Here are 5 smart money moves for millennials who want to grow real wealth

ByJames Dennin

You know you should save more, especially for retirement — but that's easier said than done if you're living paycheck to paycheck. You might even feel like the deck is stacked against you.

In some ways, you wouldn't be wrong.

Warren Buffett — the third richest man in the world — is famous for publicly saying he likely pays a lower tax rate than his secretary, thanks to the intricacies of the U.S. tax code. In a now-famous 2011 opinion piece for the New York Times, Buffett brings the receipts: 

"Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4% of my taxable income — and that's actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33% to 41% and averaged 36%."

Frustrating, right?

Still, you can do one better than envying the financial advantages of the wealthy: Try emulating them instead.

Here are five strategies from the pros about how to reduce your own tax bill, bump up your net worth, and invest your hard-earned cash — so you can end up keeping more of it. Just like Buffett.

Take easy deductions for young taxpayers.

Tax deductions lower your taxable income, reducing the total amount of tax you owe.

Most young people end up taking the easy "standard" deduction, which in 2016 is $6,300 for single people. But you might be able to save more money by instead doing what's called itemizing: putting together a bunch of different deductions that could net you even more savings than the standard.

"Usually if you're making a good wage and paying some pretty substantial state income, then you need to start itemizing," Bill Fleming, a certified financial planner at PricewaterhouseCoopers, told Mic. "The biggest issues we see with kids today is that they work in a lot of different states ... and sometimes forget to take credit on other state income taxes they've paid."

State income taxes are among the most common deduction people forget, Fleming said, but they can make a big difference: "If you travel a lot and spend like half your time in another state, then you might be spending twice as much on your state income taxes as you should," he said. 

Student loan interest can also be used to reduce your taxable income by up to $2,500 — as long as you make less than $80,000 a year as a single tax filer.

Another deduction most people miss, Fleming said, is on charitable contributions, particularly donations.

But what if you donated clothes and don't remember how much they were worth — because you lost the receipts?

"Most Goodwills ... have shopping lists of what they'll sell [each item] for," he said.

Embrace the tax benefits of a Roth IRA.

Even if you have debt, it's important to start saving for retirement at a young age, said Jeff Rose, a certified financial planner based in Carbondale, Illinois.

For young people in particular, Rose recommends putting cash in a Roth IRA, a type of retirement account with serious long-term tax benefits.

The magic of a Roth account is you're putting in money that has already been taxed, so you won't have to pay tax once you're old — and are likely in a higher tax bracket.

"Once you start taking money out in retirement, you're not paying taxes on it," Rose said of the Roth IRA. "For someone that is young and has potentially 40 years of seeing that money grow, that could end up being a sizable amount."

In contrast, the cash you stash in a traditional IRA or employer-based 401(k) grows tax-free — but you will have to pay tax when you retire.

Since you can't predict future tax rates, that's an argument for diversifying (hedging your bets) by holding both Roth and non-Roth accounts.

Consider hitting up a CPA if software isn't cutting it.

Lots of people are fine just using tax software.

"Many millennials are part of over 60 million taxpayers who have a relatively simple tax return and can do their taxes themselves for free or very little money," Lisa Greene-Lewis, a certified public accountant who works with TurboTax, told Mic via email. 

Some services, like H&R Block, even have apps that let you do your taxes via smartphone, letting you simply snap a picture of your W-2.

But putting in a little more effort (and money) by hiring someone to do your taxes can sometimes pay off.

"If you're a freelancer, hire someone to do your taxes," said certified financial planner Sophia Bera.

Freelancers who are keeping track of their own finances can easily run into tax trouble — or miss out on the plethora of deductions for self-employed workers that a CPA will know inside and out.

"Especially as your situation becomes more complicated ... they're going to find [deductions] that you're not going to find," she said. 

Want to play the market? Be picky.

If you are lucky enough to have extra money lying around — after funding your emergency and retirement funds, of course — it's not good practice to just let it sit in a savings account where it will earn a pittance in interest. 

You might instead consider opening a cheap (or free) brokerage account and starting to investing in the stock market; just remember that long-term winners "buy low and sell high."

Warren Buffett, for example, famously bought $1 billion worth of Coca-Cola stock in 1988, right after the 1987 stock market crash. Buffett's theory was that the crash had made people fearful, and their fear led them to wrongly ignore Coca-Cola's underlying value.

Today Buffett still owns Coca-Cola stock — and the value of his investment has grown nearly 16 times.

Now, figuring out when it's right to "buy low" is way easier said than done. After all, a stock might not be tanking because it's undervalued — it might just be a problem company.

But luckily you don't need to take on a ton of risk — or even invest in just a single stock — to take advantage of this general principle: Just look for a "value" style mutual fund or ETF that has been vetted by an impartial third party. These bundles of stocks are considered "undervalued," meaning their fundamentals are better than their current prices suggest.

Start small — very small — and treat this as a learning experience that will help you better understand what's going on in your regular retirement account.

After all, the simplicity of a 401(k), Rose says, is a mixed blessing: "Simplicity is great, but when it's too simple, you're not really fully aware of what you did."

Just remember that — unlike in an FDIC-insured bank account — any money you put in the stock market could disappear overnight. So put in only what you're willing to lose.

Get insured: You're an adult, and it's time. 

One of the best ways to grow your wealth is to protect it from shocks.

But millennials tend to be underinsured. To a certain extent, that's forgivable — if you don't have a ton to lose, then there's not much to insure. 

Then again, unpaid medical bills are a leading cause of bankruptcy for Americans — a strong case for making sure you're always covered by health insurance, even after you age out of your parents' plan.

You should probably start thinking about other types of insurance, as well. 

"[Young people] definitely need health insurance, and definitely need renter's insurance," Bera said, encouraging this reporter to "to go and get it right away," when asked if he could live without it.

"If there's a fire in your house and you lose everything, you won't be able to claim anything," she warned.

As for life insurance?

That's less important for millennials, she said — unless you have kids.