johnm

It’s a common problem: “I’m making good money, but I don’t have much to show for it.”

I was introduced to a term recently that you’ll find alarmingly familiar – HENRY, which stands for ‘High Earner, Not Rich Yet.’

Does this sound like you?

Earning a healthy salary is one thing, but it doesn’t automatically make you ‘rich’. That’s a different ballgame.

And while we all have our unique visions of ‘rich’, for me, it’s about replacing my salary with investment income.

What are the common traps for HENRYs, and how can you sidestep them?

Trap 1: Weak money habits

Managing money is like building muscle.

I’ll explain this through the prism of an elite athlete.

You don’t expect to execute an elite athlete’s regimen overnight. It starts with mastering the basics – building fitness, strength, and coordination over time.

Elite athletes make things look easy, resulting from years of honing these skills.

It’s the same with crushing it with money.

Start with the fundamentals: build a solid system to manage your day-to-day cash flow, learn some investment basics and smash any ‘bad’ debts.

By building solid financial habits, setting incremental goals, and hitting them, you’ll accumulate a toolkit of skills and habits to propel you forward.

Remember, seeking perfection from the get-go can be paralyzing. Start where you are, and improve as you learn.

Trap 2: The creep

Here’s a golden nugget of wisdom from one of my mentors: “If you can’t manage $100, you won’t manage $1 million.”

Falling victim to lifestyle creep is a one-way ticket to remaining a HENRY.

As your salary climbs, so might your taste for the finer things – like swapping that perfectly fine $20 vino for a $150 label.

But is the leap in price genuinely worth it?

Something to mull over…

Trap 3: Flying blind

Building a house doesn’t start with the details like choosing the carpets or installing toilets. It starts with an overarching plan, a bird’s eye view before you zoom in on the specifics.

It’s the same with getting ahead with money.

I’ve seen HENRYs dabble in stocks, dump some funds in savings, flirt with the idea of an investment property, and put a little extra into super.

But why?

Is it because Jim from accounting won’t stop raving about his latest stock pick, because Aunty Vera dropped her two cents, or some media pundit sounded convincing?

It’s like throwing darts blindfolded — sometimes you hit the board, but you’re relying mostly on luck, not skill.

This scattergun approach, or ‘Spraying & Praying,’ isn’t going to cut it.

Let’s face it, if you’re a HENRY, you’re probably spinning a lot of plates — work’s crazy, home life’s buzzing and those big life dreams aren’t going to chase themselves.

Who’s got the time to sit down and get all your money ducks in a row? So, yes, sometimes the cash decisions get a little… let’s say, haphazard.

But breaking it down into manageable, actionable steps can help you make progress (paying off a credit card, saving for an emergency fund, or a holiday).

And yes, while I may be biased, enlisting professional help – a top-notch accountant, a sharp mortgage broker, or a skilled financial adviser – can save you a lot of time, hassle and head space.

Your Next Steps

You can leave the ‘High Earner, Not Rich Yet’ badge behind.

Re-evaluate your approach to money, curb unnecessary expenses, and redirect your savings into building up good assets.

And get the right pit crew around you to keep you focused and accountable.

Cheering you on!

 Certified Financial Planner®, Director

Download our Money Flow Playbook

Click here to download a copy of our Money Playbook and Dashboard.

Book a free phone chat

Click here to book a free phone chat to talk about your specific situation.
Financial Advisor Geelong.

Important

This is general advice only. Your personal objectives, needs or financial situation have not been considered when preparing this information.

You should consider the appropriateness of any general advice we have given you and, if necessary, seek advice before acting on it.

It’s always recommended to consult with a qualified tax professional to maximise your tax position.

Imagine this: It’s 2008, and financial markets are crashing everywhere.

People worldwide are scrambling to sell their investments as quickly as possible.

Investors are sweating bullets, desperately trying to rescue properties from foreclosure.

Lehman Brothers, a major financial institution, has just collapsed.

Yet, one man was quietly strolling around America, snapping up high-quality businesses at a bargain price.

This man is the Michael Jordan of the investment world: Mr. Warren Buffet. (If you’re wondering who Warren Buffet is, he made a cameo in the Entourage Movie.)

He invested $5 billion in Goldman Sachs, a move that has proven to be astute.

How did he do it?

He had been steadily building up cash in his coffer, prepared for a rainy day, a downturn like this.

Buffet knew that the bad times always come and go (think about all the market highs and lows we’ve seen in the last 30 years!)

But he sees these gloomy times not as setbacks but as prime opportunities for those organised and prepared to seize them.

His robust stash of cash let him weather the storm and capitalise on opportunities.

Let’s break down why it’s wise to have cash stashed in your coffer (ideally 3-6 months of your fixed costs):

1. It’s your safety net when times get tough.
2. It’s your ticket to jump on opportunities when they pop up.
3. And it’ll help you avoid bad debts.

Steps for building up your cash stash

1. Jot down all your fixed costs. Think about fixed costs as money out the door before you’ve been paid (sad but true).
2. Calculate the monthly total for your fixed expenses and then multiply that by six.
3. Next, check how much cash you have in your bank account/s. Are you on target? Above? Or is there a shortfall?
4. If there’s a shortfall, divide the shortfall amount by 52. That’s the amount you need to set aside weekly over the next year to have a healthy amount of cash stashed.

If you’ve got a surplus stash of cash, think about how you can get that money working harder for you.

You can download our Money Flow Playbook here for more practical steps to get control of your money.

And our Investment Playbook is a great starting point if you’re keen to learn more about getting your money to work smarter for you.

I’ll leave you with the famous Warren Buffet quote: “Be fearful when others are greedy and greedy when others are fearful.”

Cheering you on!

Download our Money Flow Playbook

Click here to download a copy of our Money Playbook and Dashboard.

Book a free phone chat

Click here to book a free phone chat to talk about your specific situation.
Financial Advisor Geelong.

Important

This is general advice only. Your personal objectives, needs or financial situation have not been considered when preparing this information.

You should consider the appropriateness of any general advice we have given you and, if necessary, seek advice before acting on it.

It’s always recommended to consult with a qualified tax professional to maximise your tax position.

We all love the dopamine hit when those tax return dollars hit our bank account. You immediately visualise all the ways you can spend the windfall.

But, before you start tapping your card left, right and centre, consider funnelling some of your cash injection responsibly so your future self will high-five you.

1. Clear out the blockages 

One responsible approach is to square away any nagging consumption debts such as credit cards, personal loans, or even that pesky HELP loan.

I think about your money flow like your body’s circular system. Your body needs blood to pump it around to keep you fit, keep your immunity up, build muscle, and so forth. If your body has blockages and your blood can’t pump around, you will be tired and generally unwell.

It’s the same with your wealth progression, particularly your money flow.

If you’ve got blockages in your cash flow, it can seriously hinder your ability to thrive financially.

Prioritising paying high-interest debts can help you flush out the blockages to free up cash flow to improve your financial well-being.

2. Build your cash floor

One of the critical mistakes I see people make is not having a financial buffer, or as we call it, a ‘cash floor’ for emergencies.

Money is coming in and going out, and none is sticking to the side.

So, they use credit as their ‘cash floor’ when the unforeseen happens. 

The cash floor is the pot of money you set aside that you don’t touch until something unexpected happens and you need cash quickly.

It’s your emergency piggy bank.

When the fridge carks it, you need to get a new engine for your car, or your beloved pet needs an emergency operation, you dip into your cash floor rather than pulling out your credit card or borrowing money from your in-laws.

3. Invest in yourself

This is always a wise choice. 

Furthering your education or acquiring new skills can boost your career prospects and possibly lead to more income or job fulfilment.

You could use your tax return to enrol in a course or a workshop you’ve had your eye on for a while.

Investing in yourself and expanding your knowledge and skillset can pay significant dividends.

4. Look after ‘Uncle Ron’

If you already have your cash floor, consider putting some money aside for later on or ‘Uncle Ron’. 

Albert Einstein called compound interest the ‘8th wonder of the world.’

Albert was spot on. Compounding is magnificent when it gets going and creates a snowball effect.

The key is to get started and be consistent.

If you started with $2,800 and invested $10 per day in the Australian Share Market, your total investment would grow to $61,861 in 10 years*. 

Extend this to 20 Years, and your investments should grow to $192,955.

Extend this to over 30 years, and this grows to $483,938.

[*Assumptions: 8% interest rate, compounding monthly. See Money Smart Compound Interest calculator].

The sooner you start investing, the longer you have the power of compounding to work its magic.

For more about getting started with investing, download our Investment Playbook.

5. A sugar hit

While we encourage you to be responsible with your tax return flush funds, we are also big believers in balance – enjoying your money now (guilt-free) and making smart moves for your future.

We all deserve a sugar hit now and then.

So, once you’ve funnelled some of your tax return dollars to the responsible actions above, reward yourself with an experience.

Some of my best memories, both from childhood and my adult life are the experiences that I’ve had. 

Whether that be a family holiday to QLD or even just heading to the ‘G’ to watch a game of footy, these are the things that I look back on fondly, and that keep me motivated and rejuvenated.

Receiving a tax return can create a great opportunity to make fun and strategic decisions. 

But, everyone’s situation is unique, so it’s important to assess your priorities and make choices that align with what’s important to you.

Cheering you on!

Download our Money Flow Playbook

Click here to download a copy of our Money Playbook and Dashboard.

Book a free phone chat

Click here to book a free phone chat to talk about your specific situation.
Financial Advisor Geelong.

Important

This is not tax advice. This is general advice only. Your personal objectives, needs or financial situation have not been considered when preparing this information.

You should consider the appropriateness of any general advice we have given you and, if necessary, seek advice before acting on it.

It’s always recommended to consult with a qualified tax professional to maximise your tax position.