fortune magazine article and has come to characterize a certain group of six-figure earners who are mostly millennials, Licea wrote. According to the experts, the typical Henry earns over $100,000, is in their early 30s, and struggles to balance their spending and savings habits. As a result, they're behind in wealth-building and are not inching closer to their financial goals. Their comfortable, if not lavish, lifestyle is partially to blame for feeling broke — but so, too, is an economy that seems good but has a lot of tensions bubbling under its surface. High-earning millennials fall victim to lifestyle creep One of a Henry millennial's biggest financial issues is that they typically live above their means and fall victim to the lifestyle creep, Gideon Drucker, a certified financial planner at Drucker Wealth and author of the upcoming book "How to Avoid H.E.N.R.Y. Syndrome," previously told Business Insider. Lifestyle creep occurs when one increases their standard of living to match a rise in their discretionary income. But just because a Henry's income keeps going up doesn't mean they have to spend more money, Drucker said. In fact, they shouldn't spend more. If they get used to living off $3,000 or $4,000 a month, they might wake up a decade later and find they're spending $10,000 a month, he added.
Licea spoke to several Henrys who had expensive habits, like staying at luxury hotels, taking international vacations, owning and/or renting two homes, and signing up for ClassPass (a gym pass that can cost as much as $180 per month). Henrys won't sacrifice this lifestyle, according to Licea, even if it requires budgeting in other areas: They'll shop at budget stores like Forever 21 or TJ Maxx and vacation using credit-card points if it means more money for travel. These lifestyle choices are a precise contradiction to one of the golden rules of advice often given by experts; avoiding lifestyle creep is a key way to build wealth. But there are forces beyond a Henry's control that are also holding them back financially. Millennials are facing an affordability crisis The economy may seem like it's riding a high right now — the stock market has rallied since fears of an impending recession abounded last year and the US unemployment rate has maintained its half-century low of 3.5%. But that doesn't paint the whole picture. It ignores the fact that living costs have increased exponentially, and income increases simply have not kept up. Consider this: Income for young adults has grown by just $29 from 1974 to 2017, adjusted for inflation. Meanwhile, the median price of home sales has increased by 39% and national healthcare costs per person have increased by $9,000 since 1970 in the same time frame. The cost of education has also more than doubled since then, and it's leading students to borrow more than ever. The national total student loan debt is now a record $1.5 trillion, and the average student debt per 2018 graduate who took out student loans is $29,800.
Even though Henrys typically have high-paying jobs, those who took on student loans to get them owe $50,000 more than the national average. Priya Malani, the founder of Stash Wealth, a financial firm that bills itself as "Home of the Henrys," previously told Business Insider that 40% of her clients have student loans — they owe $80,000 on average. It's all a bad formula for a generation that's already financially behind from the Great Recession. Older millennials got a rough start in the job market and were left playing financial catch-up. Younger millennials watched the financial crisis unfold and became more cautious and risk-averse with their money. Studies have shown that millennials are the most financially conservative generation since the Great Depression and that the majority are wary of investing. So, even if the stock market is good, it's likely that millennials are too scared to put their money in it anyway and are thereby missing an opportunity to build wealth. $100,000 isn't "rich" As living costs surpass income increases, a six-figure salary is no longer what it used to be. In today's economy, $100,000 is considered middle class in the US. The Pew Research Center defines the US middle class as people earning two-thirds to twice the median household income, which was $60,336 in 2016. That means middle-class American households were earning about $40,425 to $120,672 that year. It helps explain why a 2019 Insider and Morning Consult survey found that 38% of millennials earning $100,000 or more a year think they're middle class. About 23% think they're upper middle class, and only 6% think they're affluent.
A family in the US needs an annual income of $421,926 to be in the top 1% of earners. But the minimum income needed to be in the top 1% in every state ranges from $255,000 in Arkansas to more than $700,000 in Connecticut. It all comes down to location — where a person lives affects how far their dollar stretches, how much they're taxed, and how they're influenced by their peers. And while Henrys can live anywhere, Malani, who has worked with clients across 32 states, said, they're predominantly in states home to notoriously high cost-of-living cities: New York City, California, and Washington, DC. For millenials who feel broke despite making six-figure salaries, the situation is affected by both internal and external factors. Since $100,000 doesn't go as far as it once did, they need to be picky when allocating their money. Learning how to balance living for the now and setting money aside for the future will, indeed, mean they have less cash to burn — which can contribute to feeling broke. But these same millennials are also dealing with economic circumstances beyond their control, highlighting the consequences that have largely affected their generation as a whole. Even with careful personal spending habits, that $100,000 salary does seem a lot smaller in the scheme of today's higher cost of living, astronomic student debt load, and the ongoing fallout of the recession.SEE ALSO: Edit in Viking Meet the 'Henrys': The millennials making 6-figure salaries who have 'pleasure funds' and enough money to travel — but still say they feel broke DON'T MISS: 'High earner, not rich yet': How to tell if you're a 'Henry,' based on your salary, savings, and lifestyle Join the conversation about this story » NOW WATCH: Traditional Japanese swords can take over 18 months to create — here's what makes them so special
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As a financial planner, I see the choices millennials are making with their money. Some...As a financial planner, I see the choices millennials are making with their money. Some are good, while others have long-lasting negative impacts they might not realize. Many aren't saving enough for retirement — or saving anything at all — and missing out on employer-sponsored 401(k) plans and matches. Most millennials I work with don't have life insurance, even though term insurance costs about $20 to $30 a month for a young, healthy individual. Policygenius can help you compare life insurance policies to find the right coverage for you, at the right price » When it comes to managing money, there isn't one right way that works for everyone. As a financial planner, I know first-hand how personal your personal finances can be. Millennials have different financial habits than generations before and are more likely to have lifestyle creep and delay saving for retirement. If you're a millennial, don't make these money mistakes. 1. Paying off debt instead of saving for retirement Somewhere along the line, millennials started to think paying off loans was more important than building their nest egg. Having debt can be a burden, but you'll be in more trouble if you put off saving for retirement. Contributing to your retirement should be a top priority no matter how old you are. If you can't save a lot right now, start small and slowly increase your savings rate over time. You might start with 5% and work your way up from there. 2. Allowing lifestyle creep Lifestyle creep is an easy trap to fall into. I see clients who get a better job or a raise at work and buy more expensive things because they think they can afford to splurge now. You might upgrade your car because $200 a month isn't a big deal, buy nicer shoes, or subscribe to more streaming services. While Hulu, Netflix, Spotify, and Amazon Prime aren't much on their own, the costs can really add up month after month. Look at what you're spending your money on and cut out a few things. Even if it's just a few dollars, your future self will thank you for it. 3. Not buying life insurance Most of the millennials I work with don't have enough money saved to take care of their family if the worst should happen. But they also don't have any life insurance. What millennials don't realize is that term life insurance is cheaper than they think. For $20 to $30 a month, you could have a death benefit of $500,000 or more to protect your loved ones after you're gone. 4. Skipping out on an employer's 401(k) plan The earlier you save for retirement, the better off you'll be. The trouble is that millennials opt out of their employers' retirement plan because they don't think they will work there until they retire. But you don't have to make a long-term commitment to an employer to take advantage of their 401(k) plan. Any money that you contribute to your plan, you get to keep. If you add $100 a month and switch employers after a year or two, you get to take that money with you. It's called vesting, and you are fully vested in your contributions at all times. 5. Risky investing New apps and investment options are causing millennials to be impulsive about their investing. While a new app or up-and-coming cryptocurrency might sound promising, they could open you up to more risk than you can comfortably tolerate. You should never invest money that you can't afford to lose. Before putting money in the "next big thing," figure out how much risk you're willing to take on and stick with that approach. If you're not sure, get help from a financial planner to make a strategy to reach your financial goals. More financial planner coverage Everything you need to know about financial planners 5 times you should consider meeting with a financial planner People with a financial adviser say they aren't just better with money — they're happier with life overall Here's how much a financial adviser costs Join the conversation about this story » NOW WATCH: Why electric planes haven't taken off yet
'It's Gen Z you want': Millennials are defending themselves from accusations that they're out partying and ignoring warnings amid the coronavirus pandemic
Millennials say it's Gen Z, not them, who have been partying and ignoring coronavirus warnings. "Millennials...Millennials say it's Gen Z, not them, who have been partying and ignoring coronavirus warnings. "Millennials are not partying," tweeted one millennial. "We and our anxiety issues are holed up ... It's Gen Z you want." Young people have been called out for not social distancing, but it's Gen Z who keep crowding beaches for spring break. Visit Business Insider's homepage for more stories. Millennials are sick of getting called out for not staying inside during the coronavirus pandemic. Everyone from celebrities like Hilary Duff to federal and local government officials have urged millennials to stay home. In a White House press conference on Monday, Deborah Birx, leader of President Trump's virus response group, said millennials "are the core group that will stop this virus." "It's important that we all work together, especially younger people, millennials," Seema Verma, administrator at Centers for Medicare & Medicaid Services (CMS) Administrator, said. "They may feel healthy. They may feel like if I get this virus it's not going to be that big of a deal, it's just going to be like the flu, but the reality is they can contribute to the spread." But according to millennials, they're already heeding coronavirus warnings. It's Gen Z you should be reprimanding, they say. "Millennials are not partying," tweeted National Review reporter Mairead McArdle. "We and our anxiety issues are holed up working from home, watching Hulu, and yelling at our parents not to go outside. It's Gen Z you want." Millennials are not partying. We and our anxiety issues are holed up working from home, watching Hulu, and yelling at our parents not to go outside.It's Gen Z you want — Mairead McArdle (@JohnsonHildy) March 19, 2020 Younger generations have recently gotten a lot of flak for taking advantage of cheap airline tickets to book travels or vacations and for crowding beaches and partying on booze cruises while on spring break. Jawontae Rodgers, a 21-year-old who spring breaked in Panama City Beach, told Valerie Crowder of local outlet WFSU he didn't think the virus was a "big deal." "I'm not saying I can't die from it," he said. "I just don't want to stop living my life because you only have one. YOLO: You only live once." According to the Pew Research Center, millennials turn 24 to 39 in 2020. The oldest of Gen Z turns 23. That means millennials have graduated college — it's Gen Z who are the ones living it up on spring break. Both generations, though, seem to be into today's cheap travel, according to Ben Kesslen for NBC, who talked to a range of 20-somethings about the trend. Millennials are more concerned about their boomer parents Lauren Morgan, a millennial licensed professional counselor in Cleveland, told Troy L. Smith of Cleveland.com that not all younger generations have recognized the gravity of the coronavirus pandemic. Their attitude isn't surprising, she said, when they already feel the deck has been stacked against them. "For a lot of millennials [and Gen Z], it already feels like the end of the world," she said. "These are young people who don't know anything other than living paycheck to paycheck. They're riddled with student loan debt. They can't afford something like a house or even a car. She added: "We're also in this political climate of young people choosing to vote for Bernie Sanders and baby boomers voting for the same sort of thing we've always had. So, millennials and Gen Z say to themselves, 'You don't care about us and whether we can afford healthcare. So, we don't care about this thing that's affecting you.'" But as McArdle's tweet shows, there are millennials out there taking this seriously. The coronavirus is scary to the generation because it shows them how old their parents are. Many millennials have baby boomer parents in the high-risk group for coronavirus: Those over age 60 and those with preexisting conditions are at greater risk of becoming ill. Coronavirus risk also increases with age. Business Insider's Hayley Peterson spoke to several millennials who said they are concerned about their parents' health and who voiced frustration in trying to convince them to stay inside. As Jared, 31, told Peterson: "Literally was fighting with my mom this morning about her a) going to Atlantic City last weekend; b) going to another casino via bus this weekend; and c) a cruise in April she refuses to cancel."SEE ALSO: 'We're not worried about it:' Photos show the coronavirus pandemic isn't stopping spring breakers from crowding beaches and partying on booze cruises DON'T MISS: 'The party is over': Officials in Miami, the unofficial spring break capital of the US, are kicking partiers off beaches and implementing 11 p.m. curfews to curb the coronavirus spread Join the conversation about this story » NOW WATCH: How networks treat the Democratic debates like reality TV
A startup founder who spent 100 hours interviewing millennials found 3 hangups usually keep them from being good with money
Sunny Israni, founder of personal finance app Clasp, spent over 100 hours interviewing millennials about...Sunny Israni, founder of personal finance app Clasp, spent over 100 hours interviewing millennials about their money perspectives and habits. In his interviews, he found that millennials who aren't good with money don't have a clear vision of what money means in their life. He also found that they tend to over-spend in social situations. And, when millennials fall behind their peers financially, some of them have a tendency to give up. What separated millennials who are good with money from those who aren't is mindset — they know what role money plays in their lives and have goals, have boundaries on spending, and work to improve their finances. Want to do better with your money? SmartAsset's free tool can help find a financial adviser near you » Sunny Israni wanted to know what separated the millennials who are good with money from those who aren't. So he asked them. For his new business, a personal finance app called Clasp, the tech entrepreneur and former Wall Street trader spent over 100 hours talking to millennials across the US about their money habits, attitudes, and goals to find out what made millennials good with money. "I wanted to target two different groups: people who tend to make really great decisions around their finances, and people who may not have made the best decisions," he told Business Insider. "I wanted to try to understand, 'what are the big factors that drive the quality of our financial decisions? Is it income? Is it geographic location?'" He found that what made millennials good with money wasn't either of those factors. Rather, it was how they thought about money. In his research, Israni found that three main psychological hurdles tend to keep millennials from being good with money: 1. They don't know what money means to them Israni found that nothing had a bigger impact on how millennials manage their money than their mindset. "I think about it in the terms of identity. As I was speaking to a lot of the participants, I got the sense that when people describe their financial behavior, they're really describing who they are as people," Israni said. "It's like their spending is a declaration of their identity." Millennials who are good with money tended to have a clear vision of what they want from it, and know their money goals. "I spoke to someone from the Midwest who was early in his career and really militant with savings. I got the sense that he was deriving his whole identity from financial freedom. He had crystal clarity on what money represented in his life," Israni said. "People who weren't necessarily making as sound financial decisions had this tension around what money really represented in their life." This tension tended to mean more than internal conflict for the millennials Israni spoke to — it also led to bad habits. "The people who had that tension the most tended to be the people who didn't necessarily make the best financial decisions," he said. 2. They don't set limits on social spending Israni noticed a bad habit that held millennials back: Spending too much on social situations. He also noticed that millennials who are good with money knew where to draw the line on their social spending. "When you're in social situations, people tend to spend more, and we know this. But when I looked at the people who are doing really well, I've found that almost all of those people had an understanding with their friends and their social circle around activities that made sense for them, and that were not necessarily so expensive," he said. "I got the sense from everyone that the price tag you pay to pursue a social activity almost never really correlated with the joy and happiness and the memories that come out of that." Meanwhile, the others kept spending, and weren't honest and realistic with their friends about what they could afford. "The people who weren't making sound decisions didn't talk about it with their friends," Israni said. Israni made it clear that cutting out social spending isn't the answer. Rather, it's about knowing where your boundaries lie. "Have a list of things to do that don't necessarily break the bank," Israni said. "Your friendship with someone shouldn't be expensive." 3. They adopt a 'screw it' mentality and stop trying Israni found that millennials who were financially behind didn't feel that anything could change for them. He found that eventually, they stopped trying. In his opinion, it all comes back to mindset. "After they were past a certain level of circumstances, they got into this whole 'screw it' mentality, where they just felt like they couldn't get a leg up," Israni said. "Oftentimes, it was mental. They felt so behind their peers that they just said 'screw it.'" "It's exacerbated by the current macro trends, especially around climate change and our political system," Israni said. "People are like, 'well, climate change is going to end the world anyway, so might as well live it up right now.'" For a generation that's been behind financially from the start, that's a problem. "It is very much negatively impacting financial behavior, especially for people who are already behind," he said. For these millennials, Israni said making progress comes down to thinking differently. "If their mindset isn't right, then they're not going to use any budgeting, whether that's a spreadsheet or an amazing app or even just you looking at your bank account," he said. Millennials who are good with money, he found, want to improve their circumstances, and don't let the doom and gloom stand in the way of their money goals. SmartAsset's free tool can find a financial adviser to help you get better with money » More personal finance coverage 4 reasons to open a high-yield savings account while interest rates are down It took less than 10 minutes to open a high-yield cash account with Wealthfront and earn more on my savings How to buy a house with no money down When to save money in high-yield savings Best rewards credit cards 7 reasons you may need life insurance, even if you think you don't Join the conversation about this story » NOW WATCH: How to find water when you're stuck in the desert