When you hear “high-income earner,” you may think of someone who makes a six-figure salary and has no financial struggles. Maybe a high-earner is saving more for retirement, investing more money in general, and overall feeling less financial stress. But is that really the case?

A recent survey indicates that 51% of consumers earning $100,000 or more are living paycheck-to-paycheck, up 9% over the previous year.¹ These individuals may be among a contingent known as HENRY: high earners, not rich yet. Considering economic factors like inflation and rising personal debt, HENRYs still need to be strategic about allocating their income.                

Below, we’ll take a look at some reasons why high-income earners are struggling to save, plus considerations to help you save more and get on track to meeting your financial goals.            

Why high earners aren’t saving enough

There are a few factors that make saving a challenge for most everyone, even those with a high income.

Cost of living

Keeping up with living costs has gotten more difficult over the years, particularly in densely populated metropolitan areas such as New York, San Francisco and other hot spots throughout the U.S.

A single person with no children needs $84,026 after taxes to support a comfortable lifestyle in the San Francisco-Oakland-Berkeley area, and the New York-Newark-Jersey City area demands a take-home pay of $78,524.² Remember, this is after taxes.

Of course, rent and mortgages aren’t as expensive in many parts of the U.S. But these figures illustrate that where you live can limit your ability to save.

Lifestyle habits

Everyone’s lifestyle choices and needs are different. But living without a budget can significantly impact your saving potential, especially if you continually increase your spending with every raise in pay. Called lifestyle creep, higher spending can creep right into your budget.

Let’s say someone makes $105,000 per year and ends up spending somewhere around 75-80% of their income on basic living expenses like rent, utilities, and transportation, as well as discretionary spending like dining out and going on vacations. Based on these assumptions, it would be difficult to cover expected expenses like surprise healthcare bills or other emergencies.

Consider tracking your expenses with free financial tools like the ones offered by Empower, which aggregate all of your financial accounts in one secure place. You can review your spending over time and set a budget that aligns with your values and goals.

One budgeting approach is the 50-30-20 rule, meaning you spend 50% of your take-home pay on essentials, 30% on discretionary spending, and put 20% toward debt payoff or savings.

Debt

Many high-income workers – and those of all income levels – continue to struggle with growing debt. The average American holds a debt balance of $46,777 across credit cards, personal loans, and car loans.³ Lifestyle creep can play a part in this cycle, as high-income earners upgrade their cars, household goods, and vacations – and charge it to credit cards.

Along with credit card debt, many high-income earners of younger generations are struggling to pay down student loans to cover the weighty cost of higher education. With education costs continuing to rise, it’s important for younger generations to consider ways to reduce their costs through scholarships, grants, and if possible, family assistance.

Ways to save more

It doesn’t necessarily matter how much you earn because if you are making $100,000 a year but spending $101,0000 a year, you’ll have a negative net worth. Working with a financial professional can help you map out your financial future and set realistic goals.

Following are a few ways to make the most of a high salary and cut the N out of HENRY.

• Acknowledge that tough times happen. It can be easy to think your income will rise over the course of your career. Unfortunately, job loss, healthcare surprises, and other financial emergencies can throw us for a loop. The sooner we acknowledge that there will likely be challenges, the better we can prepare. Establish an emergency fund, manage your spending habits, and get into the practice of paying your future self first by investing consistently.
• Speaking of which, keep a progressive savings rate. Do you know how much of your after-tax income you are saving? Whether it is building up your emergency fund or contributing to a brokerage or retirement accounts, set a goal on how much you would like to save and how. Try sticking to a set percentage of your income so that as your income rises, your savings do, too. For instance, you may be due for a bonus or pay raise. Instead of spending all of the new money, consider treating your future self by investing that extra income in your 401(k), IRA or investment brokerage account.
• Focus more intently on building net worth vs. growing income. Your net worth and your income are both important factors in your overall financial picture. But building real long-term wealth goes hand-in-hand with focusing on net worth. Income is just one source of wealth creation. Once you shift your eyes to your net worth, you can start developing multiple income streams through investing, optimizing your finances for taxes, considering estate planning, and thinking through advanced moves to get you further ahead.
• Automate your savings. If you don’t your full paycheck hit your bank account, you can’t even consider spending it. This can be a tactic to help you stick to your established spending versus saving ratio. If you plan to use your money in the short-term, consider parking some of it in a high-yield, liquid cash account that has no fees or minimum requirements. You can also funnel funds directly into your retirement savings or brokerage account.

The bottom line

Saving money takes discipline. The more you make, the more discipline you need because there will be more temptations. Pay yourself first and focus on growing your net worth.