“Millennials already contended with graduating into one of the worst recessions in history and now, a little over ten years later, it feels like we’re getting punched in the teeth again,” says “Broke Millennial” Erin Lowry, author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together.
Lowry answered our questions about how millennials can balance all of the financial concerns on their plate right now, from bringing in enough income to giving back to your community.
What are some of the biggest financial challenges that millennials are facing due to this pandemic?
I would say one of the biggest challenges is how many people didn’t necessarily fully have their feet under them. Whether you’re at the younger end of the millennial generation and you were still in the beginning stages of establishing your career or putting your financial oxygen mask on, so to speak, that’s certainly part of it.
There’s plenty of people who finally felt like they had gotten their financial lives in order and now they’ve been laid off or furloughed or just have no ETA on when their financial lives may resume any level of stability.
Understandably everyone’s going through it, but there are a lot of people who didn’t have emergency savings to fall back on and they don’t have the level of stability that perhaps some older generations did.
What advice can you give millennials trying to juggle it all right now?
The first thing is to focus on what is truly important at this moment…We don’t know how long this is going to last, so I would press pause on all aggressive debt repayments and look at every possible relief option available as a means to preserve cash right now.
Calculate your bare essentials budget
You have to start with looking at, I call it your bare essentials budget: What is the bare minimum you need just to get by in a month? Calculating that number is a really eye-opening exercise for people because it also helps inform ultimately how much you need in an emergency savings account.
Take advantage of any relief you qualify for
Evaluate what your other options are right now. What are your options that are available to you to free up cash without penalty, without harming your credit score, without having any late fees applied that can get redirected elsewhere?
Know your rights
What exists in your local community that can be of help to you right now? Whether it is food assistance, making sure that you don’t get evicted – particularly if you’re a renter like myself – and educating yourself based on your current rights based on your city and state…so that you don’t get pressured or strong-armed into something.
You know the ever-popular expression: ‘It’s better to ask for forgiveness than permission?’ Not right now, it’s not!
This is not a time that you want to wait until after a missed payment, you want to be proactive. You want to reach out to your lenders, your creditors, your bank, and have conversations before a missed payment happens, especially if you have a really strong history. Use some of that goodwill that you’ve built up over the years of making those on-time payments to have a frank conversation, explain your situation and see if they’re willing to work with you.
Do you have any tips for bringing in extra income right now?
Do the math
If you’re on unemployment, the first thing I would say is just double check your state rules and how much and if it’s going to impact your unemployment benefits if you pick up part-time work. It’s just something to consider when you’re doing the math on all of this, especially with the extra $600 that’s being paid out currently through the end of July.
Consider your health
That’s really something we all want to be protecting, especially anyone who might be in an at-risk category. There are jobs out there in industries like delivery, hardware stores, grocery stores, any essential worker-type job for which you could be qualified. There are places hiring, but it does potentially mean the threat of exposure in a way that you wouldn’t have if you’re able to stay safely at home. Just considering that especially if you have young ones, especially if there’s an elderly relative living with you.
Leverage your resources
Reach out to any networks that you have, anybody who might know of a job that you would be qualified for that could be done remotely and that’s hiring remotely. I also recently learned of a site called Aunt Bertha. It helps offer assistance in your area.
I have a massive COVID-19 relief hub spreadsheet that has a huge collection of resources available for people.
How can people balance giving back to their community during this time along with protecting their personal financial security?
Don’t discount the importance of your financial stability
Put your financial oxygen mask on first before assisting others. I don’t say it flippantly or callously. I totally understand the desire to support your local economy and to give to charitable organizations that are important to you, but make sure you’re doing the calculations on how much you really can afford to give and still meet all of your own needs.
Keep in mind that you can always contribute and donate in a couple of months if your financial life stabilizes.
Try to ideate on the other ways that you can help and support people, whether that is giving your time, helping mobilize community outreach to people who are at-risk, or using the skills that you have to help some sort of charitable organization.
If you’re financially stable, consider giving
I would say for those who are in a very privileged financial situation right now, especially if you received a stimulus check, that you should consider ways that you can financially contribute to your local economy and to charitable organizations.
Have you learned anything from this experience that challenges conventional personal finance wisdom or will change the advice you give to people in the future?
Emergency savings funds should be bigger
You can’t update a book like you could an Instagram caption or a blog post but one thing that’s in my first book is I had made reference to the standard “If you’re paying down debt, you need to have an emergency savings fund of at least $1000.” I had said if you have a child or a pet you should add at least $500 to that, that was sort of my little tweak at the time.
Now, absolutely not, that’s not enough. Even if you’re paying down debt, you need to have a minimum of one month’s bare essential living expenses for you. So you have to do the calculation on how much that is, but that needs to be the new standard for a bare minimum emergency fund.$1,000 is a nice benchmark on the way to that number, but that’s not a place that people can stop because $1,000 just simply doesn’t go far enough.
I will probably want at least a year in cash reserves in our emergency savings fund in the future. Now, this will make me slightly more conservative than I have been prior.
Seriously, don’t use emergency savings to pay off debt
I have always said “it’s never a good idea to raid emergency savings to pay off debt even when you get close” but then I also talked about how my husband and I pulled several thousand dollars out of our emergency savings fund to pay off the last of his student loans in December because we wanted to come into 2020 debt-free. And look what happened!
We’re very lucky that we hadn’t gutted our emergency savings, we also haven’t had to touch it yet. I’ve been able to bring in enough income that we’re still stable but this is a great example of why that’s always a risky move.
Have you changed anything about how you manage your personal finances during this pandemic?
As a byproduct of being somebody that earns a variable income, we already had what we affectionately call our “Doomsday Budget” which was any time that there’s some sort of big shake-up, more for me because my husband’s income is very stable, but any time there’s a big change in my income level we can immediately transition over.
It’s just a reduction of how much we put into savings, how much we spend on things that are non-essential, and then we also have one that is the bare-bare minimum of what we need just to get by every single month.
The fact that we already had these budgets modeled made it completely seamless to transition over because as soon as all of this started to unfold, I decreased the salary that I took from my business and that just helped keep my business account more full. It stretches out money for a longer period of time and it prevents us from ever having to go into savings.
If and when things resume to normal I’ll go back to paying myself the amount that I normally would draw from my business, but for now I did my own reduction in pay, like a lot of other people around the country.
At The Simple Dollar, we’ve been following COVID-19 since the start. Check out the articles below for resources and the latest news on financial relief from the coronavirus.
- Where to Find Financial Relief During Coronavirus (COVID-19)
- Laid Off? Here’s How to Apply for Unemployment Insurance
- The New Tax Deadlines, Explained
- How To Get Help With Your Taxes While Social Distancing
- 7 Insurance Companies Providing Coronavirus Support
- Coronavirus Mortgage Relief Is On the Way, But What About Renters?
- What’s Happening to Interest Rates and Why Does It Matter?
- Is Now a Good Time to Invest?
- Coronavirus and Your Car Insurance: A Practical Guide
- Coronavirus and Your Home Insurance: A Practical Guide
- Coronavirus and Your Life Insurance: A Practical Guide