Millennials Are Poorer Than They Were a Year Ago — 5 Ways They Can Turn Things Around

Young couple sitting on sofa reading a financial bill at home.
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The net worth of millennials — along with a number of other Americans — actually went up quite a bit from 2020 to 2022, even as the worldwide pandemic raged on. Part of the reason was the immense amount of stimulus that the U.S. government provided both to individuals and business owners. Another contributing factor was increased homeownership among millennials during a time where prices skyrocketed.

But from 2022 to 2023, the average millennial net worth actually went down. The elimination of stimulus programs, the plateauing of home prices and the sharp rise in inflation were contributing factors. So how can millennials turn things around going forward? Read on to learn the best moves to make now.

Keep Contributing Regularly to Investment Accounts

If your net worth has fallen, you may naturally feel a bit gun-shy about putting more money into your investments. But reducing the amount you invest, even if your cash flow has fallen, can make things even worse for you over the long run. This is because time is of critical importance when it comes to long-term wealth building. The longer you wait to contribute to your investment accounts, the more you’ll have to put away as you get older, straining your cash flow even further.

An example will show how important it is to continue contributing to your investment accounts while you are still relatively young. If you’re a millennial, you’re currently between the ages of 27 and 42. Imagine that under your investment plan, you’ll contribute $400 per month to your account, earning an 8% return along the way.

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If you stop contributing to your investment accounts at age 27 and wait to start until age 42, perhaps thinking you’ll be earning more income at that point, you’ll end up with about $315,000 by the time you retire at age 65. Not bad. However, if you keep contributing at age 27 through thick and thin, you’ll end up with closer to $1.2 million!

That’s nearly four times as much money as if you had waited until age 42. Even if times get tough, do your absolute best to continue your long-term investment program.

Look for Opportunities in the Housing Market

The housing market was one of the biggest contributors to the rising wealth of millennials during the pandemic era. While the big gains may be gone for now, real estate is highly correlated with long-term wealth, often comprising the biggest single component of a person’s net worth.

Great opportunities may be harder to find now, but they still exist. Mortgage rates do remain near recent highs, but they’re not that out of line with the long-term average rate. And if rates ever fall, you may have the opportunity to refinance.

Know Your Worth in the Job Market

According to Lowell Ricketts, a data scientist for the St. Louis Fed, an ongoing worker shortage should give millennials greater opportunities in the workplace going forward. With older workers retiring, immigration falling from peak levels and the economy still chugging along, there are plenty of job openings for millennials.

This means that if you’re a millennial looking for work, you should know your value. This isn’t the time to settle for a low-paying job just to make ends meet. Rather, it’s a rare opportunity to find a high-paying job in a field you actually enjoy. Earning a high salary while being happy at work is a dream situation, and it’s there for the taking for well-qualified millennials.

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Avoid Big Expenditures Until Inflation Gets Under Control

Although the headline CPI inflation number has already fallen somewhat dramatically, from 9.1% in June 2022 to 3.0% in June 2023, the “core” inflation rate, which strips out food and energy, was still running at a 4.8% rate. Essentially, this means that except for large falls in the cost of food and energy, the prices of other goods and services in the economy are still running hot.

To maximize your cash flow and net worth, consider postponing big purchases until inflation gets closer to the Federal Reserve’s long-term target of 2%. A better time to spend your money, particularly on discretionary items, is when your salary is increasing faster than the rate of inflation.

Stick to the Basics of Long-Term Success

Beyond these time-specific suggestions, millennials should stick to the basics of long-term success that work in any type of economic environment. Specifically, you should build a suitable emergency fund of at least $1,000 and up to three to six months of your income. Keep boosting your contributions to tax-advantaged accounts like 401(k) plans and IRAs, and save or invest at least half of your bonuses and raises.

Lastly, stick to a strict budget to help you reign in unnecessary discretionary expenditures. You’ll find that doing all of these things in conjunction can have a massively positive effect on your net worth.

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