For those aspiring to affluence, securing a job with a high salary would seem to be a big step in the right direction. However, recent reports reveal that high income alone does not guarantee a high net worth and that a growing number of high earners report that they don’t see themselves as rich. Media reports refer to them as HENRYs, which stands for “High Earners, Not Rich Yet.”

HENRYs are those who have a high amount of discretionary income but live a lifestyle in which saving and investing are not a priority. The money comes in and goes out, leaving net worth unaffected.

Recent stats on retirement investing, which is a key component of building net worth, reveal one practice that contributes to the frustrations HENRYs feel regarding their financial situation. The stats show high earners—defined as those making between $150,000 and $283,000 annually—are the least likely of all income brackets to prioritize retirement planning. They reveal that 32% of high earners are not engaged with retirement planning in a significant way.

The disconnect between earning a high income and establishing a high net worth creates an affluence illusion, in which the financial stability that should result from high earnings remains out of reach. Those who don’t understand and address the disconnect relinquish the potential they have to build their net worth and secure a financially secure future.

What Fuels The Affluence Illusion?
A high-consumption lifestyle is one of the factors that keeps affluence an illusion for high-income earners. The 50/30/20 rule—50% of income for living expenses, 30% for discretionary income, and 20% for savings—empowers anyone to build net worth by limiting consumption and contributing to savings. When living expenses push past 50%, something has to give. Usually, that something is savings, resulting in a financial lifestyle that derails the process of building net worth.

Other recent stats reveal high earners struggle with the 50/30/20 rule, showing that over one-third of people earning more than $200,000 a year live paycheck to paycheck. Among those making $100,000 or more per year, the percentage is 40%.

Other recent reports show that savings for today’s high earners are closer to 10% than 20%. Whereas the top 1% of earners save 38%, the remainder of the top 10% report saving only 12%. With the bottom 90%, the average percentage of income saved is only 4%.

Net Worth Suffers When Priorities Are Misplaced
Misplaced financial priorities also contribute to the affluence illusion. Increasing your net worth requires setting priorities to value tomorrow’s needs over today’s wants, meaning savings and investing need to be as important (but preferably far more important) as a newer car or another vacation.

The way in which a pay increase is handled illustrates how the affluence illusion is often sustained. If an unexpected bonus is used to fund a spontaneous vacation or a pay increase is put toward a higher lease payment on a newer car, a higher net worth remains out of reach. Net worth always suffers when depreciating assets are prioritized over tangible wealth.

Part of the problem for high earners is that an extra $600 spent on a car payment doesn’t seem like much to someone who brings home $16,000 a month or more. However, $600 per month deposited in an investment account earning a 7% return translates into more than $700,000 earned over 30 years. If 20% of a $16,000 monthly income is put into the same account, the end balance after 30 years is $3.7 million.

It’s interesting to note that some experts see social media as a contributing factor to misplaced financial priorities. Sharing your latest purchases on Instagram has come to be the modern equivalent of “keeping up with the Joneses.” Several reports share stories of people who were able to increase their savings when they cut back on their social media scrolling.

Having Difficult Conversations About Affluence
For financial advisors, conversations about the affluence illusion and how to overcome it are the most important—and the most difficult—you will have. Retirement and savings are usually a future need for clients, which means they are easy to blow off. “We’ll worry about that later,” is a common response from those who have made retirement planning a low priority, often perceiving retirement as a future issue, whereas a new car is seen as a more immediate issue.

Advisors can shift the topic of retirement planning into the immediate category by showing what happens if it continues to be downplayed. Encourage clients to wrestle with what will happen if they don’t make saving for retirement a priority today. Your clients need someone who will challenge their ways of thinking about finances, especially when their priorities are blocking their potential for building net worth.

Aaron Cirksena, founder and CEO of MDRN Capital, is a 2011 graduate of the University of Maryland, College Park, where he studied economics. Since then, he has devoted his entire career to financial planning, distribution planning, and managing client money. He first worked with multiple $1 billion teams at Morgan Stanley and independent firms, and eventually created his own independent services firm in MDRN Capital, which is revolutionizing retirement planning by offering a comprehensive range of services, including income planning, investment management, tax planning, healthcare, and estate planning, all with a greater degree of effectiveness compared to traditional providers. As a fully digital firm, MDRN prioritizes efficiency and convenience, providing remote consultations and digital account opening.