The Generational Wealth Series: Don’t Be a Statistic Part II

For many generations of Americans, becoming a homeowner feels like one major step towards “making it”. Long considered a cornerstone of the American Dream, homeownership is still widely a symbol of financial stability and success.

But today, research shows that the millennial generation – today’s 30-40-year-olds – are lagging far behind previous generations in accumulating wealth. It’s a big reason why millennials have been slower to buy their first homes than older generations – in fact, many are moving back to their childhood homes. In 2020, Pew Research reported that 52% of adults ages 18-34 were living with their parents. That’s the highest rate seen since the Great Depression.

This is the second in a series of five blogs entitled “The Generational Wealth Series”, where we dive into some of the largest financial milestones Americans need to save for in order to beat the generational wealth odds. This installment will cover a pivotal moment in many Americans’ lives: buying a home.

HOMEOWNERSHIP

Though some have doubted the value of homeownership in recent years, the US Census Bureau recently determined that the two biggest factors that “make or break” household wealth are 1) having a retirement account, and 2) owning a home. Homeownership is one of the key ways Americans can begin building real wealth that they can later pass down to their families.

Millennial homeownership rates have risen over the past five years, but they still lag far behind those of previous generations. Though buying a home alone isn’t a one-way ticket to financial freedom, if done right, it can be a springboard to building your nest egg.

When buying your first home, there are a couple of important factors to consider. First, determine how much you need for a down payment. A trusted Financial Advisor can work with you to consider smart strategies for saving and investing for this large purchase – probably one of the largest lump sum payments you’ve ever made. Part of this work is creating a budget – a good Financial Advisor will help you create a flexible budget for home maintenance and renovation, as well as your down payment. And managing your debt-to-income ratio is important before taking out a mortgage loan – a Financial Advisor can help determine your ratio and help you establish a plan for paying off debt so you can secure a great mortgage.

But the work isn’t done after you make your first home purchase. Many believe that buying a home is the only thing they need to do to start building wealth, but a good Financial Advisor will steer you clear of that narrow view. Diversifying your wealth management by building a varied portfolio that meets your goals helps you ensure you’ll have enough to retire and pass on wealth. Though becoming a homeowner is one important way to build wealth, an experienced Financial Advisor will ensure you don’t rely on any single asset to create your nest egg.