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Relief from Covid-19 and interest rates at record lows have boosted the finances of many Americans during the pandemic. That has been especially true for millennials, who on average have amassed significant wealth.
Millennials, born between 1981 and 1996, have more than doubled their total net worth, reaching $9.38 trillion in the first quarter of 2022, up from $4.55 trillion two years earlier, according to a MagnifyMoney Report.
And the average millennial net worth, defined as total assets minus total liabilities, also doubled during the same period, jumping to $127,793 from $62,758, according to the report.
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However, the report finds that the average net worth of millennials still lags behind previous generations, with Gen Xers and baby boomers averaging $647,619 and $1,021,264, respectively.
Real estate more than a third of the wealth of millennials
With home values on the rise in the past two years, it’s no surprise that real estate, including primary homes and other properties, accounts for more than a third of millennials’ total assets.
The median home sale price in the US was $329,000 during the first quarter of 2020, and the number rose to nearly $429,000 two years later, according to Federal Reserve data.
However, millennials who recently bought homes may have significant debt, according to the report. Nearly 63% of millennial debt is in home mortgages, followed by nearly 36% in consumer loans.
I would encourage millennials to focus more on their cash flow than their net worth at this stage in their careers.
dj hunt
Senior Financial Advisor with Moisand Fitzgerald Tamayo
“I would encourage millennials to focus more on their cash flow than their net worth at this stage in their careers,” said certified financial planner DJ Hunt, principal financial adviser at Moisand Fitzgerald Tamayo in Melbourne, Florida.
He said millennials may be “losing financial ground in the long run” if monthly mortgage payments prevent them from fully funding their retirement accounts.
Of course, the definition of a fully funded retirement account varies by individual, Hunt said.
While millennials over the age of 40 should aspire to Maximize 401(k) contributions to $20,500 In 2022, younger workers should deposit enough to receive the company’s match, striving for up to 15% of gross earnings, he said.
Diversification is the ‘name of the game’
While owning and living in your home serves an important purpose, diversification is “the name of the game,” especially for younger investors with more time to build assets, said Eric Roberge, CFP and CEO of Beyond Your Hammock in Boston. .
If most of your wealth is home equity, it may be wise to focus on building retirement plans or a brokerage account, he said, suggesting 20% to 25% of annual gross income for investments to long term.
“For many people, a diversified portfolio will likely provide higher long-term returns,” he said.
Apply for a home equity line of credit
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If you have wealth in your home, it may be worth Apply for a home equity line of credito HELOC, which allows you to borrow from a pool of money over time, if needed.
“It’s always a good idea to have a HELOC if you have substantial equity in your home,” said Ted Haley, CFP, president and CEO of Advanced Wealth Management in Portland, Oregon.
HELOCs are often inexpensive to set up, with lower interest rates than credit cards, and there’s no extra cost until you use them. While higher interest rates can affect how much and when to borrow, it’s still a “good idea” to have one, he said.
