The Top Financial Missteps High Earners Make

Woman sitting on a bench with several shopping bags

High earners face unique financial challenges that can prevent them from building true wealth despite their income. For those in the “High Earner, Not Rich Yet” (HENRY) category—typically urban professionals in their 30s making six-figure salaries—managing common financial pitfalls can help with long-term prosperity.¹

Lifestyle Creep: The Silent Wealth Killer

Many high earners allow their spending to increase proportionally with their income, a phenomenon known as lifestyle creep.

In one striking example from a CNBC report, a couple was shocked to discover they had spent $1.4 million on jewelry over 18 months. After examining their spending patterns, they adjusted their priorities the following year.

Smaller purchases can also undermine financial progress when they accumulate over time. When analyzed collectively, dining out, travel, and gift expenditures often surprise people.²

Home and Education Decisions: Emotional vs. Rational

Big-ticket purchases, such as a vacation home or exotic car, can become expensive ongoing financial obligations that can sometimes be budget busters.

For example, with a vacation home, here are some top considerations:

Will you buy it outright or take out a mortgage? Are you interested in renting it when you’re not there? What’s the impact on your cash flow?
How Much Time Will You Spend There? If you only intend to spend a few weeks a year there, you’re likely better off renting.
Will a Second Home Increase Your Stress? Like your primary residence, you’ll have to deal with utilities, maintenance, repairs, property taxes, homeowners’ insurance, and other considerations.

The Balancing Act: Strategic Spending Vs. Saving

Not all discretionary spending is problematic. It can be helpful to follow some broad guidelines so you have a better idea of when you are pushing certain limits. For example, have you ever heard of the 50/30/20 Rule? It suggests allocating 50 percent of your income to essentials (rent, groceries), 30 percent to wants (entertainment), and 20 percent to investments. It’s only a high-level rule, but it can offer some insights if you find your spending is much different.

Balancing Uncertainty

According to Business Insider, many high earners save 40-70 percent of their income because they are concerned about economic uncertainty and future expenses like childcare or supporting aging parents.²

Working with a financial professional can help address that uncertainty by creating a long-term financial plan based on your financial goals, time horizon, and risk tolerance.

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