For anyone involved in rugby, the mention of “Henry” will probably make you think of the likes of Slade and Arundel.
However, from a financial planning perspective, “HENRY” is an acronym that could apply to many rugby professionals, and which you might want to be aware of.
It stands for “high earner, not rich yet”, and could describe someone with a good contract who has not yet made any steps towards planning their financial future.
Read about why you may well be a HENRY, or on the cusp of becoming one, but have not yet amassed significant wealth, and how financial planning can help you during your professional career.
You could be a HENRY if you are always tempted to spend rather than save
Typically, a HENRY is someone earning in excess of £100,000 a year, but who has not yet accrued the wealth normally associated with earnings that high.
There is a range of potential contributory factors that could have combined to leave you in this scenario. For example, you might:
- Have substantial monthly mortgage outgoings, driven by high property prices and rising interest rates
- Often be unable to avoid the temptation to spend your money rather than to save
- Pay high rates of Income Tax, including the tapered loss of your Personal Allowance on earnings over £100,000. This can result in you falling into a “tax trap” incurring an effective 60% tax rate.
Your situation may have been exacerbated by the recent cost of living crisis and the big increase in inflation in 2021/22.
A combination of some, or even perhaps all these factors may well have left you as a HENRY, and not feeling as rich as your income and lifestyle would suggest.
It can be easy to fall into the trap of becoming a HENRY
There is no doubt that a career as a top-level professional rugby player provides an excellent income. A Yahoo report confirms that the average Premiership salary is now £182,000, even before any international recognition.
In France, the figure is even higher, with OVAL3 suggesting the average salary in the Top 14 to be £200,000.
Of course, it is important to bear in mind that professional rugby careers come with a limited time span. Furthermore, you face the ever-present threat of a serious injury either ending your career or threatening your earnings potential.
Both those factors can lead to the understandable temptation to spend and enjoy your wealth while you can, rather than looking too far ahead.
This can lead to many of the financial issues related to being a HENRY, such as:
- Not having any savings or an emergency fund
- Neglecting to plan for your long-term future, such as putting money into a pension
- Spending excessively and having to resort to expensive, unsecured borrowing.
If you are in the position of facing some of these issues, you may want to start putting a plan together to get yourself on the right financial track. This will enable you to make the most of your earnings now, while also helping secure your long-term future.
It is important to have control of your finances
Above all, this shows the importance of having control of your finances, no matter where you are in your playing career.
A simple first step is to set up an income and expenditure schedule so you can see exactly what you are spending each month.
By doing this, you will be able to see where you are spending too much money, and make it easier to start assessing your financial priorities so you can put a long-term plan in place.
You will probably soon get an idea of the problem areas, and how you can start reducing your outgoings so you can divert the money you save to more productive uses.
It will also help you budget each month, so you are no longer having to resort to borrowing to maintain your spending.
Indeed, a sensible financial priority is to reduce your debt. Not only will this save you a lot of money in terms of the interest you will no longer be paying, but it will quickly increase your disposable income each month.
Save for your long-term future in a structured way
Once you have a clear idea of your outgoings and reduced your debt, you can then start putting arrangements in place to save money regularly and secure your financial future.
While the amount you save will depend on your plans and personal circumstances, there are three areas you may want to focus on:
- Saving for the short term in an interest-bearing account
- Investing for longer-term goals (those that are five or more years away) in stocks and shares
- Setting wealth aside for the future into a pension plan.
Given the amount of Income Tax you will likely be paying, it makes sense to maximise tax efficiency.
For example, you will get tax relief at your marginal rate of tax on your personal pension contributions up to your Annual Allowance of £60,000 gross (less employer contributions made this tax year, and plus any carry forward) or 100% of your earnings if lower. Pension contributions can also help mitigate the effect of the “tax trap” you read about earlier.
Bear in mind your Annual Allowance may be reduced if your earnings exceed certain thresholds.
ISAs are also an effective and tax-efficient option when it comes to saving and investing. You can save up to £20,000 into ISAs in 2024/25, and the money you accrue in your ISA fund will not be subject to Income Tax or Capital Gains Tax.
Read more: As Luke Littler pays almost £500,000 to HMRC, could you make your wealth more tax-efficient?
Get professional advice
A financial planner will help you put together a robust financial plan, and then review it each year to ensure you are on track to meet your objectives. That includes both while you are still active as a player, but also for your “second career” once your playing days are over.
As well as securing your financial future, they can also advise you of the best way to protect your income, and ensure that your loved ones are financially secure in the event of upheaval in your career.
If you believe that you may be a HENRY, and would like to talk about planning your financial future, email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate tax planning.