Money and Me: High income, not rich yet - how can Singapore’s HENRYs build wealth?

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A high salary can pay for a comfortable life, but how much of it is building financial security? A mortgage, car payments, tuition fees, as well as other major family commitments or even a health crisis, can leave even a well-paid household with little room to save. There's a name for this group. I didn't know about this. It's called Henry's. High earners, not rich yet. Henry's, their income is high, but they may still worry about losing their job or not having enough money for retirement. Today on Money And Me, we want to find out about the gap between earning well and building wealth. How do you turn a good income into lasting financial security? With us is Grace Tay, Associate Director at Finexis Advisory. Grace, good morning to you. Welcome to the show once again.

Grace Tay (1:17)

Good morning, Lance. Good to be here.

Lance Alexander (1:18)

Great stuff. What separates a high earner from someone with high net worth?

And where do Henry's high earners not rich yet fit in?

Grace Tay (1:29)

Yeah, so that's an interesting demographic, right? And I think people are increasingly aware of this demographic. And maybe just to explain a little bit about what Henry's mean, high earners not rich yet. Typically, they refer to households with an income of at least 15,000, so 15,000 to 30,000.

And these are households that tend to fall outside of government safety nets. So, what happens is that they do have a high fixed cost of living and are oftentimes under a lot of financial stress, right? They are supporting elderly parents, younger children, and as well as their own financial goals. So, your question about what separates high earners from high net worth, I think the difference is between income and wealth. High income does not mean high wealth, right? Because oftentimes, the lifestyle can still be very dependent on the next salary coming in. So, like you mentioned, mortgage, cars, supporting parents, children, travel, this can all seem like very reasonable expenses in and of themselves. But if you take together, they do accumulate, right? And all of it may be dependent on the next month's salary to continue supporting them. But once that salary stops, the question is, is there sufficient wealth to continue supporting these expenses?

Lance Alexander (2:42)

Have you got an example to give us maybe? Because you don't have to name names. I'm just keen to find out if someone's got a household income of $15,000 to $30,000, you think that they're doing fairly okay.

Grace Tay (2:55)

Yeah, it's pretty hard to imagine that someone who's earning $30,000, let's say, is struggling, right? Yes, so I do have maybe two examples of these two individuals. They are similar in age in their late 20s, and I've had the opportunity to work with both of them. So one of them earns more than $200,000 a year.

But interestingly, he has essentially no savings. So whatever comes in is out by the end of the month.

Lance Alexander (3:22)

How? What?

Grace Tay (3:23)

So there's your country club memberships, your gym memberships, he is always treating his friends to meals. And basically, it's quite an expensive lifestyle that he's living.

Yeah, so that is one individual. And then I have another individual who earns not more than $5,000 a month, also in her late 20s. But by the time we started working together in her late 20s, she's already saved more than $100,000.

Lance Alexander (3:51)

And she's earning about $5,000 a month.

Grace Tay (3:53)

Not more than $5,000.

Lance Alexander (3:54)

Not more than $5,000 a month. Wow.

So how important is it then to get individuals who earn money, as soon as the pay gets into their bank account, to say this money goes into savings? Is that tough for people to do? Obviously, the first example you gave, if you're treating your friends constantly, if you've got membership to a country club, that's all something you need to cancel out or cut down in a big way.

Grace Tay (4:21)

So I think before perhaps we think about cutting expenses, I think the first step is really to have clarity, to understand what kind of options you want your money to create for you, and the job that every dollar has to do. So you're right that it's usually wise to start with, how much do you want to allocate apart from just spending it today, right?