Economic cycles come and go. The ups and downs are similar to trying to soothe heartburn. The ups and downs can be compounded when being a high earner and not yet rich yet (HENRY). HENRY’s usually make income from $100k to $300k. Although HENRY’s pay some of the highest taxes, there are ways to make it easier with these simple planning tips.
Payoff Unnecessary Debt
Usually, HENRY’s are millennials burdened with school debt. It’s best to pay off all debt especially school loans before investing. Paying higher interest rates such as credit cards is a healthy way to achieving future financial well being. It’s essential to pay off high interest rate debts early and as quickly as possible.
Mortgage Interest Deduction
Why buy a house? Some interest is good. Mortgage interest is considered good because its deductible. Go big or go home! Apartments are good and very flexible but lack interest deductions available with mortgages. US tax code is constantly changing. Take advantage of it while you can. An important thing to remember mortgage interest is deductible. A big portion of the mortgage payment is interest the first 10 years on a 30 year mortgage. Because interest is deductible on a mortgage, you have the ability for nice deductions to help lower your tax bracket.
Retirement Account Deductions
Max out your retirement accounts such as a 401k, IRA, or Roth IRA. If you have a side business, think of added deductions with a SEP IRA or Solo 401k. As long as the employee 401k is offered by separate companies, you can participate in both a 401k and SEP IRA. If you participate in a 401k and want to participate in a Solo 401k, there are limits on elective deferrals by the person, not the plan.
Start a Small Business
The American dream is to live your dream by owning a small business. Do what you enjoy! An added benefit is the tax deductions as an owner vs. an employee. HENRY’s are some of the highest taxed individuals. Planning is essential.
Being a HENRY has benefits such as extended vacations, nice cars, but is financially tough. Minimizing high interest debt is important. Houses have beneficial interest benefits. Max out retirement accounts when possible. And finally, a small business have benefits. These simple steps can help propel you to the next level of being a high net-worth individual (HNWI) for more economic freedom.
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