Have you heard of the latest millennial trend? They’re called HENRYs—high income, not rich yet. These are millennials who have finally scored the six-figure job of their dreams, but who somehow only manage to break even. Student loans, childcare, and the high cost of living eat their entire paycheck.
While it’s undeniable that just getting by is harder than it used to be, if you’re making six figures, being broke is optional. People—probably including yourself!—have lived comfortably on half that. So it’s time to take a serious look at your financial decisions and ask how to keep more of your high income.
Six Figures Isn’t What It Used to Be
Thanks to inflation and costs that increase faster than wages, six figures isn’t the fortune it was a generation ago. It’s almost twice the median, and a much higher income than most millennials make. But it isn’t “never have to worry about money” rich. People who make six figures can have a high standard of living and meet financial goals, but it does involve keeping a budget and watching your spending.
Also, six-figure money means something very different depending on where you live. In a city like New York or Los Angeles, much of that salary will end up paying for housing. A one-bedroom apartment in New York City costs an average of $2098 a month, and a modest house can run up to a million. Meanwhile, transportation, meals out, and almost every other expense will cost more as well.
If you have a choice of where to live, staying in an area with a lower cost of living could make a massive difference in what you can afford. But with many six-figure jobs, living within commuting distance of a city is a requirement. Before accepting a job, consider how far the paycheck will actually go in the city you will move to.
It’s Not the Avocado Toast
We’ll never tell you that you can make up for punishing student loans by spending less on avocado toast and lattes. Your biggest budget items are probably loan payments, housing payments, and insurance. You may have already found that a month of avoiding your favorite treats hasn’t saved you that much.
Instead, make a budget and find out what the biggest-ticket items are. How much goes to housing? You might be able to reduce that by settling for a place just as nice, but in a slightly less desirable neighborhood. Or is it travel? Set a budget for vacations and only take trips you can afford. Don’t let your high income on paper make you forget your disposable income is still limited.
Once you’ve trimmed the biggest budget categories, you can calculate a reasonable “fun” budget and stick to it. Never try to set a fun budget of zero; you won’t follow it.
Get Out of Debt
When you did your budget, you may have found the biggest line items were debt payments. Millennials often have to get deep into debt before landing that high-earning job. You might have student loans, credit card debt, and more. And, if you were struggling before, you may have gotten into the habit of paying only minimums.
When you receive your first big paycheck, don’t spend it all on improving your quality of living. First, you have to dig yourself out of the debt hole. You can’t predict what life changes might come next: needing to move to a more expensive city, getting married, or having a child. The more you pay off now, the more freedom you will have when those life changes come.
Try debt payoff strategies like paying off the high-interest debt first. Check to see if any of your loans have penalties for paying them off early.
Still Broke? Talk to a Financial Advisor
Once you achieve a high-earning job, it’s time to get your financial house in order. Within a few years, you could be debt free and saving for the future. But it might take more financial savvy than you needed when you were making minimum wage. A financial advisor is there to help with all aspects of your budget, debt, savings, and investments. Contact us to get started today.
