The average American millionaire, according to extensive research by the late Dr. Stanley, is about 55-years-old, self-employed, has 3 children, has been married to the same person for 30 years, and lived in the same home about 20 years.
This article will dive into the last aspect of this profile – home ownership – and how it contributes to becoming a millionaire. We will discuss the percentage of portfolio, how to buy, and when millionaires usually move up or down in home.
Percentage of Portfolio
For those who are worth just $1,000,000 a home can range in being 10-50% of that nest egg. For example, for those who have a home in the Southern Maine area where real estate experts like http://feghalihomes.com/ is located there are a good number of homes that can be purchased for $100,000-200,000, allowing a family to put cash away towards a Roth IRA or into precious metals.
However, for a family living in Los Angeles the cost of a small home can run about half a million, making the road to being a millionaire one that involves conquering a mortgage with lots of interest instead of dutifully investing, and letting interest boost up the savings.
This is why how one buys a home is so important.
How to Buy a Home
People who buy $500,000 homes on incomes of $100,000 are going to have a very hard time saving and investing. After all, homes require maintenance to the tune of about 1% per year. If your struggling to make regular payments, how are you going to come up with another $5,000 with which to keep up the property?
Buying a home with a monthly mortgage payment of just 25% of your take home pay is the key to being comfortable. If that mortgage is paid off in 15 years, then it’s as though you used that key to open a door from comfort to prosperity.
This is why many wealthier people move up or down in home. They understand that comfort is important. Sometimes they can afford it. Other times they can get more out of their money by having less to take care of.
Best Times to Move Up or Down in Home
When you have a very healthy income and a need for more space, then moving up makes sense. It could be for a business you want to keep in the house, for a new child on the way, or because of other needs and wants, like a garden, a place to entertain, or a better school district.
More often than not people move up as they grow their family, and then they move down as the nest empties out. This is why the right time to move down is often as one gets older. By selling the larger home you raised your family in to buy a smaller one you are able to enjoy more time doing what you like because there’s less to clean, less grass to mow, and all the rest.
Additionally, there’s more money for fun stuff because of the sale proceeds from the home and lower utilities and taxes, allowing one to travel and relax more.
You can be a millionaire. The key is to own a home that fits into a budget that permits you to pay it off while saving for retirement. If every dollar you earn is also being stressed by that payment on the 1st of each month, then you’re going to have a hard time paying it off let alone putting together a healthy net worth.