Defined by Bloomberg as earning between $100,000 and $250,000 a year, the Bay Area has more than its fair share of High Earner Not Rich Yet “Henrys.”
In 2010, retailers didn’t need Henrys to come roaring back. The demographic above them, the so-called ultra-affluents who belong to the top 2 percent of earners, went shopping again after the 2009 recession forced even them to cut back.
Henrys followed last year as the economy appeared to improve and helped bring another solid year of retail sales growth. Their confidence might not last. While they have discretionary income to spend, they can be fickle, according to Michael McNamara, vice president at Mastercard Advisors SpendingPulse, which tracks consumer spending. Their desire to make purchases hinges on how rich they think they are — the so- called wealth effect — and there are a lot of reasons they might be feeling more middle-class.
Negative headlines, stock market performance and home values have much more sway on Henrys’ spending habits. Many are also small-business owners and see shifts in the economy first. [Mac McKay, whose flower] shop is in one of the wealthiest counties in the country, said a top customer went from spending $2,000 on Mother’s Day to less than half that. Another long-time client recently lost his job as a rocket scientist.
How confident are the Bay Area homebuying Henrys feeling today?
UPDATE: As a number of plugged-in readers have noted, while Bloomberg defines the income range for Henrys as $100,000 to $250,000, Fortune Magazine defined it as $250,000 to $500,000 back in 2003, a range that makes more sense around here.
∙ The Problem With Henry May Derail U.S. Recovery [Bloomberg]
∙ A Tough Week On The Street And Close To Home [SocketSite]
Wow, I never knew about “Henry”. We are well above Henry yet have never purchased a single brand in the attached article. We buy $15,000 used cars, our kids wear hand me down clothes (ages 5-7 and have since birth), we fix pretty much every car problem, house problem, and appliance breakdown ourselves, and purchase used goods too. We rarely eat out.
Who are these Henrys and where are they?
I’m in the same boat as JT. My family chose to buy a modest home in Bernal and I don’t think we will ever trade up.
This Henry(etta) is glad she already owns and is not planning on any big-ticket items in the near future. Unless you count painting the house and buying a new mattress. We (husband and I) may be high earners, but we feel a bit poor these days. I would much rather save my pennies than shop at Barney’s… or buy more real estate. My friends, however, who are in a similar (income) boat, were looking to buy but after getting overbid on every property by $100k or all-cash offers, have decided to table their search effort and instead have decided to rent for another year or so. Crazy world!
“Wow, I never knew about “Henry”. We are well above Henry yet have never purchased a single brand in the attached article”
I’m far from the biggest fan of Gap – but wonder how you and your significant other have managed to go through both your lives without buying at least one thing from there…
bay area HENRYs are likely feeling like HEFFERs – High Earners Far From Even Rich.
in the land of the 1-5%, it takes a lot more then a $250K household income to even act rich.
we’ve been in and above this demographic, yet saved for almost 15 yrs (while paying off student loans and maximizing retirement and savings), before we bought.
we’re relatively allergic to retail, take comparatively cheap vacations (visiting and boarding with friends and family), have no private school tuition.
our biggest splurges – not watching food and wine expenses, gym memberships, a monthly maid service, and dry cleaning.
“Two of his biggest customers, Neiman Marcus Group Inc. and Saks, asked him to provide lower-priced pieces to attract Henrys.
Last year, he obliged them and introduced pieces below $10,000. His $5,000 earrings aren’t selling”
QFS. Quelle Fing Surprise.
How many people earning between 100-250 a year, before tax, are going to be looking at spending 5k just on a pair of earrings…
If those earrings not falling off the shelves are a sign Henrys are not feeling confident then I think things may well still be OK, really…!
Great. I guess by this definition, I’m an ultra-affluent, but oddly – it sure doesn’t feel that way. These definitions are fairly meaningless to those of us in the Bay Area. Some of the generalizations in this article were really funny too …..Chanel and Hermes indeed 🙂
Sorry, commenting alot. Can’t help it.
“Negative headlines, stock market performance and home values have much more sway on Henrys’ spending habits. Many are also small-business owners and see shifts in the economy first. [Mac McKay, whose flower] shop is in one of the wealthiest counties in the country, said a top customer went from spending $2,000 on Mother’s Day to less than half that. Another long-time client recently lost his job as a rocket scientist.”
someone between 100-250k was spending 2k on flowers just on one day of the year?
It doesn’t take the unemployed rocket scientist to tell me that the fact he’s now spending $900 on that same day, just on flowers, is hardly a sign of impending doom.
Good grief.
BTW, this definition from Investopedia makes a lot more sense than what Bloomberg is calling a Henry:
“A buzzword coined in a 2003 Fortune Magazine article to refer to a segment of families earning between $250,000 and $500,000, but not having much left after taxes, schooling, housing and family costs – not to mention saving for an affluent retirement. The original article in which the “high earners, not rich yet (HENRYs)” term appeared discussed the alternative minimum tax (AMT) and how hard it hits this group of
I’m with all the posters above. We make over double the “Henry” limit but modernedwardian’s comment @ 10:21 AM describes us perfectly — just 10 years further along. (We are happily spending under 5% of our income renting for now.)
Capping this “class” at $250k seems completely arbitrary, particularly here where unless you make well over $1M in a year, you’re not buying RE off a year or two’s income. Depending on how far into a career you are (and how many kids you have), your accumulated wealth on the same income will vary vastly. There are plenty of people far richer than we are who make less than half what we do — they’ve just been doing it a lot longer. I suppose those are the people who were spending $2k on *Mother’s Day,* which strikes me as beyond insane.
i agree with lance $250- 500,000 seems more accurate for this demographic (as long as you don’t live in sf or palo alto)
Modernedwardian also described me and my wife pretty well. We’re at the high end of the “Henry” (never knew there was such a thing) demographic and we’re pretty prudent when it comes to retail (neither one of us are big “shoppers”) although we do splurge occasionally on food, wine and travel.
We’ve been fortunate enough to have rent-controlled apartment in the Marina since ’94 and have taken a lot and put it into retirement.
“How many people earning between 100-250 a year, before tax, are going to be looking at spending 5k just on a pair of earrings..”
Ask my wife!
Anyway those income ranges are way off. I’d say more like $200-400k in SF.
Bingo, Lance. I remember the article very well. This Bloomberg article is WAY off target.
Article is poorly written too…unclear if the woman declining to buy a $4000 dress is a “Henry” or richer than a “henry”. Point of view is all over the place, and doesn’t make a very convincing argument.
And yes, I agree it doesn’t make a lot of sense for the Bay Area. (Which makes me feel even poorer….thank god I don’t have a taste for expensive sports cars or designer dresses).
I see people in Gucci, Neiman, LV, etc all the time in Union Sq. And I wonder who these people are with $4k handbags are. I know a number of people who are either HENRYs or millionaires and none of them buy that stuff – at least not more than a nice car, a nice bag, a nice vacation and a house, after their stock/option windfall.
It can’t all be purchased by finance industry mistresses, can it?
I had an aunt who was into all that stuff. Lived in the best neighborhoods, wore expensive stuff.
The reality was that they were always nearly broke. But she liked living that way and her husband, my uncle, let her spend every cent.
A relative got sick and my aunt and uncle told me to come right away and stay in the same hotel they were staying in a midwestern town. She loved ordering room service. Ordered it at every meal. What was essentially Denny’s food got served in silver plated serving dishes in a cramped room for the price of a really nice meal elsewhere, but she thought she was in heaven. Living the life of luxury. I thought it was ridiculous and found some really creative restaurants in the area for half the price. It was more ridiculous when I knew she was flat broke.
She “had” to have the latest it bag, because it let her feel she could then run in “the right” circles. So every year a new one was purchased. The old one got sent to a consignment shop, and it’s not terrifically expensive if you do it that way every year. The old one isn’t that old so it sells for a pretty high price. Your friends see a different one every now and then and don’t realize you only have one. It was always something that was very obvious and very expensive but almost nothing else was.
She grew up poor, married “for money”, though he was far from Mr. Rich, and, having married for it, she wanted to spend it. My frugal dad was always loaning them money. They never paid any of it back. He cut them off, they came to their rich relative, tipster, and having seen their lifestyle all those years, I just laughed at them. If I spend 5% of my income in a good year, it’s an extravagance.
I’ve had a couple of friends tell similar stories about their parents – lived the life, but always broke. Sometimes there was no food in the house for nearly 24 hours. The parents just sent them to friends houses.
Some people think that’s fun. I think dodging the creditors had to be nerve wracking. When I see people in Pac Heights or in the Hermes store, that’s what I envision them as, though obviously not all of them are broke. But trust me, a lot of them are.
When the economy turns down, it’s hardest on people like my aunt and uncle: they barely make it in a good economy. You lose a couple of big spenders and that’s the end of the lifestyle, because a lot of your costs are fixed. You can laugh at the $2000 flowers story, but that sort of thing keeps more people in business than you know.
There is a huge difference between 250k and 500k (obviously). At 250k, you are doing fine in SF but not livin’ large. In most of the U.S., you are livin’ large on that with a 4000 sf house and a pool, and plenty to spend on really nice clothes and accessories. Doesn’t mean you’ll save much for retirement or kids’ college, but few Americans do. Those on this blog are the exception to that rule.
At 500k, even in SF you have PLENTY of money to live in a very nice place, take great vacations, and spend a ton on clothes. Again, that is curbed quite a bit if you save anything significant for retirement or college, but most people don’t, which is why you see people driving a Mercedes and shopping at Hermes even though they only make the same as you, and you can’t figure out how they do it. I put away about 30% of my gross income the last 7-8 years. You better believe I could have lived much more extravagantly with an extra 15k-20k every MONTH to spend! But I don’t want to work until I drop dead.
Heck, I see waiters and Macy’s shoe guys in my neighborhood (Castro) wearing A/X clothes and dropping $200 every saturday just on bars. On less than 100k a year. Quite easy if you save not a red cent.
This article is poorly written, but the sentiment is spot on. This segment spends a LOT because they save very little.
Articles like this really tend to bring out the 1%, don’t they? And lots of tsk tsk’ing of the hoi polloi too. I hope that at least 1 of the writers above was sporting a monocle.
At 500k, even in SF you have PLENTY of money to live in a very nice place, take great vacations, and spend a ton on clothes.
Speaking from experience, I disagree entirely. Yes if you have no kids and/or have been making that income for 10 years or more. Otherwise, no. That’s why talking about annual salary without any other context (income rather than wealth) is pointless.
Actual shza, it all depend on your definition of “very nice” “great” and “ton”. But, frankly, it’s hard not to imagine lots of reasonable definitions of those terms on 500K per year.
I save for retirement, take a couple of trips abroad each year and live in what I consider to be a great place on a fraction of that. But I don’t have kids or debt, and I’m not extravagent in my spending otherwise. In the end it’s all about choices, because above subsistence no one really “needs” anything…but we all “want” a lot.
(that seems to be a common thread of all the anecodotal stories above).
rabbits, don’t get me wrong. I’m GLAD the hoi polloi spend every cent they make and more. Keeps our economy buzzing and keeps my pockets more filled. My point was just to explain to the head-scratchers (those that save for retirement, college, a rainy day, etc.) how it is possible to live extremely well on incomes that don’t seem to permit it.
shza, on 500k, if you save nothing, you easily end up with 300k after taxes. Even if you add in a couple of private school tuitions, you have over 240k – $20,000 a month. Sorry, on 20,000 a month you can live in SF in an awesome place, eat at fantastic restaurants, drive a Benz, and dress in Armani. No problem. It’s that pesky retirement and college savings and more you’re putting away that makes this seem impossible. Most simply cut out that buzz-kill and live it up.
I read somewhere that 75% of the 1% practice stealth wealth, e.g. they take some nice trips, pay their kids tuition in cash, have a decent car that’s under warrantee, but are generally considered by their peers to be upper middle class, not rich. Mostly, they avoid conspicuous consumption.
I think that there’s a backlash by these people at the caricatures being made of them in the media. They know they are rich, but they are often not evil.
I used to volunteer on the executive committee of a non-profit. A substantial part of our budget was provided by anonymous donations provided by volunteers that were in every obvious way indistinguishable from our regular less affluent volunteers.
I get Tipster’s view on things – some wannabes buy $2k in flowers and some truly rich people anonymously donate 10s of thousands of dollars to making the world a better place.
snon,i’ve beaten this point to death, but # of years making that income is the big variable. It takes a long time to save up a down payment for that “awesome place” you’re talking about, for instance–unless you have a one-time windfall or you’re making multiples of $500k/year (or inherited wealth). It’s just the same point you’re making about “pesky savings” from a different angle.
I’m not trying to act like we’re poor, or not making much more than most. I just think wealth is a far more useful measure for classifying “class” or potential lifestyle than current annual income. It’s a simple point but it always gets lost with talk about “the 1%” (plenty of whom are less wealthy than people in the upper quintile of the 99%) or superficial articles like the one covered here.
Certainly if we keep our household income at or above what it is now over the next decade, I imagine we’ll feel quite comfortable. Zero guarantee of that in our profession though, even if we decide we want to keep working the hours.
We definitely end up with less than $300k post-tax on over $500k HHI, btw. AMT + no mortgage income deduction can do that.
tipster writes:
>If I spend 5% of my income in a good year, it’s an extravagance.
how is that possible?
Steve,
I’d guess that Tipster either runs his own business or has well into the 8 figures in investments or likely, both. There might be a bit of exaggeration going on, but it seems very possible. In this area, many execs, partners in law firms, etc can make in the high hundreds of thousands to a million or more per year, consistently for a decade or more. Doing that and living moderately is actually the easiest way to make 10million+
IPO culture may be rampant in Silicon Valley, but there are many rich people who run high revenue small businesses and don’t have to share the profits with anyone or more than one or two people.
Everyone here knows that tipster talks and talks. I’d be surprised if his actual income was $100k+
You need savings of 25X your annual spending to really retire comfortably. So if you can live a life that you find acceptable on 100k a year you only need $2.5M in savings, which is a very achievable goal, especially for a HENRY. If you need more like $400k to live a lifestyle you find acceptable, then you need to save $10M, which is pretty hard to do, even for a high earner.
I pity da foo who thinks they need to spend $400k/yr for happiness.
To everyone above who says ” They call me affluent but I don’t feel ‘rich’ ” or who parses the difference between living well and being rich, I highly reccomend this analysis:
http://chronicle.com/article/In-Praise-of-Leisure/132251/
Frog is correct.
1. Start a business.
2. Beat the crap out of the costs and the time it takes to run it. Question everything.
3. Rinse, and repeat with other businesses. And make sure they aren’t related so that if one goes in the toilet either cyclically or permanently, the others don’t head south at the same time.
#2 naturally transfers into your personal life. If your significant other can’t comprehend that, get a new one. At some point, your personal expenses are so ridiculously low relative to your income that you realize you no longer need to worry about money, forever.
Tipster prob saves from not going out for drinks n dinner ecause who wants to hear his pessemistic bitter world is collalapsing attitude. He sees the worst in evsrything. I pity the girl who deals with that and bless him to find one.
“At some point, your personal expenses are so ridiculously low relative to your income that you realize you no longer need to worry about money, forever.”
Maybe, although have to point out it looks like you think, and therefore to some extent worry, more about money (both your own and other peoples) than anyone else on this site.
Yes, jerrh, I realize that JCP, whose stock droppped 8.5% today alone, might in fact be the greatest thing ever for SF, and draw bazillions of shoppers to step over the bums of mid market, but hearing an opposing viewpoint among the chorus of realtors and boosters singing its praises from on high, and providing an endless stream of happy talk about virtually everything, is probably not a bad thing.
But it isn’t all negative. For example, I did point out how a recent buyer saved $199,000 by ignoring the approved short sale price, and possibly the advice of a realtor, by bidding far lower, thus getting the property and saving money. That was very good news. Not good for the realtors involved, and realtors and sellers of subsequently listed properties nearby (who now have a much lower comp to deal with) but good for the buyer! See–happy, happy.