(BPT) - By Tori Guttierez, Cetera Investors
There has been a lot of angst over the faltering economy in general, but the “COVID generation” — young adults just hitting the job market or those looking forward to achieving key financial milestones — have been particularly hard-hit by the ongoing coronavirus pandemic. These young workers are facing a tight job market while paying down student debt just as housing prices skyrocket.
While it may seem like a less than opportune time to think about savings and financial well-being, there are good reasons for millennials to be proactive. Even amid recent economic volatility, there are ways for millennials to take advantage of greater financial offerings and new opportunities to save. From adaptive budgeting to strategic investing, there are a number of things savvy millennials can do to enter 2021 with confidence.
Working With the Current Job Market
The job market, for some, is the biggest thing standing between you and financial security. Even well-qualified candidates with years of experience are having trouble landing a job. But there are some things you can do in the coming months to stay active in the workforce and stabilize your finances.
First, take advantage of any and all unemployment or enhanced relief benefits available to you due to the pandemic. Once another round of federal stimulus funding is passed in Congress, these benefits could be available for a longer period of time.
If you don’t qualify for these benefits, or want to explore ways to make money, gain job experience by joining the gig economy. Many businesses have shifted to a remote workforce amid COVID-19 and are looking for short-term or part-time employees. And the digital marketplace for goods and services has opened up more outlets for starting an online business even as you continue to search for a full-time position.
Your chances of success will depend in part on your professional profile and how you position yourself. Now’s a good time to polish up your digital presence. Create a compelling LinkedIn profile and engage with other professionals and relevant content on the platform. Review your social media accounts and make sure they present you in a professional light.
Investing with Confidence
In addition to the professional considerations, it’s important to attend to financial issues. Did the budget you mapped out earlier this year shift as a result of quarantines and social distancing? For most people, that answer is yes. We spent less on gas and more on groceries, for example. And you may have had money set aside for travel or a special purchase that was put on hold. Reworking your budget to reflect those lifestyle changes can help you set aside more for savings, retirement and a 2021 emergency fund.
As advisors to clients in this age category, Cetera and I have additional tips of relevance to millennials struggling with the volatility of today’s economy:
- Review your retirement investments. If you find yourself in a lower tax bracket this year, you should look at your retirement plans for places to take advantage of the current circumstances. You might open a Roth IRA, and even consider moving some of your 401(k) to achieve tax advantages.
- Capitalize on Dollar Cost Averaging. We all hope to time our investments just right, riding the market up and making a killing when it peaks. But it’s nearly impossible to time the market’s highs and lows. A surer way to prosperity, though, is through regular, incremental investments that grow securely over time. Research bears out that systematic investment behavior — setting up consistent, automatic contributions to investment, savings and retirement accounts, or a “set it and forget it” strategy — yields better results in the long run.
- Match your portfolio to your values. This isn’t the first generation to fight for social change, but millennials have been outspoken in voicing their commitment to addressing issues like climate change, racial inequity and poverty. There are a growing number of ways to invest with purpose. A financial professional can help you align your portfolio with your values.
- Look for pay-as-you-go services. Younger professionals don’t have the scale of assets necessary to take advantage of full-service financial advising, given fees that benefit large or diversified investment portfolios. There are a growing number of advisors who are right-sizing their services for new clients with smaller portfolios. The options range from subscription-based financial management packages to a la carte or pay-as-you-go fee structures. These can save you considerable money as you gain your financial footing.
Beyond these key to-do’s, my Cetera colleagues Damon Accardi and David Tozer lay out some additional considerations when it comes to developing your broader 2021 financial plan:
- Get smart about trading. This year’s unprecedented volatility has brought out the day traders in many of us and its momentum has sustained. A good rule millennials should keep in mind heading into 2021 is that it's “time in the market not timing in the market” that leads to long-term success.
- Consider an app. Millennials are digitally native and know a second opinion or crowd-sourcing ideas has long been available with a swipe. A variety of apps can aid in financial planning but do your research. It’s good to discuss the basic pros and cons of, say, Acorn, Robinhood or some of the apps catered to the millennial generation with a financial professional. While those apps may have their advantages, some may have hidden costs or features that take you off course. An investment professional can help you understand the complexities of investing and how to withdraw funds (one of the biggest challenges we often observe).
- Find a financial professional that understands your needs. No matter your age or where you are in your career, finding a financial professional who understands your circumstances and interests can help you navigate the complex landscape right now. For millennials, there are unique advantages to working with a financial professional. An advisor can help you set objective, achievable financial goals and hold you accountable to them.
While periods of economic strife can feel daunting, taking a strategic and proactive approach to managing your finances can set you on a positive trajectory in the long term. Our current fiscal challenges are temporary, so patience and resilience, and some savvy strategies, are all that you need to stay on the path to a brighter future.
Tori Gutierrez is Financial Advisor and Investment Adviser Representative for Cetera Investors. She is based in Pasadena, CA.
A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal of earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Before rolling over your retirement account, consider all available options, which include remaining with your current retirement plan, rolling over into a new employer's plan or IRA, or cashing out the account value. When deciding between an employer-sponsored plan and IRA, there may be important differences to consider — such as range of investment options, fees and expenses, availability of services, and distribution rules (including differences in applicable taxes and penalties). Depending on your plan’s investment options, in some cases, the investment management fees associated with your plan's investment options may be lower than similar investment options offered outside the plan.
Dollar-cost averaging will not guarantee a profit or protect you from loss but may reduce your average cost per share in a fluctuating market.
A diversified portfolio does not assure a profit or protect against loss in a declining market.
Please add the Investment Risk disclosure: “All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.”.
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Cetera Financial Group (Cetera) is a leading financial advice firm. It empowers the delivery of an Advice-Centric Experience® to individuals, families and businesses across the country through independent financial professionals as well as trusted tax professionals and banks and credit unions. It's headquartered at 200 N. Pacific Coast Highway, Suite 1200 El Segundo, CA 90245-5670.
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