Man, I really hate Millennials.
Not because I think they’re lazy or spoiled or weighed down by the illusion of being entitled to things they haven’t yet earned or even deserve.
I hate Millennials because I’m jealous of Millennials.
The other day, I was sitting at a bar with a friend of mine. We were surrounded by all these 20-somethings. They were all carrying on, having a good time. As they should. Yet all I kept thinking was how stupid I was at that age.
It’s no secret that wisdom comes with age. And I’m still fairly young, so I suppose I’m only half as stupid today as I was twenty years ago. But one thing’s for certain …
If I knew back then, what I know today, I’d be very close to an insanely comfortable retirement.
Rent is for suckers
Hate is not a healthy emotion, so instead of hating on Millennials, I’d like to offer them a piece of practical, financial advice they can start utilizing right away.
Buy a house!
Although the most recent real estate market implosion is still fresh in everyone’s head, the fact is, owning a home, or at the least, a small piece of property, is an excellent long-term investment.
In 1996, I was smart enough to by a home. I paid $63,000 for it, and at the time, that was at the high end of what I was looking for. Now I could easily chest-pound and tell you that ten years later, that house could’ve fetched close to $220,000. Because it did.
Of course, this had nothing to do with the REAL value of the home. This was nothing more than the result of an irrational market. Quite frankly, it was an anomaly. Only in an irrational market could you watch the value of a home climb 250% inside of ten years.
Typically, a home should only appreciate between 3% to 5% a year. Certainly there are variables, but this is what most investors expect.
Now consider this …
A 25-year-old buys a home today for $250,000. He lives in it, and maybe even rents a room to generate some extra income.
Assuming a 20-year mortgage, by the time he’s 45, the mortgage is paid off, and it’s now worth between $450,000 and $660,000.
To a 25-year-old, 45 might seem like an illusion – a distant age that’s nearly impossible to even comprehend. But of course, those 20 years always fly by.
My advice to the imaginary Millennial reading this …
If you can scrape up enough to put 20% down now, never miss a payment, and take on the responsibility of owning a home, without doing anything else, in twenty years you’ll be sitting on a nice chunk of change and a whole lot of security.
Of course, with a mortgage you’re also shelling out a decent amount in interest. But if you pay more than the minimum payment every month, you’ll be able to pay off your mortgage much faster. That means more of your hard-earned money will end up in your pocket, and not in the coffers of your bank.
A great way to enable this is to rent out a room in your home.
If you bought a house today for $250,000, with the current interest rate being around 4%, your monthly payment would be around $1,500/month.
Rent out a room for $800 a month, and put that cash towards what you owe on the house.
Although you won’t likely be able to do this forever, if you can rent one of your rooms, even for the first few years, you’ll be able to put close to $10,000 extra per year towards what you owe – when what you owe is at its highest amount.
And don’t forget, since you’re not renting, the money you pay every month will come back to you, allowing you to secure your wealth instead of handing it over to a landlord.
Also, here’s something else to consider …
What you make today is likely going to be a lot less than what you’ll be making five years from now. So when you do see an increase in your wage, consider putting that extra cash towards your mortgage payment.
Let’s say you’re making an extra $800 per month in rental income, plus you start making an extra $1,000 a month in take-home pay. Plow all that extra cash into your mortgage payment, and in no time you’ll be living in a home – debt-free.
Yes, I know, there’s very little of this that sounds particularly exciting to those in their early to mid twenties. But you know what is exciting? Being 35 years old and living rent and mortgage-free.
A little financial freedom is exciting because few ever get to enjoy it. And while owning your own home won’t necessarily allow you to live like a Kardashian, it will give you a hell of a lot more wiggle room to enjoy all the things that make life worth living.