5 Financial Habits Millennials With $500K Have That You Don't
As of 2024, the average millennial net worth was $333,096, according to Empower.
Reaching $500,000 or more isn’t impossible, but it does take some discipline. Here are what millennials who have reached that $500,000 mark recommend doing so you can start growing your net worth.
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1. Be Flexible on the Location of Your First Home
Sometimes, we can get hung up on making our first home purchase flawless. The truth is, with the price of homes, you might have to broaden your expectations for your first home so you can get to that dream home eventually. Corinna Rose, paraplanner at Bell Investment Advisors, is a millennial with a net worth of over $1 million. She said in order to make her and her husband’s dream of owning a home a reality, they had to move.
“When we were ready to buy a home, we realized we couldn't comfortably afford a starter home in the San Francisco Bay Area," Rose explained. "Rather than stretch our budget to buy there, we temporarily left California and moved to a suburb of Denver, where jobs were plentiful and starter homes were within reach. We built equity for several years before eventually returning to California and using that equity toward a home here.”
2. Try House Hacking
Once you do own a home, one way to make extra money to pay the mortgage is by “house hacking” or renting out a part of your home.
“House hacking is a game changer,” said Casey TeVault, founder of Casey Buys Houses. “I have a duplex. I live in one unit and have tenants pay for my half of the mortgage for the other unit.”
3. Think About Your Taxes
When you’re thinking about building wealth, it’s important to think of the tax implications. Taxes can cost you a lot. That’s why Paul Daniel Wilkie, founder of Golden State PR, said it’s beneficial to look into ways of saving your money that will pay off when tax time comes.
“Seek every tax-advantaged savings opportunity you can. [This means] 401(k) [plans], IRAs, Roth IRAs, (SEP) IRAs for business owners, etc. These are great for long-term market health and help you save money on what you owe the government at tax time,” Wilkie added.
4. The More You Make, the Less You Spend
Experts warn about the dangers of “lifestyle creep,” meaning you rationalize spending more once you’re earning more. Rami Sneineh, co-president of Insurance Navy, said it’s better to spend roughly the same amount, no matter how much your salary goes up. However, you should adjust your savings rate.
“Each promotion I could take increased my savings rate (not my spending rate). It was that deficiency that proved to be the impetus. So, for me [it] wasn't quite as much about how much money that I was making, but how much money that I wasn't wasting,” Sneineh explained.
5. Put Money Back Into Your Business
If you want to start a business, it’s important that you take your profits and use them to enhance it. Russell Peach started his painting business Peach Painting in Tampa, Florida, when he was just 18 years old. He now treats putting money back into his business as a way of diversifying his portfolio.
“I learned to strategically delay gratification and to instead invest in materials and equipment like a company vehicle and quality sprayers because I understood they were necessary," Peach added. "After all, they would help improve not just delivery time, but the quality of my work, improving customer satisfaction and earning my brand even more referrals, which in the service-based environment I operate in, is everything.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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