Everyone wants to make a lot of money. And some actually succeed. However, earning a lot doesn’t necessarily make one rich. That is why those who fall under this category have been recently labelled as “HENRY,” which stands for “High Earner, Not Rich Yet.”
Individuals who have above the minimum wage when it comes to borrowing from banks or money lenders may feel this way because of their high income. But if they can’t maintain their affluent lifestyle, they are not considered wealthy. To avoid being labelled as HENRY, let’s consider these things you need to consider before taking out a loan.
Long-Term Financial Goals > Lavish Lifestyle
Getting a high-paying job and pampering yourself with your salary feels great. After all, you earn more than the average employee, so you can definitely afford these simple comforts without compromising your budget or savings.
But can you establish a long-term financial plan or not? That depends on a wide variety of factors, including your behaviour, character, attitude towards finances, and the lifestyle you currently have and wish to achieve. For example, imagine an individual who earns $250,000 per month gross but spends a lot on high-end accessories, does a lot of travelling, and has taken out a mortgage for an upscale property. Can such a person save or invest in the next 10 years despite their high salary? That seems and sounds doubtful.
That is why every borrower should develop a long-term financial plan. Doing so will help them avoid overspending, which limits financial growth. This is especially true if there are loans involved, as you can get trapped by repayment terms.
Choose the Right Loans That Support Your Goals
As a HENRY, you might not need to take out small loans just to buy something out-of-pocket. Instead, you’ll be taking out loans that will improve your quality of life or serve as capital for an investment or a small business.
It’s strongly advised to take advantage of loans that can help you build wealth. Talk to a licensed money lender, such as https://cashdirect.sg/, and see which loan products fit this particular goal.
At the end of the day, what matters is that the loan serves its purpose. Because even if the loan doesn’t cause you financial strain in the long run, it would be a shame if you took it out and it didn’t improve your lifestyle or grow your finances.
When There Is a Loan, There Are Interest Rates
The percentage may appear to be reasonable, but taking out a loan will be costly. If you consider yourself HENRY, you must spend the loan wisely. If you can’t, you’re better off not taking out the loan in the first place. Even if you don’t consider yourself a HENRY, which means you earn more than the national minimum or average pay, this doesn’t imply you may take on as much debt as you want without thinking about it. Remember that when the loan is high, the interest rates will follow a straight line.
Don’t Sit Still in Your Comfort Zone; Build Emergency Funds
Feeling financially independent and having a reliable monthly income is a great thing. You can spend the extra money on the finer things in life, but you’re better off saving it, especially for emergencies.
After all, there are many unfortunate things that can happen. You can get sick. You can get in an accident. The economy can go bad, the revenue of the company you work for can decline, and you can get laid off. All of these things will strain your finances if you’re not prepared, which is why you have to make sure you save money instead of using your extra money for indulgence.
Conclusion
Being a HENRY is a great thing, as you have enough money for your wants, needs, savings, and goals. You can even build wealth by making the right decisions. In some cases, that could mean taking out a loan. However, even if you’re earning comfortably, you should still be prudent in all aspects of your financial life, especially when it comes to borrowing money.