“There are parents with wealth who just want their kids to be wealthy, and then there are other parents with money who want to teach their kids how they got it. That’s what my dad was like.” – Sofia Richie
Millennials have more debt than preceding generations, skyrocketing home prices, dwindling job opportunities – everything that majority of their parents never had to deal with. On the flip side, there are millennials who are managing to build up a sizeable amount of present and future wealth. Adults aged 18 to 33 represent 11% of high net worth households. So what’s their secret? It all comes down to making the right money moves. If you want to take a page out of the rich millennials’ playbook, here’s what you need to know.
So what’s their secret? It all comes down to making the right money moves. If you want to take a page out of the rich millennials’ playbook, here’s what you need to know.
They Embrace Investing
When it comes to investing, the typical millennial has no idea where to start. They are either interested in investing and don’t know how or they completely hate the idea of investing and place it as a synonym for gambling. A general distrust of the market and a lack of basic investing knowledge tend to be among the top reasons that 20-somethings are less enthusiastic than older investors when it comes to the stock market.
Among rich millennials, the trend is reversed. Rather than being afraid that they’ll lose money, many wealthy millennials seem to be confident that their assets will perform at the level they’re expecting and that their investments will continue to gain value over time. Among the wealthy that I have met, they are less worrisome when it comes to investing because they have had the training from their parents and others who have already done what they are hoping to achieve.
The typical millennial holds 52% of their assets in cash.Less than two-thirds of high net worth millennials do the same. Instead, many of them veer toward riskier bets, such as private equity and hedge funds. Obviously, unless you have $500,000 to your name or more, you won’t be doing the exact same, but there are many ways for you to get involved in investing.
They Invest Based On Morals/Ethics
Whether or not it’s possible to beat the market on a consistent basis is something investing experts constantly debate. Wealthy millennials, however, tend to tune out the noise and focus on investments that align with their core values.
Now so more than ever before, millennials are aiming their guns at the injustices of the world. Be it world hunger, inequality, or animal rights, millennials are more focused on making the world a better place – and they would not mind ensuring that their money goes towards achieving that.
Average millennials with more debt that cash may not be able to invest $10,000+ into causes that matter to them, but they are capable of starting businesses that do the same thing. With social media on the rise, there is no time like now to help change the world and still make a living during that time.
They Are Choosy With Credit
Millennials, in general, tend to be wary of credit cards and that’s particularly true for those who have a higher net worth. According to 2013 research from the Schullman Research Center, 67% of wealthy millennials said they paid cash for their last luxury purchase instead of using plastic.
That reluctance to rely on credit means rich millennials are less likely to be bogged down by debt. That, in turn, means they have more opportunities to continue building wealth because they’re not spending a big chunk of their income on debt repayment.
What’s the takeaway here for the rest of us? If you’re in debt, it’s a good idea to make paying it down your top priority. Once it’s paid off, you can use the extra money to expand your investments or bump up your savings. If you don’t have debt, it’s best to be selective about how often you take on credit card debt, loans or lines of credit.
They Set Financial Goals
Among rich millennials, 66% say they’re focused on setting and achieving long-term goals where their investments are concerned. By thinking long term instead of getting caught up in the present, they’re in a better position to stay the course even when their investments stumble temporarily.
Goal-setting is a good way to motivate yourself to make major financial changes. If you’re in debt, for example, you’ve got a better shot at paying it off if you set concrete targets instead of making a vague pledge to get rid of it. The more specific you are, the easier it’ll be to keep your eyes on the prize.
A majority of the 20-somethings that I talk to have absolutely no financial goals outside of getting a job after university. Unless you haven’t noticed, jobs aren’t as safe as most of our parents have been drilling into our heads. Instead of depending on a pension that you may in fact never get (look at the situation the Baby Boomers are in), create your own pension by investing wisely and building your own side businesses why you achieve the career goals you may have.
Rich millennials tend to set themselves apart in the way they manage their money and there’s a lot we can learn from their example. Even if you don’t have a net worth of $100,000 right now, investing wisely and dumping your debt can help you get there.
Until next time,
Live Long and Prosperous.
J.M.
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