Do you know any first generation millionaires? Since I am deeply involved in the personal finance world, I know a few. But in my offline life, I don’t know any.
First generation means being the first of your family born on US soil. I’m a first generation kid myself, my father having been born and raised in the Dominican Republic.
And I plan to be a millionaire, even though I’m not there yet. (Here’s how long it takes to become a millionaire by the way.)
Where Are the First Generation Millionaires?
In 2019 only 6.71% of all US households held millionaire status. (This definition includes cash and investments only and excludes real estate assets.) It’s weirdly hard to find out how many stock market millionaires there are, but we do know the incredibly depressing fact that the top richest 10% of Americans own 89% of all stocks!
When it comes to first generation Americans becoming millionaires, there are some important things to take note of.
In the United States, the average Black and Hispanic or Latino households earn about half as much as the average White household and own only about 15 to 20 percent as much net wealth.
Becoming a US citizen is a long process, and it can take years to complete.
So generally speaking, the path for first gen kids to become millionaires is longer than it is for others.
Steps To Being The First Millionaire In Your Family
But if you’re out here breaking generational curses because you’re a first gen Latina, or the person your family depends on, then I’ve got the financial to do list for you to become a first generation millionaire! Let’s get this money together y’all.
Use Budgets to Maximize Investments
Budgeting is often not explicitly taught at home. It might be that your parents do things like emphasize turning off lights in rooms you’re not using so the light bill is lower, or buy non brand name foods at the grocery store to save a bit of money. But sitting down and walking through how to use a budget? It’s not common for most of us.
But budgets are life and truly the first step to changing your financial future. I used budgeting to pay off nearly $30,000 in student loans while I was broke as hell and to figure out how to set aside money each month to build my emergency fund.
Our best selling values based budget workbook walks you through how to create a financial plan that fits YOUR life and incorporates your goals.
In your budget, make sure to include both cash savings for things like your emergency fund AND money to put towards your investment accounts. We build wealth through investing, not just saving. If you need help starting to invest, click here!
Take Advantage of Workplace Investment Plans
If your job offers you enrollment in an investing plan, TAKE IT. That means signing up for your 401k, 403b, 457, IRA- whatever they’re offering you take it.
Why do we love a workplace plan so much?
Your company will take the money directly out of your paycheck so you don’t have to do it yourself
Your company may offer a contribution match, which means they contribute FREE MONEY into your investments.
It’s an easy way to start when you’re young if your first job offers one. And if you’ve moved jobs a few times and know you hvae an old 401k out there, you can use Capitalize to find it and roll it over FOR FREE.
Open an IRA
IRA stands for Individual Retirement Account and they are critical to your first generation millionaire journey! Only 44% of Black Americans have a retirement account and only 8% of Hispanic Americans have an IRA.
IRAs are powerful because they are not tied to a workplace- they are accounts linked to your name only. That means if you leave a job or your company combusts, your IRA is still yours! IRA’s are fantastic wealth building tools and the sooner you can open one and get your money in the market, the better.
As of 2022 the maximum you can put into an IRA is $6,000. That’s $500 a month. If you invest $6,000 a year for 20 years you’ll have $275,000 in your IRA! Combine an IRA with a 401k and maybe the equity in a house, and you could easily be a first generation millionaire. The key is to start investing in an IRA as soon as possible!
Open an IRA today if you don’t have one already. You can open one in 15 minutes right here and begin building wealth this week!
Leverage Debt
Here’s the thing: rich people actually use debt as a tool. They don’t carry debt as a liability.
What does that mean? Let’s say you buy your first house (we’ve got a plan for that here!). As you pay off your mortgage and as the value of the house goes up, you have the option to “pull equity out of the house.”
And what that means is leveraging your debt. You can essentially pull cash money out of your physical house and use it to buy other assets! You, of course, keep ownership of the house so you still have the asset.
This is how rich people stay rich y’all. The rules are different once you start accumulating wealth. And for those of us trying to become a first generation millionaire, there’s often less access to this information.
What are you doing to become a first generation millionaire?
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