The Pandemic has Millennials on Financial Pins 'n Needles
It’s a fair statement to suggest that younger people – Millennials, for example – have suffered some particularly catastrophic economic hardships in recent years.
It’s a fair statement to suggest that younger people – Millennials, for example – have suffered some particularly catastrophic economic hardships in recent years.
Catastrophic Economics
Studies show that Millennials – those born 1981-1996 and now in their mid-20s to late 30s – have accumulated much less wealth than their parents and grandparents had at similar stages in their lives. This could be attributed to those catastropic economic hardships. Case in point is the older group of Millennials whose financial short straws started being drawn during the recent Great Recession that began in December 2007 and ended in June 2009. Having already suffered a less than ideal job market during those years, they and their younger cohorts are now being battered by multiple Covid-19 pandemic torments… if not the virus itself, a job loss, a pay cut, a temporary layoff, a loss of health insurance, etc. “What to do?” they might be heard muttering.
Pandemic Pins 'n Needles
An obvious first thing to do in the instance of job interruption or loss is to determine your eligibility for unemployment insurance, and if eligible, to apply. The CARES Act signed into law in March 2020 provided pandemic-related unemployed workers with an additional $600 per week on top of regular unemployment benefits, but that ended in July and has yet to be renewed by Congress. However, the President signed an August 8 executive action partially restoring the lapsed $600-a-week unemployment supplement. Under this edict, the federal government is providing unemployed workers an extra $300 in weekly payments. Forty-four billion dollars from FEMA’s Disaster Relief Fund is being used to finance the benefit until it's exhausted.
Confronted with job losses, Millennials must consider where they can save the most – perhaps in housing by moving in with family or renegotiating rent or lease payments with a willing landlord. Failing that, it then becomes a matter of prioritizing rent and mortgage payments with groceries, utilities, and other essentials.
If you still have a job but haven’t yet started an emergency fund, start one if at all possible. Rainy Day funds represent a firewall against both unexpected financial challenges and against having to interrupt long-term retirement savings plans.
Debt Conundrum
Along with credit cards and mortgages, many Millennials still face the prospect of paying off those pesky and burdensome student loans. Because many lenders have programs to help debtors address financial difficulties, now is the time to discuss “revised” payment options with them. If student loan deferrals or mortgage refinance opportunities are available, resultant savings might be redirected into a Rainy Day fund. Whatever you do, don’t fail to address these financial problems head on. To those fortunate enough to have long-term savings, if possible, avoid raiding these valuable retirement accounts to pay off debt. But don’t let debt pile up that will plague you for years to come. Therein lies the conundrum.
Retirement Life Raft
If your financial woes are attributable to Covid-19, and if you have a retirement plan and all other sources of financial relief have been exhausted, under terms of the CARES Act, you may qualify to withdraw up to $100,000 from retirement accounts through December 2020… without penalty, if under 59½ years of age. Personal income tax will be due on the amount withdrawn, but it’s payable over the following three years. Such a distribution could be paid back anytime during that period and a tax refund claimed on any taxes already paid. This withdrawal option should be avoided if possible because of its potential negative impact on future retirement plans, but folks must occasionally do what they have to do during sudden financial setbacks in their lives.
Skill Redux
If a temporary layoff becomes permanent, this might be the time… call it an opportunity… to learn a new skill or enhance existing qualifications that might help land a new job. Online courses are readily available and new skill sets might be gained by doing different types of part-time work. You might even consider going back to school to train for a career in a promising “new” industry as opposed to one decimated by the pandemic or technical obsolescence. In short, acquiring new skills, building new relationships, and focusing on developing trends will put you in position to grab emerging opportunities when presented. Broaden your thinking and focus on these new challenges. By the way, developing these sorts of outlooks are good even in “normal” times.
Financial Wellbeing
Managing your financial wellbeing, particularly during hard times, can be incredibly stressful, but carefully monitoring your credit is especially important in your overall financial wellbeing. Because current personal financial dilemmas are so widespread, the three top credit agencies – Equifax, TransUnion, and Experian – are all offering free weekly access to credit reports through AnnualCreditReport.com.
If you need career advice, reach out to family, friend, and workplace networks for trustworthy help. Thousands of people are currently dealing with serious financial circumstances, and it’s highly likely that someone in your circle will be more than willing to provide advice or encouragement in this time of crisis. Help is out there. Go for it.
And remember: This, too, shall pass.