Young households’ net worth is on the rise: Here’s how to build yours
Young people. We’re typically roasted for everything from our work ethic to our perceived entitlement, but new data proves we’re slowly making moves toward building more wealth.
The U.S. Census Bureau recently released its Wealth and Asset Ownership study, which finds that the median net worth of households under age 35 has been steadily increasing since 2009, and even doubled between that year and 2013. In 2009, the net worth of households under age 35 was $3,475. That number jumped to $5,402 in 2010, and then spiked to $6,936 in 2013.
Your net worth is important because it paints a clear picture of your financial situation. It’s essentially the value of all your assets (like your home and the money in your 401(k) and your checking and savings accounts) minus the total of your liabilities (like your mortgage and other debt). The net worth of young households took a major hit in 2009 (thanks, Financial Crisis!), but it’s been on the rebound ever since.
Not to make this a love letter to all my young folks out there, but I’m proud! While the most recent Census data is from 2013, Bankrate data also show that the millennial generation is on the right track. This year, millennials were the age group most likely to save or invest our tax refunds, and were also the generation most likely to choose the youngest age ranges when asked what age someone should be financially independent.
Swervin’ those stereotypes left and right.
5 simple steps to increase your wealth
Feeling like you’re not on pace with your peers when it comes to wealth? I have good news! You don’t need to be a Rich Kid of Instagram or have an embarrassing video go viral to see a spike in your net worth.
While there’s no shortcut to building wealth (unless you’re Chewbacca Mom), there are simple money moves you can make to increase your net worth.
Small habits — like having a focus on saving instead of splurging — are just as healthy for your overall net worth as your daily Soul Cycle class is for your bod. Here’s what you can do to build that net worth like a boss.
1. Increase your retirement contributions
I know it sounds like a century away, but start saving for retirement, stat. Be sure you’re contributing enough to take advantage of the full company match in your 401(k). And if you get a raise or a windfall, dial up your contributions and pump it into your retirement fund.
One way to make saving less painful: Set up automatic, annual increases to your workplace retirement contributions so you start saving a bit more every year. Make it a habit, and you’re looking at a fat retirement fund and a healthy net worth.
2. Start investing
Start investing outside of your retirement fund. I know it can sound intimidating, but I promise you don’t have to be a “Wolf of Wall Street” to figure this stuff out. Do your research to figure out which plan works best for you, but if you’re young, it’s generally advised to be a bit more aggressive with your approach; you have a longer time horizon, so you can be a bit riskier. Yay!
New to investing? There’s an app for that. Two good apps for beginner investors:
- Stash: Allows you to invest with as little as $5 and gives you personalized guidance along the way
- Acorns: Rounds up your purchases to the nearest dollar and automatically invests your spare change.
3. Pay down your debt
While it’s important to build your assets, it’s just as important to wipe out your liabilities. Pay off any debt, starting with high-interest debt first. Debt is dark and stormy — like the cloud, not the cocktail — and taking care of it is essential to building wealth.
That might mean cutting back on frivolous expenses (I know it’s concert season, but this is IMPORTANT), and instead, increase your monthly payments to pay down that debt faster.
If you’re carrying credit card debt, consider opening a balance transfer card. These cards allow you to consolidate all of your credit debt onto one low-rate card.
4. Consider buying rather than renting
Buying a home can be a great way to build wealth. (Bonus: You don’t have to deal with annoying landlords.) What’s calculated into your net worth is your home equity, which is the portion of your home that you actually own, not what you owe on your mortgage.
I know we might be a generation of renters (some by choice, some by necessity … but neither because of a surplus of avocado toast, but buying a home can end up being your biggest asset, especially if you work hard to pay off your mortgage.
However, buying a home might not be the savviest move for you, based on things like the market you’re in or whether you plan on moving soon. Ask yourself these major life Q’s first.
If you’re ready to become a homeowner, start by comparing mortgage rates to get the best deal.
5. Sock away more savings
While your perfectly curated Instagram pics of Coachella are not considered an asset when determining your net worth, the amount in your checking and savings accounts is. Yet another reason to be on Team Saver, not Team Spender.
If you’re serious about building your net worth, you’ll also be serious about trimming your expenses and stashing more in a savings account, specifically a high-yield one. It’s one of the simplest ways you can increase your net worth, and while it might not rack up the “likes,” it’s much more valuable than your status on social media.
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