Earning a good salary but have no money

I am talking to more and more couples who are coming to me about the same thing. They are earning a good salary but have no money. They are typically professionals in their late 30’s to early 40’s and are getting near the top of their profession. But when they look at their net worth, it doesn’t amount to much.

There is a name for these type of people, HENRY’s – High Earners, Not Yet Rich. So, how do you find yourself in this position that you have no assets despite earning a good income?

You have a good lifestyle

As you progressed with your career, you were getting lots of good pay rises and bonuses, giving you lots of disposal income. As you have no responsibilities, you enjoyed life and could buy things without worrying about the costs. This is perfectly normal. Your lifestyle usually reflects how much you earn.

Savings are for old people

Saving money doesn’t come into it, that’s for old people. In fact, at the end of the month, you may even find yourself in overdraft or using your credit card to pay for the shopping. It wasn’t an issue as your salary will clear it easily come pay day.

You become a grown up with responsibilities

Suddenly the talk turns to weddings and mortgages. Life is beginning to get serious as people are starting to settle down. But you don’t have any any savings! So you have to start saving like mad to get the money for a deposit and use all that bonus payment that you usually spend for a deposit. You are earning decent money and want a house in a nice area, which of course means a big mortgage and big repayments.

Then kids arrive and they are expensive! You have to pay creche fees of €1,000 a month. Maybe one of you will take a few years out of work instead of putting them into creche. You are now down a salary, still have the mortgage and now kids to pay for. But you still enjoy life and would like to continue the lifestyle that you have grown accustomed to. You are just about managing to get by.

Then you start talking about secondary schools for your kids and would like them to go to a private school. That’s going to set you back at least €6,000 a year. Where are you going to find that or the €18,000 when all three of your kids are in secondary school at the same time?

Or one of you would like to a career change but it would mean a drop in salary, even for a few years. It’s not even an option at this point.

Be intentional

You have to realise you only have a certain amount of money and you have to live within your means. If the plan is to save what is left at the end of the month, you won’t change anything, you will spend the money on things you don’t need.

You need to be intentional with what you do with your money. Talk about what you want your goals are in the next few years, when you want to do it and how much it is going to cost you. Then put that money away each month just after getting paid.

If it is a longer term goal, get the markets to help grow your money by investing it. Over the long term, you will make good returns for doing nothing.

The key thing to realise is that you have to sacrifice some of your lifestyle now so that you can maintain it long into the future.

If you have any questions, you can contact me directly at steven@bluewaterfp.ie