How Millennial Millionaires are Making Their Money
What would it take for you to have $1 million in the bank? Does the thought even seem attainable or like a crazy pipe dream way off in the distance? Believe it or not, even if you’re young, it is possible to reach millionaire status – as long as you’re driven enough to work for it.
At ARQ Wealth Advisors, we specialize in helping Millennials reach their goals of becoming millionaires. Here are some surprising facts you may not know about how these young people are making their money:
They’re Investing, Not Spending
Millennial millionaires aren’t holding off on investing. They’re making an active decision to invest now. In fact, they’re even prioritizing saving over spending.
Choosing to save instead of spend requires immense focus, but Millennials are proving they’re up to the challenge. While many experts recommend saving 10 to 15 percent of their income for retirement, Millennial millionaires are saving at least 25 to 50 percent.
How can you implement this strategy into your own life? View saving as an opportunity instead of as a sacrifice – this requires you to shift your mindset. Look for ways to increase income and reduce spending. Then invest the extra money. A financial advisor (Scottsdale) can help set up a plan based on your specific situation.
They’re Taking Advantage of Time
Millennials have time on their side when it comes to investing – and many are taking advantage of it. They realize that time is money, so they’re looking for ways to increase their income. As their income increases, they’re able to save more money. Because they have decades to watch their money grow, they can often make riskier investment decisions while they’re young.
How can you implement this strategy into your own life? Look for ways to increase your earning power. Even if you don’t have a large income at the moment, invest as much as you can now. With the help of compound interest and time, your small investments can grow into a large nest egg.
They’re Working Hard to Reach Millionaire Status
Despite the reputation the generation tends to have, many Millennials aren’t afraid to work hard for what they want. Many older generations seek comfort from their jobs. They’re satisfied with a middle-of-the-road income, two weeks of vacation and a house.
Millennials seem to want more than that. They want the type of freedom and security that comes with having more money. They don’t just want to be wealthy; they want financial freedom.
Outside of the typical 9-to-5, Millennials often bring in extra income through side hustles like:
- Food-delivery service
- Uber or Lyft
- Airbnb rentals
- Dog walking
- Freelance work
They find ways to monetize their free time. Instead of lavishly spending their extra money on a new car or a vacation, they invest it all.
How can you implement this strategy into your own life? What type of side hustle can you take on to bring in extra income? Use the extra money to boost your investments.
They Already Have Retirement Goals
Many Millennials have embraced the FIRE movement – Financial Independence, Retire Early. The FIRE movement is about having a lifestyle guided by personal values rather than possessions. The ultimate goal is to retire early so you can follow your passions and get out of the 9-to-5 rat race. Frugal living is at the heart of the movement, as Millennials aim to live below their means and invest the rest. This type of goal gives them the focus they need to stick to their savings plan.
How can you implement this strategy into your own life? FIRE doesn’t have to be in your financial plan. But take a few minutes to think about what you want your retirement to look like (even if you’re still in your 20s or 30s). Use your ideal retirement as fuel to help you meet your financial goals.
Take advantage of this complimentary assessment as well to get a basis for what a financial plan will address for you.
How Millennials Choose a Good Financial Advisor (Scottsdale)
Simply making a ton of money won’t get you to millionaire status. What you choose to do with your money determines how wealthy you’ll be. As you start accumulating wealth, you’ll want to turn to a professional who can help you grow and manage your money. You’ll want your ideal financial advisor to be:
- A fiduciary. A fiduciary financial advisor has a legal responsibility to put your needs above their own, be transparent and avoid conflicts of interest. Simply put, a fiduciary’s top priority is helping you reach your financial goals.
- Fee-only. Fee-only fiduciary financial advisors receive zero commissions on product sales. This means they’re true fiduciaries and won’t simply recommend a product because of a hefty commission they’ll get for the sale. Instead, they’re typically paid hourly fees, based on Assets Under Management (AUM), or retainer fees.
- Available. You want your ideal advisor to be available when you need him or her. If you prefer a hands-off approach to investing, you may be fine only meeting with an advisor once or twice a year. If you have a lot of questions, you may want someone to meet with you once a month. Choose someone who gives you peace of mind.
- Able to break down complex financial topics. You don’t want to choose an advisor who talks way over your head. You want someone who takes big, complex topics and breaks them down using plain language.
4 Investment Terms Every Millennial Should Know
As you begin investing, here are 4 key terms you should be aware of:
- Compound Interest. Compound interest is the key to wealth creation. With compound interest, your interest earns interest. For example, if you have $10,000 and earn 5 percent interest annually, you’d have $10,500 the first year, $11,025 the second year, and $11,576 the third year.
- Bear or Bull Market. These terms describe the current environment of the stock market. If the market is down and investors are pessimistic, we’re in a bear market. If the market is up and investors are optimistic, we’re in a bull market.
- Diversification. When you diversify your assets, you minimize risk by spreading your money out to a variety of different stocks, instead of just a few. In other words, you’re not putting all your eggs in one basket.
- Stock Market Volatility. Volatility refers to the dips and swings in prices that happen in the stock market. Many people fear volatility, but it is actually needed for long-term stock market growth.
Becoming a wealthy Millennial isn’t easy, but it is possible. Whether you have millionaire status right now or hope to have it in the coming years, you can benefit from meeting with a trusted financial advisor.
If you’re looking for a financial advisor Scottsdale, contact us to see how we can help.