Even high earners consider themselves ‘not rich yet,’ despite their net worth

These days, fewer people feel financially comfortable, let alone rich.

The average household’s net worth has soared in recent years, rising 37% between 2019 and 2022, according to the survey of consumer finances from the Federal Reserve.

Yet, even as households became wealthier, inflation and instability have left more people in the bucket of so-called HENRYs — short for “high earners, not rich yet.”

Only 14% of Americans would consider themselves wealthy, a recent Edelman Financial Engines report found, and the bar is only getting increasingly out of reach. 

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Despite higher-than-average salaries, those HENRYs have struggled with a higher cost of living and a growing savings shortfall.

A prolonged period of high inflation and instability has chipped away at most consumers’ buying power and confidence. More than half of Americans earning more than $100,000 a year say they live paycheck to paycheck.

“Market volatility over the past two years has taken a financial and emotional toll on individuals and families regardless of wealth,” said Kelly O’Donnell, chief client officer at Edelman Financial Engines.

In 2023, 67% of Americans said they would need at least $1 million to feel rich, up from 57% a year earlier, the Edelman Financial Engines report found. Roughly 20% said it would take $5 million or more.

“That million dollars is just not getting you as much,” O’Donnell said.

To bridge the gap, more people rely on credit cards to cover day-to-day expenses. In the past year, credit card debt spiked to an all-time high, while the personal savings rate fell.

When it comes to building wealth, most consumers say high-cost debt is now their biggest obstacle, according to the Edelman Financial Engines report.

However, feeling financially secure is often less about how much money you have and more about the ability to spend less than you make.

In part, the current economic conditions have fostered the feeling of being overextended, said certified financial planner Jason Friday, head of financial planning at Citizens Wealth Management.

“HENRYs are relative. There are a lot of people who live well below their means and people who spend too much,” Friday said.

“Social media is also to blame,” O’Donnell added. “There is a bit of keeping up with the Joneses and the pressure to continue to buy and consume even when people may not have the actual funds to do so.”

Understanding how much to save for retirement or other long-term goals can be key to finding a balance.

“If you are not grounded in long-term goals, short-term budgeting can get away from you,” O’Donnell said. Instead, “set up long-term goals and work backwards.”

Historically, feeling wealthy has also had strong ties to homeownership.

In the aftermath of the Covid-19 pandemic, due to skyrocketing housing prices, many Americans became house-rich, at least on paper. When mortgage rates touched historic lows, those homeowners were also able to refinance, reducing the size of their monthly payments and creating more breathing room in their budgets.

However, that opportunity is now largely gone. For those in the market for a home, nearly half, or 45%, of potential buyers feel discouraged by the current high prices and higher mortgage rates, according to Edelman Financial Engines. Even among wealthy respondents, or those between the ages of 45 and 70 with household assets of up to $3 million, 37% said the same.

“That American dream, particularly around homeownership, has created a lot of stress for people,” O’Donnell said.

But a deterioration of the American dream has been decades in the making, according to Mark Hamrick, Bankrate’s senior economic analyst.

“Structural or long-term changes have been injurious to Americans’ ability to manage their personal finances,” he said.

“Where there was a time in the U.S. when a married couple, with children, could get by with a single-wage earner in the house, those days are mostly vestiges of the past,” Hamrick added.

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