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Millennials entered the workforce in 2008 amid the worst economic crisis since The Depression, and they’ve been flailing financially ever since. Headlines continue to abound about their trying economic circumstances and their panic around managing their money. They’re saddled with enormous student loan debt — those between the ages of 18 and 34 hold, on average, $36,000 in debt and spend 34 percent of their monthly income paying it down, according to a 2018 Northwestern Mutual study. They make make 20 percent less than Boomers at the same stage of life and spend $20 less per day than they did ten years ago. A 2018 Bank of America survey (one of the few that’s optimistic) found that 16 percent of older millennials (ages 23 to 37) have saved $100,000 or more — promising! — but a 2017 GoBankRates survey found that most younger millennials (ages 18 to 24) have less than $1,000 saved, while around 46 percent had nothing in the bank in 2017 — and that number continues to climb. The Pew Research Center reported that 15 percent of millennials lived at home in 2016 (5 percent more than Gen X), and they live with parents longer than Boomers or Gen Xers did. Consequently, many are delaying or eschewing milestones that once signified adulthood — buying a house, getting married, and having children.

In a viral essay about millennial burnout, Buzzfeed writer Anne Helen Petersen, a millennial herself, put it this way: “We’re deeply in debt, working more hours and more jobs for less pay and less security, struggling to achieve the same standards of living as our parents, operating in psychological and physical precariousness, all while being told that if we just work harder, meritocracy will prevail, and we’ll begin thriving.”

Ankur Jain, co-founder of Kairos, a startup that invests in companies seeking to make essentials, like rent and childcare, more affordable for the masses, agrees, noting that this bleak reality afflicts all classes of millennials. “This is not a lower economic problem. Upper middle class people are coming out of Ivy League schools making six-figure salaries and struggling to pay off basic needs too,” he emphasizes, pointing to a startling statistic: An average middle-class American consumer spends over 80 percent of his or her total net income on five basic necessities: food, housing, apparel, transportation, and health care, per the Bureau of Labor Statistics. That doesn’t include childcare or debt, which is why 46 percent of Americans, as reported by Pew in 2017, spend more than they make each month. “It’s a serious problem,” Jain says, “and millennials are at the heart of it right now.”

The money stress is taking a toll. Nearly one-quarter of millennials say that financial anxiety makes them physically ill, and 2 in 10 feel depressed due to money-related stresses, according to Northwestern Mutual’s 2017 Planning & Progress Study.

Amid reports that another recession is on the horizon, Thrive Global tapped three financial experts, all millennials, including Jain, to illuminate five steps you can take now to protect your financial (and mental) health before another market downturn.

Make a budget

Erin Lowry, the author of Broke Millennial: Stopping Scraping By and Get Your Financial Life Together, knows people loathe this first tip, but says it doesn’t have to be strict. “You need to have a very good understanding of your numbers in order to start actually saving,” says Lowry, who keeps her savings in an account at a different bank to curb any temptations to draw from it and encourages you to do the same. Making a concrete financial plan will help you prioritize — and take seriously — your financial well-being. “Track your spending and try your best to implement a 50/20/30 strategy, where 50 percent of your income goes to necessities, 20 percent goes to savings, and the other 30 percent goes to discretionary spending,” she says.

Start a side hustle

The way 33-year-old Grant Sabatier, creator of Millennial Money and author of the forthcoming Financial Freedom: A Proven Path to All the Money You’ll Ever Need, amassed $1.25 million over a five year period was to create 13 different income streams alongside his main job as a digital marketer earning $50,000 a year. He flipped Volkswagen campers, wrote white papers and worked at a moving company (to name a few of his freelance gigs) and invested a shocking 82 percent of his entire income. “I drove the crappiest car you could imagine, lived in a crappy apartment and worked 80 hours a week, all to escape the grind for good,” he says. While he was able to retire at 32, we’re not advocating his burnout pace. Yet even Lowry agrees you should pursue extra money-making enterprises. “Look into ways to increase your income,” she urges, “We tend to panic and just focus on what we can cut, cut, cut, but it’s very important to proactively be finding out how to add income now.” She suggests looking for seasonal work, babysitting, dog walking, or applying your professional expertise on a freelance basis, and using the extra cash to build an economic buffer.

Create an emergency fund and put it into a high yield savings

Lowry advises establishing an account to cover two to three months of expenses for those with debt to accommodate a job loss. “If you work an industry that’s highly susceptible to a down market and it’s likely you’ll lose your job in a recession,” Lowry warns, “you need to shore up your emergency fund a bit more than the standard $1,000 so you have some breathing room.” When calculating your crisis account, think through all your bare-bones necessities, such as your rent or mortgage, electricity, food, and transportation. That’s a tall order if you’re already strapped thin, which is where additional income streams come in.  

Sabatier sets the bar even higher, encouraging us to save three to six months of expenses to avoid having to tap your retirement accounts (always a last resort) in the event of a catastrophic life event like losing your job or needing to take a leave of absence to attend to an ailing parent. If you’re a renter, Ankur Jain’s latest enterprise, Rhino, offers an ingenious way to secure your deposit. For a little as $5 a month, they’ll guarantee your deposit — often a tricky negotiation with your landlord. “All of a sudden you can get back two to three thousand dollars, which you can now put aside as emergency savings,” he says. Lowry and Sabatier add that you should make your savings work for you by putting it in a high interest savings account that will yield you two to three percent a year. Check out Ally’s and American Express’s offerings.

Pay down debt and invest… at the same time and at all times  

Sabatier says a big mistake millennials make is that they neglect their savings to pay off their debt. “A lot of people believe they need to pay off debt before they start investing, but I recommend you try to pay yourself at the same time,” he advises, especially if your only debt is a low interest student loan. That means investing in your 401K, a retirement account employers sponsor that allows employees to allocate a certain percentage of their paycheck (up to $19,000 in 2019) pretax. If your company matches your contribution, definitely don’t fail to contribute — it’s like throwing free money in the wind! Also, put as much as you can in a Roth IRA, an after-tax retirement account that allows you to contribute up to $6,000 a year in 2019 ($7,000 if you’re over 50), which you can withdraw from after age 59½ without being taxed. (In a crisis, you can take out what you’ve put in without being penalized, but that of course is a last resort.)

Credit card debt, Sabatier says, is the only exception to his rule of prioritizing savings alongside paying down debt. “Your interest rate on a credit card could be as high as 22 percent and you’ll never see that gain on the stock market with its average annual return of 7 percent,” he says. Keep in mind the average debt is $35,000, but the average American will earn more than $2 million over a lifetime, Sabatier points out, so our debt is a relatively small percentage of our overall gains.

Our volatile economy may make millennials squeamish about investing now, but that’s a missed opportunity. “People hit pause or stop investing because they panic when they’re hearing so much negativity being reported,” Lowry says, but the idea is to buy low and sell high. “You lose out on a lot of potential gain by not investing during down cycles when stock prices are essentially on sale and you can get more bang for your buck.” Even if you’re nowhere near retirement, it’s painful to see your accounts tank, which is why Lowry advises that we “don’t look at your statements if it’s going to make you freak out,” because we’re in it for the long haul.

Maximize your benefits

Sabatier recommends scheduling an appointment with your company’s H.R. department to discover all the perks of your job: “Make a 20 minute meeting to ask them, ‘What benefits do I have access to that I’m not taking full advantage of?’ Don’t leave money on the table.” For example, many companies offer a Flexible Spending Account (FSA) for dependent care, which allows you to contribute $5,000 pretax dollars to your childcare costs. Similarly, if you hold student loan debt, Lowry suggests you make a call to your federal loan officer (1-800-557-7394) to see what you can do to improve your financial situation. “See if there’s anything you can do to adjust your monthly loan amount with an income-based repayment plan, potential forgiveness plans, and deferment and forbearance,” she says. If you’ve been forewarned that you’ll be losing your job, Lowry stresses that you call your loan officer to see if you can negotiate putting your loan in forbearance, rather than calling after you’ve missed a payment.

“There are no guarantees, but it’s better to have that conversation up front,” she says. Ankur Jain also helped fund Pillar, which easily allows people to see if they are eligible for refinancing or income-based repayment. “If you took out a loan on a variable interest rate, you may be able to refinance at a fixed rate,” he says. “If the market turns and interest rates go up, that’s a situation you want to preempt.”

Prioritize your mental health

Taking care of your mental health will help you weather the stress of economic turbulence. “If you don’t take care of your mental health, then you’re just going to spiral, especially during a downturn, and that’s when you need to be in top form,” Jain says. Prioritize meditation, healthy sleep habits, and exercise. “Mental health,” he says, “is as crucial as saving your savings.”

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  • Stephanie Fairyington

    Contributing Writer at Thrive

    Stephanie Fairyington is a contributing writer at Thrive. A New York-based journalist, her work has appeared in The New York Times, The Atlantic (online), The New Republic (online), The Boston Globe, and several other publications. She lives in Brooklyn, NY with her spouse Sabrina and daughter Marty.