Saturday, February 28, 2009

I have a bone to pick

I check into a few news and financial sites each day and read the articles that look interesting to me. With this whole economic crisis business, I have seen the term HENRY a few times (quite possibly being used by one author, I haven't paid that much attention). HENRY stands for High Earner Not Rich Yet. It applies to people (married couples with kids, from the context of the article) who just can't save any money on their income of $250,000/yr or more. The argument goes that the poor pitiful HENRYs are unfairly taxed by the alternative minimum tax (AMT) and NEED to put all their money towards lessons and private schools for the kids, college savings, house payments, etc.... The most recent article suggested changing the name to HENRI (high earner not rich indefinitely) because new tax policies will take even more from them. I'm going to briefly put the tax issue aside because I just don't care to discuss it here and start a battle (if you know me in real life and would like to discuss in person, I'm always up for that). For the sake of argument, lets assume these people bring home $125,000/yr after taxes (they're really in the 35% bracket, I think, so I'm erring on the side of caution). With over $10,000 to spend every month, they can't save anything?!? Really?? I have a HUGE problem with this argument. The problem is not that they CAN'T save, it's that they CHOSE not to. They are choosing to live a $250,000 lifestyle. Here's a radical idea....when a major windfall or raise comes your way, keep living the exact same way you are and SAVE the leftover. If these families led $50,000/yr lives (and plenty of families feel very very blessed to make $50,000/year---BEFORE taxes), they would have at least $75,000 per year to put towards savings. They might quickly pay off a reasonable house (no McMansions) with that money. If they put it all in a measly low-interest savings account (1.75% interest), they'd have over $800,000 saved in 10 years. I'm really finding it outside my abilities to have sympathy for the poor pitiful HENRYs---how big is their house? How big is their TV? Their cable package? Do they drive new cars? What kind of family vacations? How often are they eating out and where? How often is everyone getting new clothes? We all make our choices and regardless or fair or not tax policies, someone who makes $250,000/yr and has no savings, has made the CHOICE not to have savings (barring major unexpected medical expenses, natural disasters....). I will continue to think of this grouping as HENRY-BTSIAs: High Earners Not Rich Yet....BECAUSE THEY SPENT IT ALL!!!!

4 comments:

Karen said...

I LOVE IT! Thank you for saying what I feel! I would feel very greatful to make $250,000/yr. MAN!!! If those people just cut back a little think of all the $ they could save. GRRR...

One Acre Homestead said...

One thing to consider is the vast differences in cost of living. In California, New York, etc., the cost of living is so much higher than here in the south. This didn't really hit me until I saw a show on...I think it was HGTV...that showed what kind of home $200,000 would buy in different parts of the US. I was amazed at the differences. For instance, a one bedroom, one bath apartment in Brooklyn was $200,000 - crazy.

The Hills said...

Very true. As you move west and east from here, prices just go up. There was a very noticeable difference in cost of living when I was living in Utah, and on trips to California, I could literally watch prices increase the further west I drove. BUT, a house (apartment, condo, whatever...) is also worth exactly what someone will pay for it. On paper, we both took a pay cut when we moved back to Texas, but we were actually getting more money as compared to our cost of living (because we had more experience, references, etc...). It was a conscious choice we made to move back here and a BIG decider was the cost of living in this area. I would still hold the argument that a person with an income in that range has the ability to re-locate if they so choose (and again, they may not for various reasons, which is fine---just don't complain about it).

TennZen said...

A-MEN! I take serious issue with people who live beyond their means - many of whom I have to consult with on a daily basis. I can't tell you at the number of people I've seen on 6-figure incomes who are still up to their eyeballs in debt.

Cut the credit cards. Live reasonably. Duh!

Keep on preachin', Sister!

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