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Making $200K and Still Feel Financially Stretched? You’re Not Alone
Making $200K and Still Feel Financially Stretched? You’re Not Alone
For high earners juggling family costs and future goals, the financial stress is real — but it doesn't have to be permanent.
When earning more doesn’t feel like enough
Ed Silversmith, a certified financial planner in Pittsford, New York, refers to clients like these as HENRYs, which stands for “High Earners, Not Rich Yet.” In the U.S., nearly 1 in 7 households made $200,000 or more in 2023, according to the U.S. Census Bureau. Some people in this category have high-earning jobs that require years of schooling and student loans, leaving them feeling like they’re behind their peers who’ve been working since they graduated from college. Others make good salaries and battle lifestyle inflation. “People get so excited when their salaries and bonuses are getting larger and they can finally live the lifestyle they want,” says Carla Adams, a CFP in Orion, Michigan. They upsize their house or cars (or both), and by the time they add in retirement and college savings, child care and paying for children’s activities, they feel squeezed. “They quickly find that it’s really easy to fall into this lifestyle trap,” Adams says. If you’re a high earner with budget challenges, there are some strategies to regain control.Meet MoneyNerd, your weekly news decoder
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.
Crunch the numbers
Modeling future scenarios is a great way to ensure that you’re on track. Financial planners have access to software that does this, but there are retirement calculators online that can help. “I try not to tell my clients how to spend their money, but rather run the long-term projections,” Adams says. For instance, Adams might show a client that cutting their spending by $1,000 a month will make a meaningful difference in their retirement picture.“Smaller changes now have an impact later on because of the power of compound returns,” Adams says. For instance, Adams might show a client that cutting their spending by $1,000 a month will make a meaningful difference in their retirement picture.
“Smaller changes now have an impact later on because of the power of compound returns,” Adams says. For instance, Adams might show a client that cutting their spending by $1,000 a month will make a meaningful difference in their retirement picture.
“Smaller changes now have an impact later on because of the power of compound returns,” Adams says.
Understand your spending
Spending is only a problem if it’s misaligned with your values or long-term goals, Silversmith says. Even if you make a sizable salary, tracking one month’s expenses can give you valuable insights. Try a budgeting tool or spreadsheet to see where your money goes. If your spending isn’t compromising your future plans, Silversmith says, there’s no need for harsh self-judgment. “The reality is, some people are going to look at the numbers and they’re going to walk away saying, ‘There are some places we can clean this up, but we really like the day care the kids go to,’” Silversmith says.Right-size emergency funds
Larger-than-average emergency savings might be smart if you’re in a higher income tax bracket. That’s because less of your income will be replaced by Social Security in retirement, assuming Social Security is still around, Adams says. And, if you have most of your savings in traditional retirement accounts, like 401(k)s or traditional IRAs, your withdrawals will be taxed at higher rates. “The standard advice for people of any income is to be saving at least 10% to 15%,” Adams says. “High earners may need to be saving closer to 15% to 20%.”Adopt a reverse budgeting approach
If you’re not going to track your expenses, consider automating your savings goals and using what’s left for day-to-day spending. That’s what Rob Schultz, a CFP in Encino, California, does with his clients, many of whom are physicians fresh out of training. “We set out a target savings reserve and then put all the other required savings on autopilot,” Schultz says. This includes sending money toward kids’ college funds, student loans and retirement funds.Meet MoneyNerd, your weekly news decoder
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.
So much news. So little time. NerdWallet's new weekly newsletter makes sense of the headlines that affect your wallet.