MONEY buying a home

Why Millennials Are Better Off Waiting 10 Years to Buy a Home

Millennial in front of house for rent
Daniel Grill—Getty Images

A new Fed study finds most young adults require years of saving before they can afford home ownership.

In a report sure to make the real estate industry cringe, researchers at the St. Louis Federal Reserve suggest most young adults postpone home ownership for years, if not a decade or longer. This comes as the housing market is beginning to boom again and older Millennials, a group that generally has eschewed homeownership, shows signs of wanting to take the plunge.

Can this be sound advice? Home ownership has been a reliable long-term wealth builder for generations. Often home equity is retirees’ largest asset and, along with Social Security, enough for them to live out their days financially secure.

The housing bust changed the calculus. Flipping and other short-term strategies, and risky nothing-down and no-documentation mortgages, contributed mightily to the bust. Yet short-term moves have always been dicey. Properly considered, a home is less an investment than a forced savings plan and place to live. Over time, real estate keeps pace with inflation and a stable, affordable mortgage provides a valuable tax deduction.

The Fed study does not dispute that. It is an examination of age and wealth, and finds that younger families are on track for a lower net worth than all previous living generations. Adjusted for inflation, the median wealth of families headed by someone at least age 62 rose 40% between 1989 and 2013—to $210,000 from $150,000. Meanwhile, median wealth of households headed by someone age 40 to 61 fell 31% to $106,000 and median wealth for younger families fell 28% to $14,000.

Researchers conclude that younger families would be better served by maintaining a personal asset mix that more closely resembles the asset mix of older families—less debt and less real estate relative to their other assets. In other words, stretching for that first home when you have no other savings and little ability to save going forward is a huge mistake.

This “mistake,” by the way, is one plenty of families in previous generations made—and for many it paid off well. What seems to have changed is a greater degree of speculation that leads to a boom-bust pattern in the housing market, one that can wipe you out in the short term if your timing stinks. The Fed researchers write that young people should “delay purchase of a home with its attendant debt burden until it was possible to buy a house that did not make the family’s balance sheet dangerously undiversified and highly leveraged.”

John Bucsek, managing partner of MetLife Solutions Group, finds merit in the Fed’s argument, saying that young families should rent for years for less money than a mortgage would cost. That preserves career flexibility and cuts monthly costs. They should begin saving in a Roth IRA to build long-term wealth through a diversified portfolio. They should also pay down student loans and other debts. Later, when they have more assets, if need be they may withdraw their original Roth IRA investment plus up to $10,000 penalty free for a first-time home purchase.

That is sound strategy, and would have been especially valuable advice before the housing collapse. Today the housing market is on firmer footing. Banks remain careful about extending credit, and in June the median price for an existing home rose 6.5% to a record $236,400, at last topping the previous high of $230,400 set in July 2006—before the bust. The pace of homes being sold is the strongest since 2007. All this suggests the market is in full recovery, though the prominent economist Robert Shiller, as ever, is raising red flags about a bubble.

At the same time, Millennials, a generation that pioneered the sharing economy and many of whom have claimed to never want to own anything, are poised to enter the housing market. A Digital Risk survey found that 70% of 18-to-34 year olds are interested in purchasing a home in the next five years. If they act on that interest, it will further boost the housing recovery—and if they commit to staying their house and saving a bit on the side, they will begin to build long-term wealth much like their parents and grandparents.

Read next: These States Offer the Most Help for Buying a Home

TIME Money

The 7 Biggest Financial Mistakes to Avoid

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Getty Images

Missing a student loan payment

As author and leadership guru Dale Carnegie once said, “discouragement and failure are two of the surest stepping stones to success.”

So, naturally, one of my favorite questions to ask guests on my daily podcast So Money is, “What was your biggest financial failure or mistake?”

Not because I want to embarrass them, but because those missteps inevitably reveal invaluable lessons and, in many cases, pave the way towards big wins.

Since launching the show, I’ve had the honor of interviewing everyone from top entrepreneurs to bestselling authors and entertainment personalities including Tim Ferriss, Ryan Holiday, and Margaret Cho.

Here’s what they — and four others — had to say about a personal financial failure.

David Pottruck: ‘Investing in startups.’

David Pottruck, the former CEO of Charles Schwab and now chairman of HighTower Advisors, says that after leaving Schwab, he began investing in small startup companies without any prior experience.

For example, remember Eos Airlines? Pottruck says investing in it was a big ol’ fail.

“… A good idea does not necessarily create a good business and a good business does not necessarily translate into a good investment,” Pottruck told me. “So, you have to look at something in terms of its idea value, its value as a business and then its value as an investment. All of those are different, and so I didn’t know that, and I had to learn that.”

Listen to the full interview with David Pottruck.

Tim Ferriss: ‘Failing to find my market.’

“You should not make a product and then find your market,” says Tim Ferriss. “You should choose your market and then make your product. You should know exactly who you’re making something for and not get stuck as a lot of engineers do, creating something with a bunch of features and then attempting to figure out who you’re going to sell it to.”

The multiple New York Times best-selling author learned this lesson the hard way, confessing that after teaching his speed-reading seminar he was eager to create a product that allowed him to offer seminars without always having to be physically present.

So, he created an audio-book, “How I Beat the Ivy League,” and invested in the project using most of his savings and a lot of his time. Ultimately, he sold only two copies — including one to his mom, he joked.

Listen to the full interview with Tim Ferriss.

Margaret Cho: ‘Not buying an apartment.’

Award-winning comedian Margaret Cho shared with me that one of her biggest mistakes was saying no to a friend who offered her a really great real estate deal back in 1994.

A friend had offered her the apartment in New York City from the movie “9 ½ Weeks” for less than $400,000. She declined the offer at the time, even though she had the money. Now she estimates it’s worth between $8-9 million.

Although it would have been a great real estate investment, Cho doesn’t look back. She says, “I was really scared to buy a house. And I really remained scared to buy a house until I bought a house … But to me, I live very, very comfortably now and really never took those kinds of risks.”

Listen to the full interview with Margaret Cho.

Rebecca Jarvis: ‘Missing a student loan payment.’

“When you don’t pay a student loan, it is a very big deal. And it can, in a very significant way, change your credit and have a major impact on your life moving forward,” ABC News chief business and economics correspondent Rebecca Jarvis recalls.

Jarvis says her biggest financial fail was missing a payment on her student loans. The missed payment not only affected her credit, but her parents’ credit as well.

“Everything ultimately worked out,” Jarvis says, “but to me, that was a pretty significant lesson, and I know it sounds, maybe to some people it doesn’t sound like that big of a deal. It is.”

Listen to the full interview with Rebecca Jarvis.

Dave Asprey: ‘Losing $6 million in 2 years.’

By age 26, Dave Asprey, author of “The Bulletproof Diet,” had earned $6 million dollars in equity at his company, Exodus Communications.

It was a $36 billion dollar company, and Asprey was the youngest person to attend board meetings. But $6 million wasn’t enough.

He was eager and hungry to make more. He wanted to reach the $10 million mark, so he pursued investment deals without seeking professional help. By age 28, he lost the $6 million and ended back at zero.

Looking back, he says, “… What I should have done was quit my job, [sell] all of my shares, and [retire].”

Listen to the full interview with Dave Asprey.

Ryan Holiday: ‘Applying for a mortgage while self-employed.’

Best-selling author and media strategist Ryan Holiday regrets initiating the home-buying process after he left his post as director of marketing at American Apparel.

“If I had just looked … two months earlier it would have probably saved me the biggest nightmare of my life, which was applying for a mortgage as a self-employed person,” he says.

The process involved mountains of paperwork and was incredibly arduous and time consuming. The bank was very demanding due to the fact that he was self-employed (i.e. “risky”) and they wanted more paperwork than usual.

He goes on to say, “When you’re self-employed … and then when you apply for a loan or you’re setting a business up … all of a sudden now your internal system is now being subject to somebody else’s system and those don’t match very well.”

Listen to the full interview with Ryan Holiday.

Dan Price: ‘Not being prepared for the recession.’

Dan Price, the 30-year-old CEO of Gravity Payments who raised his company’s minimum wage to $70,000 per year (and slashed his own from $1 million to $70,000), says that in 2008, the small nonprofit he was running was ill-prepared for the financial crash.

This resulted in him having to — ironically — give drastic 80% pay cuts across the board.

“We almost didn’t make it. And so, I promised myself that the next time I faced a recession, I would be prepared for it …” he says.

Listen to the full interview with Dan Price.

This article originally appeared on Business Insider

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MONEY home improvement

How to Get Color in Your Garden Without Spending a Fortune

For Sale sign illustration
Robert A. Di Ieso, Jr.

Q: Not a single flower is blooming in my yard. We had so many in spring, but every July and August, we’re left with monotone greenery. Can we add late-summer color without spending a fortune?

A: Yours is a common problem in the northern tier of the country, where the vast majority of plants bloom in spring. But the good news is that there are plenty of affordable ways to add flowers throughout the summer and into the fall, says Tony Abruscato, director of Chicago Flower & Garden Show.

The easiest, most affordable solution is annuals—that is, plants that complete their entire life cycle in just one year. Annuals don’t come back from year to year, although you’ll sometimes get lucky and the seeds they release in the fall will sprout new plants in the spring.

The great thing about annuals is they bloom pretty much nonstop for the whole growing season, especially if you remove spent flowers to encourage new ones to form. They also spread, so a small patch of them will expand into a large patch over the course of the summer.

Annuals are also extremely low cost: about $1 to $6 per plant, versus $12 to $30 (or more) for a perennial, a plant that goes dormant for the winter and comes back the next year.

Color Options

You can get annuals that flower in almost any color. Many thrive in shady areas, which are tricky spots for flowering perennials. Popular annuals include impatiens, zinnias, petunias, begonias, dahlias, geraniums, and verbena.

Abruscato also recommends tropical perennials, which can’t tolerate northern winters and so die off each winter like annuals. These include Mexican petunia, Mexican sage, and ginger lily. “If you plant them in pots, you can move them indoors for the winter, and put them back out next spring,” he says .

There are also many standard perennials that will bloom late in the growing season. And because most people’s attention has turned from gardening to vacationing this time of year, you can often get them at a 40% to 50% discount. That means you can probably pick up a plant that will add color every July, August, or September for perhaps $10 to $15.

Abruscato suggests several long-blooming perennials: black-eyed Susan, Echinacea, astilbe, aster, geranium Rozanne, allium, Lacey blue Russian sage, and oak leaf hydrangea. Rose of Sharon shrubs also offer late-season flowers, he notes.

Ask your local garden center for plant recommendations that are suitable for your area. Then select a mix of bloom times, so something is always putting on a show in your yard.

TIME real estate

For $725 Million You Can Buy This Massive, Historic Texas Ranch

Texas, Your Texas
Donovan Reese Photography—Getty Images Texas cowboy on a Texas ranch.

It was a favorite of Will Rogers and Teddy Roosevelt

A Texas ranch featuring more than 1,000 oil wells, 6,800 head of cattle, 30,000 acres of cropland, and a tombstone for a horse buried standing up is on the market. You can get all this (and more!) for the cool sum of $725 million.

The ranch “takes days to see,” according to real estate broker Bernard Uechtritz. The W.T. Waggoner Estate Ranch is about 175 miles northwest of Dallas and covers 800 square miles, making it bigger than New York City and Los Angeles combined, reported Bloomberg.

The ranch is being sold whole hog, which means any buyer gets everything on the property, from the 29 tractors to the empty Old Taylor bourbon bottles that sit in an old hunting lodge. If Waggoner sells for its asking price, it will be the biggest publicly known sum ever paid for a U.S. ranch. The most paid to date was $175 million for a Colorado spread in 2007.

The ranch has a storied history and is going on the market after a local judge ordered the sale of the property, ending 20 years of litigation between dueling branches of the Waggoner family, which has owned the property almost as long as Texas has been a state.

Here’s just some of the interesting items that come with the sale:

  • IBM Selectric typewriter
  • 500 quarter horses (for which the ranch is known)
  • Pink poodle lamp
  • 1998 Bell 206B-3 JetRanger II helicopter
  • Dogs named Shoog, Bee, Jazz, CoCo, and Brute

Read more at Bloomberg.com.

MONEY real estate

Seniors Are Seeking Out States Where Marijuana is Legal

senior woman smoking marijuana pipe
Norma Jean Gargasz—Alamy

The top moving destination in 2014 was Oregon, which voted to legalize marijuana last November.

When choosing retirement locales, a few factors pop to mind: climate, amenities, proximity to grandchildren, access to quality healthcare.

Chris Cooper had something else to consider – marijuana laws.

The investment adviser from Toledo had long struggled with back pain due to a fractured vertebra and crushed disc from a fall. He hated powerful prescription drugs like Vicodin, but one thing did help ease the pain and spasms: marijuana.

So when Cooper, 57, was looking for a place to retire, he ended up in San Diego, since California allows medical marijuana. A growing number of retirees are also factoring in the legalization of pot when choosing where to spend their golden years.

“Stores are packed with every type of person you can imagine,” said Cooper who takes marijuana once or twice a week, often orally. “There are old men in wheelchairs, or women whose hair is falling out from chemotherapy. You see literally everybody.”

Cooper, who figures he spends about $150 on the drug each month, is not alone in retiring to a marijuana-friendly state.

Twenty-three states and the District of Columbia have laws legalizing medical marijuana use. A handful – Colorado, Oregon, Washington, Alaska, and D.C. – allow recreational use as well.

The U.S. legal marijuana market was $2.7 billion in 2014, a figure expected to rise to $3.4 billion this year, according to ArcView Market Research.

Figuring out how many people are retiring to states that let you smoke pot is challenging since retirees do not have to check off a box on a form saying why they chose a particular location to their final years.

But “there is anecdotal evidence that people with health conditions which medical marijuana could help treat, are relocating to states with legalized marijuana,” said Michael Stoll, a professor of public policy at University of California, Los Angeles who studies retiree migration trends.

He cited data from United Van Lines, which show the top U.S. moving destinations in 2014 was Oregon, where marijuana had been expected to be legalized for several years and finally passed a ballot initiative last November.

Two-thirds of moves involving Oregon last year were inbound. That is a 5 percent jump over the previous year, as the state “continues to pull away from the pack,” the moving company said in a report.

The Mountain West – including Colorado, which legalized medical marijuana in 2000, and recreational use in 2012 – boasted the highest percentage of people moving there to retire, United Van Lines said. One-third of movers to the region said they were going there specifically to retire.

Lining Up for Pot

The image of marijuana-using seniors might seem strange, but it is the byproduct of a graying counterculture. Much of the baby boom generation was in college during the 1960s and 70s, and have had much more familiarity with the drug than previous generations.

Many of the health afflictions of older Americans push them to seek out dispensaries for relief.

“A lot of the things marijuana is best at are conditions which become more of an issue as you get older,” said Taylor West, deputy director of the Denver-based National Cannabis Industry Association. “Chronic pain, inflammation, insomnia, loss of appetite: All of those things are widespread among seniors.”

Since those in their 60s and 70s presumably have no desire to be skulking around on the criminal market in states where usage is outlawed, it makes sense they would gravitate to states where marijuana is legal.

“In Colorado, since legalization, many dispensaries have seen the largest portion of sales going to baby boomers and people of retirement age,” West said.

The folks at the sales counters agree: Their clientele has proven to be surprisingly mature.

“Our demographic is not punk kids,” added Karl Keich, founder of Seattle Medical Marijuana Association, a collective garden in Washington State. “About half of the people coming into our shop are seniors. It’s a place where your mother or grandmother can come in and feel safe.”

Read next: Can You Buy Marijuana With a Credit Card?

MONEY financial advice

Financial Website Brothers Share Their Best Financial Advice

BrightScope co-founders Mike and Ryan Alfred talk about retirement savings and their biggest money mistakes.

Save until it hurts was the first thing Mike Alfred, a co-founder of BrightScope, said about retirement savings, and that’s part of his best financial advice to give others as well. “Live below your means,” he said, “which sounds very simple in theory but it much more difficult in practice.” His brother Ryan, the other BrightScope co-founder, suggests keeping your investments at arms-length so you’re not tempted to overanalyze them.

Mike said his biggest mistake was buying in to the dot-com bubble, while Ryan talks about how they funded a large part of their business on their own credit cards.

Read next: The Co-founders of BrightScope Share The Painful Secret to Retirement Success

TIME real estate

You Could Win a 35-Acre Farm Just By Writing an Essay

“This place has so much potential for somebody who has imagination and drive"

A Virginia couple offered writers a shot at owning their bucolic, 18th century horse farm, so long as they can explain in 1,000 words or less why they’re worthy of the property.

Owner Carolyn Berry, along with her husband Randy Silvers, said that she harbored no ill will toward real estate agents, but dreaded the idea of a potential owner “traipsing across the property, and pointing out what they might consider a flaw,” according to local radio broadcaster WAMU.

To safeguard against gut renovations, the couple has announced an essay competition to give away Rock Spring Farm in Essex County, a property valued at $600,000, Berry says, to “somebody who loves the land as much as we do.” Essays will be evaluated by an expert panel of “educators, hobby farmers, and horse enthusiasts,” according to the contest’s submission guidelines.

The catch? Contest rules require a $200 submission fee, which the couple hopes will net enough funds to pay off their mortgage and retire comfortably in the knowledge that their farm won’t be redeveloped into a property solely for humans.

MONEY millionaires in the making

How to Make Money Like a Millionaire

It's easier than you may think.

A seven-figure nest egg may feel far off, but these millionaires—and millionaires in the making—have figured out the keys to financial success. From smart investing to aggressive saving to launching a business, check out their tips for reaching your million-dollar payday. (And then read the rest of our advice for How to Reach $1 Million.)

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Scott Jones

Debra Cohen, 48, Long Island, N.Y.
Her Approach: “I feel very strongly that if you have some drive and want to make a million dollars, you should be in business for yourself,” says Debra Cohen, president of Home Remedies and creator of the Homeowner Referral Network (HRN).

After recognizing a need to help connect quality contractors and consumers, she borrowed $5,000 from her husband’s 403b to start a contractor referral business. After six months, she paid the money back. Three years later, she got a call from a woman in Boston who was interested in starting her own referral network. Sensing the widespread appeal of contract referral businesses as self-employment options, she wrote The Complete Guide to Owning And Operating A Successful Homeowner Referral Network, a business plan that has helped establish more than 400 HRNs nationwide.

The popularity of the HRN model helped propel the company’s revenue to $1 million in 2007—a feat Cohen celebrated with a family trip to Puerto Rico. As her net worth continues to grow, Cohen has incorporated other cost saving measures, like remodeling her home instead of buying a new house, a move she estimates saved her $400,000 over 10 years.

Want to learn more about becoming an entrepreneur? Check out our Small Business Startup Guide.

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Simon Margolis

Simon Margolis, 30, San Francisco
His Approach: Ever since he started investing in 2007, Simon Margolis has viewed downturns in the market as opportunities to buy.

“I haven’t really been concerned with investment performance too much over the past 10 years or so,” he says. Even with the Great Recession hitting just when Margolis was getting into his investment groove, he still opted to offset paper losses with new investments. “I thought of it as an opportunity to buy cheaper stuff than I had the previous week.”

With a net worth of $450,000, the 30-year-old’s strategy is paying off. He makes a point of maxing out his 401k and IRA, favoring low-fee exchange-traded funds. Though initially attracted to S&P 500 index funds, he’s since diversified his portfolio by including international exchange-traded funds, REITs, and commodities, and has taken a larger cash position, all to help hedge some risk.

Based on his current savings rate and investment returns, Margolis predicts he’ll hit the $1 million mark within the next five years. His advice to investors who want to follow in his footsteps?

“Pay yourself first. Make sure you invest before you do anything else. Before you buy a car, before you pay for dinner, pay yourself first.”

Want to invest your way to $1 million? Here’s help getting started.

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Dan Malkin, 27, New York City
His Approach: “For me, it’s all about saving—and saving properly,” says Dan Malkin. Set to hit seven figures by his 30th birthday, the 27-year-old contributes to his company’s 401k, as well as auto-deposits money from each paycheck into an investment account comprised of exchange-traded funds and two to four individual stocks.

To stay on track, Malkin checks his account balances regularly. “I’m big on comparing expenses one month to another,” he says, doing it with the help of the expense tracking and budgeting app Wallet. The app offers insight into his spending habits, which he tries to manage by walking to work in the summer and cooking his meals at home instead of eating out with friends. Another major savings strategy? Reasonable rent.

“I try to live in a place without insane rent,” he says. “I know people paying 70% of their salary in rent.”

You, too, can save your way to a seven-figure retirement account if you follow these real people’s examples.

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Alison Doyle

Alison Doyle, 58, Alexandria, Va.
Her Approach: Alison Doyle didn’t set out to establish a grand real estate investment plan–it was more of a natural progression. After deciding she wanted to upgrade from a condo to a townhouse in 2004, she recognized the potential of her neighborhood and decided to rent the unit instead of putting it on the market. Four years later, she found herself regularly traveling to her hometown of Buffalo to visit her mother and help plan her high school reunion. With all the back and forth, she decided to purchase a duplex, rent one side and live in the other.

“[Investing in real estate] became more intentional as I learned how well it worked,” says Doyle. “Did I sit down and come up with an investment plan? No, and I probably wouldn’t now. That’s a lot riskier than what I did. I guess I’m more conservative.”

Doyle now manages five rental units: two condos in Arlington, Va., and two duplexes in Buffalo (she keeps one half of one of the duplexes as a vacation home for herself). With all the properties paid off, the recently retired lawyer lives off the rental income and her savings, opting to let her retirement accounts grow unfettered.

Interested in investing in properties? Learn how to unleash your inner landlord.

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Colin Wiesner, 34, Milwaukee, Wisc.
His Approach: With the help of his parents, Colin Wiesner graduated from college debt-free. To honor his folks’ commitment to his education, he decided to make the best use of his income—and that meant maxing out his 401k and an IRA straight out of school. His contributions, plus employer match, allowed him to save $25,000 to $30,000 a year.

Retirement saving became such a part of his routine, Wiesner had a hard time scaling back his 401k contributions when he and his wife decided to save for a house. “It was actually kind of difficult for me to do mentally,” he says, “but I understand the need to scale back my saving to attend to my short-term future instead of my long-term goals.” Though he was still maxing out is IRA, he gradually got used to reallocating a portion of his 401k contributions toward a down payment on a home.

Wiesner also tracks his and his wife’s net worth, which is already more than $500,000, with the website Personal Capital. Based on his current savings rate, he anticipates reaching $1 million within 10 years.

“In the back of my mind I’m always concerned [about losing it], but I know I’m in a much better situation than a lot of my peers and my elders,” he says. “I would rather be in the position I am than [that of] people approaching retirement with less than $100,000.”

Think you can’t max out your retirement savings? Think again.

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Sue Carlson

Sue Carlson, 62, Anna Maria, Fla.
Her Approach: In 1984, Sue Carlson took a chance on a $32,500 distressed property Traverse City, Mich. Over the next four years, she committed nights and weekends to updating the home, eventually selling it for $67,000.

“I was able to double my money with that first investment, so I purchased another one, then another one,” she says. “The rest is history.”

Instead of focusing on long-term rentals, Carlson saw the opportunity in short-term vacation rentals in Michigan and Florida. In late 1999, she opened Anna Maria Island Accommodations. In 2005 she sold the company, which had grown to include 75 rental properties on the island. Five years later, she started a second rental property company, Coastal Cottage AMI.

Carlson now owns $2 million in real estate holdings, and, with the exception of a $185,000 mortgage on her home in Anna Maria, her other properties—a second home in Longboat Key, Fla., a rental property in Bradenton, Fla., another rental unit in Anna Maria, and a home in Kewadin, Mich.—are paid off.

Think you’ve got what it takes to launch a business? Here are 5 creative ways to fund your startup.

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Chip Downes, 51, Harleysville, Pa.
His Approach: Downes‘s path toward seven figures began when he was 23 years old and started investing in individual blue-chip stocks. Now 51, he has maintained an aggressive strategy, compiling a portfolio that is 95% stocks. Though he still has the individual stocks he originally purchased in his 20s, he now opts for low-fee exchange-traded funds to help diversify his portfolio. While his strategy isn’t right for everyone, especially in his age bracket, he says buying and holding the equities has worked well, even during the financial crisis.

“I’m just willing to take the ups and downs over the years with the expectation that the percent gain will be better than a savings account,” he says.

He anticipates weathering another market downturn before he retires from his position as an information technology consultant. Until then he will continue to funnel any raises into retirement savings while maintaining his current cost of living, a practice that has helped him gradually up his 401k contribution to a healthy 12%.

An added interest maintaining rental properties—he currently owns two rental units—has also helped push his net worth above the million-dollar mark.

Want to live well while spending less? Here’s how.

Read Next: How to Manage Your Career Like a Millionaire

TIME housing

Here’s Why the Real Housing Recovery Is Just Getting Started

Construction At A Toll Brothers Development Ahead Of Housing Starts Figures
Bloomberg—Bloomberg via Getty Images A worker builds a new Toll Brothers home.

Home builders are busier than they've been in years.

The year of the construction boom just got even better for American homebuilders.

The Census Bureau and the Department of Housing and Urban Development announced Friday morning that builders launched new housing projects at a seasonally-adjusted annual rate of 1.17 million in June — that’s up nearly 10% from May, and 27% from June 2014. The rate is also just shy of the eight-year high of 1.19 million set in April.

The numbers were driven by a big increase in multi-family construction, as housing starts of single-family homes actually shrank by 0.9% in June. As you can see in the chart below from Calculated Risk, the housing construction recovery has been dominated by the construction of apartment buildings, reflecting a shift in demand for urban over suburban housing, and the fact that the recession has made it difficult for many Americans to qualify for mortgages to buy a home.

But even if many Americans aren’t able to buy homes, they still need somewhere to live. In the years following the real estate bubble, data suggested that Americans were increasingly doubling up, and living with friends and family rather than starting households of their own. Now that trend appears to be shifting, with more recent data showing stronger household formation that at any time since the housing crisis.

Although more data will be necessary before we can declare the housing construction slump officially over, 2015 is shaping up to be a great year for builders.

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MONEY buying a home

7 Ways to Avoid Real Estate Negotiation Nightmares

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Fuse—Getty Images

#3: Keep stubbornness in check

Do you squirm at the thought of negotiating with sellers at garage sales, flea markets, and antiques stores? Even if you’re pretty confident (if you do say so yourself), the process of buying a house can be filled with real estate negotiation nightmares.

Here are some out-of-the-box negotiation ideas that can help turn a possible nightmare situation into a good deal for you.

1. Don’t shy away from a challenging deal

Rachelle Schreiber, a real estate agent with Realty Group International, comes right out and discloses to potential buyers when a deal could be “challenging.”

For example: Divorcing spouses don’t always agree — on anything, but especially not selling their marital home. But that doesn’t mean you should walk away. Instead, rely on the agent to guide the process. That way, “when the sellers don’t agree on terms, we have a less painful reaction [from buyers].”

2. Be realistic about repairs

You really want to sell your house as is, but the only acceptable offer you’ve received includes making repairs — and you don’t have the time to devote to the research, vetting, and oversight those repairs require. Don’t fret. You may be able to get the buyer to do the legwork for you.

“The buyer needs to carefully calculate the cost of doing the repairs,” says Susan Naftulin, CEO of Rehab Financial Group. The seller can then offer a credit for the cost of repairs at closing instead of risking a lost sale.

As the seller, you should carefully double-check the buyer’s numbers so that you’re not reducing your price by more than is absolutely necessary.

3. Keep stubbornness in check

Sometimes egos can ruin a home sale. When that happens, take a deep breath and remember your goal.

“I just had a deal where my buyers paid $300,000 over the asking price for a single-family home,” says Roh Habibi, a real estate broker with Coldwell Banker and star of the TV show Million Dollar Listing San Francisco.

But even so, the deal almost fell through because the sellers wouldn’t include a washer and dryer in the sale.

Note: Just erase a zero (or two) from this example and you’ll see that the advice applies no matter the budget. Don’t let a small setback become a deal breaker.

4. Look at the big picture

You’ll be more likely to win a negotiation battle of wills if you’re not stuck on a specific number.

Sellers and buyers often enter a stalemate over minimal sums, says Chris Leavitt, a broker at Douglas Elliman who also stars on the TV show Million Dollar Listing Miami.

When that happens, Leavitt suggests that sellers consider the monthly carrying costs. “Do you really want to be on the market for potentially a few more months?”

For buyers, it’s about whether they really want to lose their potential new home over a small amount of money.

“Almost 100% of the time, both parties will meet in the middle,” says Leavitt.

5. Understand the difference between prequalified and preapproved

When lenders prequalify buyers, they simply estimate how much buyers might be able to borrow, and they base that figure on what buyers reveal. Being prequalified is not a guarantee that buyers will get a loan.

However, being preapproved means buyers have a loan in place that they’ll probably get if they act within a specified time.

Both buyers and sellers save time and negotiation skills when the buyer comes to the table with a preapproval letter from a lender.

6. Be realistic about short sales

Negotiations don’t work the same way when you’re dealing with a short sale. In this case, sellers are considered to be in dire straits financially, which means they can’t afford to make repairs or provide a repair credit, so that one’s off the table. These sellers also might have outstanding liens on the property that they want or need their buyer to pay.

As a buyer, you’re under no obligation to take whatever the seller dishes out. But if you still come out ahead after calculating costs of repairs and liens, then you might want to go for it.

7. Prepare to walk away

Sometimes people become unreasonable and even resort to bullying as a negotiation tactic.

“You can almost always work out an agreement, even when some part of the transaction has gone terribly sideways or down,” says Bruce Ailion, an Atlanta real estate agent.

But when someone is unwilling to engage in a civil way, Ailion says, it’s time to walk away. “Life is too short to deal with difficult people. Some transactions are just not meant to happen.”

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