A Pandemic Financial Guide for Millennials

 


Several months into the coronavirus crisis, millions of Americans are still suffering from the economic fallout. Younger people are in an especially tough spot.

Millennials, or those in their mid-20s to late-30s, have accumulated considerably less wealth than previous generations had at similar stages in life, and many older millennials suffered during the Great Recession only to face the current crisis a decade later. “They already had entered into the job market at somewhat of a disadvantage,” said Kimberly Palmer, a personal finance expert at NerdWallet. “This is like a double whammy.”

Younger Americans also experienced significant losses this year. A Wall Street Journal/NBC News poll conducted in April — a month after the pandemic struck the country in earnest — showed that voters age 18 to 34 were most likely to suffer an economic blow, like losing health insurance or getting a pay cut, because of the crisis.

Whether or not you fall into that category, the uncertainty brought on by the pandemic may leave you worried about your financial stability. Here are some tips to help you manage your finances.

If you recently lost significant income, find out if you are eligible for unemployment benefits and, if so, apply, said Tripp Kelly, a financial adviser and principal of Socium Advisors of Northwestern Mutual, a financial services company.

Then, consider where you can save the most. That may be housing: About 2.7 million adults across the country moved in with a parent or grandparent in the early days of the pandemic, according to an analysis of population data from the Census Bureau by the real estate company Zillow. If you can no longer afford rent, talk to your landlord. You may be able to negotiate your rent, start a repayment plan, or even break your lease early. If you rent through a management company, find out whether it reports to credit agencies before making any big decisions that might affect your credit score.

If you can’t cut on rent or mortgage costs, revise your budget so that you prioritize those payments and other essentials like groceries and utilities, Ms. Palmer said. If you are still working, she recommends the 50/30/20 budget rule: Allocate 50 percent of your after-tax income toward needs (like rent or mortgage payments), 30 to wants (takeout, entertainment), and 20 for savings or debt payments.

“It’s just a useful way to make sure you’re setting yourself up to be financially secure going forward,” Ms. Palmer said.

If you are pursuing a graduate degree and the tuition has become a significant burden, try negotiating with your college or university. Educational institutions are in a financial bind, Mr. Kelly said and may be willing to reduce tuition or offer incentives to keep students enrolled

Many companies and institutions have hardship programs to help debtors during difficult times. If you are struggling to pay off student loans, your mortgage or credit card debt, call your lenders, and discuss your payment options. “Financial accommodations are generally readily available right now,” said Amy Thomann, the head of consumer credit education at TransUnion, a credit-reporting agency. “Lenders, just like consumers, understand the hardships that are going on in the economy.”

If your lender agrees to defer your payments or lower your interest rates, Mr. Kelly recommends putting the amount you would have owed into an emergency fund.

Speaking of interest rates — they are extremely low right now, so read up on incentives and find out whether this is a good time to refinance your mortgage or private student loan, said Taha Choukhmane, an assistant professor of finance at the Massachusetts Institute of Technology.

Whatever you do, don’t allow your debt to pile up. “The worst thing you can do in a tough financial situation is just to let it accumulate and not face it upfront,” Dr. Choukhmane said.

If you are still working but don’t have an emergency fund, start one. The economy remains precarious, so it’s best to plan ahead as much as possible.

“We always talk about saving for a rainy day,” said Ms. Palmer. “This is a rainy day.”

In an ideal world, you should put away three months' worth of expenses, she added. If that’s not feasible, save at least $1,000 in the event that you need something to fall back on down the line.

If you are facing dire circumstances and have a retirement account, one option is to make an early withdrawal. Under the Coronavirus Aid, Relief and Economic Security Act, individuals affected by the coronavirus may qualify to withdraw up to $100,000 from their plans through Dec. 30 without the 10-percent penalty that typically applies to those under 59 and a half. You would have to pay income taxes on the amount, but the payments can be spread out over the next three years. You could also pay back the distribution anytime during that period and claim a tax refund on the taxes you’ve already paid.

Normally you should avoid dipping into your savings, but “now we’re in a situation where maybe that’s not clear,” said Dr. Choukhmane.