PRE­PAR­ING FOR POS­SI­BLE STORM If re­ces­sion hits, mil­len­ni­als face es­pe­cially tough po­si­tion

Orlando Sentinel - - SUCCESS - B y Tyler R. Davis

L| ast year’s brief in­ver­sion of the yield curve has stoked fears of an eco­nomic re­ces­sion on the hori­zon.

For younger peo­ple, pre­par­ing for the worst presents unique chal­lenges due to gen­er­a­tional gaps in wealth.

“I don’t think that many mil­len­ni­als are pre­pared,” said Holly Mirabella, the as­sis­tant di­rec­tor for poverty so­lu­tions for Mary­land’s Depart­ment of Hous­ing and Com­mu­nity De­vel­op­ment and a mil­len­nial her­self.

And, in­deed, by al­most ev­ery eco­nomic mea­sure, young peo­ple right now are less fi­nan­cially se­cure than pre­vi­ous gen­er­a­tions: 37% of mil­len­ni­als own a house, eight per­cent­age points lower than Baby Boomers when they were young, ac­cord­ing to the Ur­ban In­sti­tute. In ad­di­tion, the av­er­age mil­len­nial has $34,504 in stu­dent loan debt, ac­cord­ing to the credit re­port­ing agency Ex­pe­rian.

A 2018 study by the Fed­eral Re­serve found that young mil­len­nial men are earn­ing the same amount of money that their Gen­er­a­tion X coun­ter­parts were mak­ing when they were younger, and more than 10% less than young Baby Boomers (young women have seen a slight in­crease in earn­ings, which the study’s au­thors at­tribute to mod­est gains in gen­der equal­ity in ed­u­ca­tion and the work­place).

“When it comes to gen­er­ally how we are do­ing, we’re not do­ing well,” said Mirabella, who is also the for­mer pol­icy man­ager for the CASH Cam­paign of Mary­land, a non­profit that pro­vides Vol­un­teer In­come Tax As­sis­tance and fi­nan­cial coach­ing to low-to-mod­er­atein­come in­di­vid­u­als.

So, what can young peo­ple do to pre­pare for a re­ces­sion? The tra­di­tional ad­vice is to bulk up sav­ings.

“The most im­por­tant thing is hav­ing cash set aside,” said Levi Sanchez, a cer­ti­fied fi­nan­cial plan­ner in Seat­tle who caters to mil­len­ni­als, who sug­gests sav­ing enough to live for three months for in­di­vid­u­als and six to 12 months for fam­i­lies.

“One thing I do tell peo­ple is to not wait un­til they’re debt free to start sav­ing, be­cause that can take years,” said Luis Rosa, an­other cer­ti­fied fi­nan­cial plan­ner and the host of the On My Way to Wealth pod­cast.

But with high debt and stag­nate wages, putting away at least three months of liv­ing ex­penses isn’t re­al­is­tic

for many young peo­ple. What should they do?

“Ac­tu­ally, some of the newer research about emer­gency funds are show­ing that even a cou­ple hun­dred dol­lars, or $500 or $750, could ac­tu­ally pre­vent go­ing into a ma­jor fi­nan­cial cri­sis,” ac­cord­ing to Jodi Ja­cob­son Frey, a fi­nan­cial so­cial worker and the chair of the Fi­nan­cial So­cial Work Ini­tia­tive at the Univer­sity of Mary­land, Bal­ti­more. “Even small amounts of sav­ings can be very help­ful.”

Frey also sug­gests us­ing tax sea­son as a way to be­come more fi­nan­cially se­cure, sug­gest­ing that peo­ple take ad­van­tage of free tax prepa­ra­tion sites and Vol­un­teer In­come Tax As­sis­tance ser­vices to find ways to save.

“When you do get a large tax re­fund or you’re able to save money at tax time, it can be very pos­i­tive for start­ing a small sav­ings bucket that could be used on a rainy day,” said Frey.

In ad­di­tion, tak­ing a look at re­cur­ring ex­penses at the be­gin­ning of the year could help peo­ple liv­ing pay­check to pay­check start a small sav­ings fund.

“Ev­ery­one hates the b-word, but def­i­nitely do a bud­get,” said Rosa, sug­gest­ing that peo­ple re-eval­u­ate ex­penses such as sub­scrip­tion boxes and stream­ing ser­vices. “Those lit­tle things might add up to where they might cre­ate some sav­ings, even if it’s a hun­dred dol­lars, you might be able to cou­ple that with a tax re­fund, and now you’re in­creas­ing your re­serves.”

There are also pro­grams that em­ploy­ers can get be­hind to help young peo­ple se­cure their fi­nan­cial sit­u­a­tion.

“I think em­ploy­ers are start­ing to see that fi­nan­cial dis­tress not only stresses out em­ploy­ees, but it also has an im­pact on their pro­duc­tiv­ity and bot­tom line,” said Frey, adding that many em­ploy­ers are ad­dress­ing this by adding emer­gency sav­ings ac­counts and in­ter­est­free loans to their menu of em­ployee ben­e­fits.

None of th­ese pro­grams alone are “go­ing to solve the fi­nan­cial sit­u­a­tion we’re in right now in this coun­try, but I think they can pro­vide some hope and safety net build­ing for mil­len­ni­als and younger work­ers,” said Frey.

To Frey and Mirabella, it’s clear that a ma­jor re­ces­sion could be too large for many young peo­ple to solve on an in­di­vid­ual level.

“Struc­tures have cre­ated poverty, just like struc­tures and poli­cies cre­ated a mid­dle class, like the GI Bill for ex­am­ple, and So­cial Se­cu­rity,” said Mirabella. “I think that, un­for­tu­nately, there are struc­tures and poli­cies in place that pre­vent peo­ple from get­ting out of a fi­nan­cially inse­cure po­si­tion,” cit­ing the way the cost of higher ed­u­ca­tion and the re­sult­ing stu­dent loan debt have grown for younger gen­er­a­tions.

“When you think mil­len­ni­als, a lot of peo­ple think stu­dent loans,” said Mirabella. “We’re the most cost-bur­dened when it comes to stu­dent loans and many of us will die with them, un­for­tu­nately.”

“I’m not sure they can dig their way out given the cur­rent econ­omy,” said Frey. “In a re­ces­sion, peo­ple talk about tak­ing ad­van­tage of op­por­tu­ni­ties to buy real es­tate and build their wealth, but if you do not have any money to in­vest, you can’t take ad­van­tage of a sit­u­a­tion when prices are low. With­out some kind of loan for­give­ness, I think we’re in an al­most desperate sit­u­a­tion to help mil­len­ni­als get to a point of fi­nan­cial sta­bil­ity and pros­per­ity.”

For one of Frey’s so­cial work stu­dents, there is a sort of sil­ver lin­ing: “We think, as mil­len­ni­als, we are the most pre­pared for the next re­ces­sion be­cause we’re so used to be­ing poor,” said grad­u­ate stu­dent Maryre­jahlil Lanier.

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