The global economic collapse that transpired a few years ago hurt everybody: household finances were shattered, the labour market embarked upon a crisis and the entire deck of cards came crashing down. It was particularly the worst for the millennial generation, and the Great Recession will have long lasting effects.
With youth unemployment levels at an all-time high, it has become very difficult for millennials to find work, especially in their own fields. As we reported last month, a majority of this year’s college graduates are working at jobs that don’t require a degree.
In addition, millennials are straddled to immense debt levels. Student loan debt has exceeded $1 trillion in the United States, while consumer debt is also significantly high for the youth demographic. It has become extremely difficult for millennials to tackle this mountain of debt, and as one report highlighted, student loan debt can come back to haunt you even in your senior years.
Although CNBC pundits and economists suggest that the U.S. economy and the economies of other Western nations are recovering, some believe that the house of cards could yet again collapse because of the various bubbles forming: credit, housing student debt, bonds, social media and elements of the stock market and overall economy.
If a recession does transpire again, one that happens to be a lot worse than the one we had a few years ago, how can millennials be prepared to survive another financial meltdown? Here are seven ways millennials can be ready for another recession and come out of it unscathed:
The savings rate for consumers is near all-time lows, and even when consumers save they tend to dip into those savings to purchase goods and services or pay for emergencies. To survive any type of economic downturn, it’s important to have an adequate amount of savings that can help cover household expenses for at least six months. It may seem unfathomable to have that much money on hand, but if you live within your means then it’s quite possible to save this sum.
2. Living Within Your Means
As a millennial, you want to have fun, which can mean shopping as much as you want, going out to eat with friends on a nightly basis and buying the latest Apple product. This also means adding to your debt pile because it’s likely that you don’t have enough earnings to pay for these stuff. In these uncertain economic times, the prudent way to live is within your means: spend on what you need (rent, utilities, groceries, etc.) and not on nice-to-haves. Remember, those who live beyond their means are destined to live beneath their means.
3. Safe Havens
In times of a financial crisis, investors flock to certain aspects of the marketplace to protect their assets and savings. One of the most popular safe havens around is precious metals (gold, silver, copper, platinum, etc.). Other investment safe havens that are popular for young people is digital currency, such as bitcoin, litecoin and peercoin, while time and tested foreign currency can also be utilized for protection, like the Swiss franc, Singapore dollar and Australian dollar.
Freelancing has become a popular career choice for millennials. A growing number of youth are using websites akin to Elance and oDesk to find freelance writing, editing, graphic design, translation and SEO gigs as either a full-time career or to supplement their current income. Earning extra cash to either put aside or pay off your debt can help prepare you in times of economic strife.
5. Debt Reduction Initiatives
The shackles of student loan debt can cripple any graduate (unless they come from a million-dollar household). One of the biggest items on your to-do list moving forward is to pay off your debt. With interest rates on the verge of skyrocketing, student debt must start be reduced immediately. After rent, groceries and your bills, make your student loan debt repayment the most important item to pay off. If there is any additional money available at the end of the month then use it to pay off your loans.
6. Liquid vs. Illiquid
Once you’re in your later millennial years, you’ll start considering purchasing a home, acquiring more stocks and buying a new car. However, if you’re still a lower- or middle-class millennial then you’ll have to stay liquid, which means having a great sum of cash savings around. When things get tight, you may risk losing more money when you have a higher amount of illiquid assets in your financial portfolio because you’ll have to sell stocks and perhaps your home in times of a recession.
Congratulations! You now have a Master’s degree in 15th century literature. Will this translate into landing a job in today’s changing global economy and labour market? Probably not. When the economy finally turns around and the recession comes to an end, you’ll want to be a marketable employee with the skills that fit today’s evolving industries. Although you may have just spend $100,000 and eight years of your life attaining a diploma, you’ll have to have other type of hard skills, particularly with computers, to be employable. This is perhaps the best way to prepare for another recession, a time when companies downsize and release their most fallible workers.
The federal government and central banks say we’re not in a recession anymore. Tell that to the millions of people who are still out of work and are stuck with an enormous amount of debt. With questionable decisions being made everyday by the supposed smartest men in the room, we could enter a recession at anytime. Prior to 2007, everyone was dismissing a coming recession. You don’t want to be left holding the bag, do you?