How To Become A Millennial Millionaire

#millennials

The word “millennial” is a loaded term. But the phrase “millennial millionaire” sounds like an oxymoron. 

Even more so than “baby boomer”, the word millennial comes with connotations and stereotypes that vary greatly depending on who you ask … some positive, but mostly negative.

For many, millennials are the lazy, entitled and unskilled generation that will ultimately drive the U.S. off a cliff.  Others are far more optimistic about millennials and many reputable prognosticators think that millennials will be the “next great generation”.

Regardless of what your opinion is on this generation, it’s fair to say that they are getting a raw deal.  Millennials will inherit from their parents generation a mountain of debt and unfunded obligations — social security and medicare.

Millennials neither benefited from the run of up in this debt nor will they get to participate in the benefits of receiving these entitlements …  But they are will be stuck with the tab.

Does this sound like a gloomy outlook?  ….I promise it’s not.  

I’ll tell you why this controversial generation is actually in the “cat bird seat” as long as they don’t decide to abandon capitalism.

Like their parents, millennials will some day be wealthy.  Except their road to wealth will be much different.  

Rising Asset Prices

The majority of baby boomers entered the ranks of the wealthy through asset appreciation.  They got rich because their houses, stocks and companies appreciated in value.

If a boomer purchased a home in 1987 (when millennials were being born) and sold their house today, it would have increased almost 4 fold (3.57x according to the Case-Shiller housing index). 

This means if they bought a house worth $100,000 in 1987 with a 20% down payment.  They are cashing out today with their mortgage completely paid off pocketing the entire sales price of $357,000 and an ROI of 1,785%.

Boomers stock portfolios have performed even better.  This is all due to the gradual lowering of interest rates since the early 80s.  Lower and lower interest rates means higher and higher asset prices (houses, stocks, bonds, etc).  

But if you don’t own these assets, then you don’t get to participate in this boom.  Unfortunately for wannabe millennial millionaires, they don’t own these assets and it’s estimated that they have only 5% of the nation’s wealth.

Millennial Millionaire Path To Wealth

So where will the millennial millionaire come from?

Millennials must grow rich by raising their skills and increasing their incomes instead of owning assets and letting them appreciate over time.  This is easier said than done but there’s promising reasons why millennials are up for the task.

Here’s the first reason:  they have no choice.

The same opportunities will not be available to them (e.g. ownership in rising asset prices).  So they have no choice but to find a new path to increasing their net worth.

Lower Capital Economy

The good news is that today’s economy is different than the one their parents grew up in.  In some ways, it’s harder and more competitive.  

But in some ways it’s easier than ever to become wealthy because entrepreneurs and employees can deliver value to consumers in less capital intensive ways.

In the last century and dating back to the beginning of the industrial revolution, you needed capital to become wealthy.  You needed large amounts of savings or borrowing to control factories and other means of production.  

Compare today’s ultra-wealthy with the robber barons of the past.  Rockefeller and Carnegie become wealthy through extremely capital intensive businesses.

Today Mark Zuckerberg, Bill Gates and Jeff Bezos become wealthy through productive computer code and internet real estate.

Don’t get me wrong: there are a lot more to these companies than simply lines of code and web pages.  But they are far less capital intensive than industries of the past …steel, oil, railroads, etc.

However, Zuck and Gates are not your average joe’s … they are the outliers. But that does not mean that mere mortals like us can’t become as wealthy as our parents in today’s economy.

Today youtube creators can earn hundreds of thousands of dollars (even tens of millions for the top earners) just from regularly creating content from their phone that people enjoy watching.  As an employee, you can deliver high-value services to your employer with just a laptop and an internet connection.

The new technology of today’s economy allows millennials to gain leverage through technology and information rather than capital, oil, steel or factories.   This is a lot more accessible way to grow wealth.

3 Foundations To Build Wealth From

So what’s the best way to get wealthy if you’re a millennial and want to become a millennial millionaire?

I submit three broad foundations to build from:

Sell To The Wealthy

Who are the wealthy?  … baby boomers.  Baby boomers are getting older and elderly.  They have a lot of money and they need a LOT of goods and services.  Baby boomers are switching from mostly producers to mostly consumers.   If you figure out what they need and find a way to sell to them, you can become richer than they are. 

Buy Boomers’ Businesses

Millions of baby boomers own small businesses that are worth a lot of money.  They want to retire but they have no exit strategy from their business. They can’t sell their company on the New York stock exchange as if it were publicly traded.  And many of these businesses are too small to be purchased by private equity funds and institutions.  Many boomers have spent a lifetime creating value in these businesses that they can’t sell.  

Enter the aspiring millennial millionaire.

Boomers will be desperate to sell their companies and they’ll be willing to finance the purchase for you.  In other words, they will let you take ownership of the company with little to no down payment and you pay them a monthly debt payment from the profit of the business.  This gives you an opportunity to take control of a business that’s much cheaper than stocks traded on wall street with very little money down.  If you grow the business, it’s a chance to quickly increase your net worth because you invested so little in the business.  This is the definition of leverage.

Help Individuals or Businesses Earn or Economize Or Both

Without going into too much detail, we are entering a “balance sheet recession”.  This means that businesses and households with too much debt will pay down debt by spending less.  To that end, they will look for ways to increase their income (as always but more desperately now) and economize their spending.  While this does not tell you specifically which business to go into … look for ways to help businesses and individuals earn and save money. And you will be paid handsomely for it.

What did I miss? Comment below on how you think (or don’t think) Millennials will become as wealthy as their parents.

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