Many millennials are now faced with new realities in the wake of the coronavirus pandemic. With one in five recently put out of work, when it comes to finances there is a growing feeling of hopelessness for many.
These unprecedented times have led to many firsts for millennials, including changes to how they are investing, job changes, changing prospects for buying a home and — a big first for most — moves toward selling their stock compensation.
Investing Shifts
Investing, unfortunately, is often punctuated by fear, especially during a recession. A recent Think Advisor survey revealed heightened anxiety among millennials about investing during the pandemic. The survey found that this anxiety caused some to change their investment strategies, including “31% [who] moved to more conservative investments and cash and 15% [who] moved to more aggressive strategies.”
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
However, while it may be scary during these uncertain times, try not to panic as you consider your investment strategy. It is important to create a plan. For individuals with company stock, creating a plan involves identifying how this stock ties into your overall risk tolerance. This plan will help evaluate how these investments connect to funding your other financial goals.
Emotionally, it’s easy to become attached to your investments, especially when it’s the stock of a company that has treated you well as an employee. But the more you detach yourself from the emotional aspect of investing, the easier it will be to rationally adjust your portfolio to fit your needs in the long term.
Changing jobs
ThinkAdvisor found that 60% of millennials have either lost their job or taken a pay cut due to the pandemic. As the economy slowly recovers from COVID-19 and job offers are accepted, decisions surrounding what kind of compensation benefits to set up follow. As part of the compensation package, many new hires are now offered stock options, restricted stock units or a combination of the two. Consider sitting down with a trusted adviser to look at your personal and professional goals and the company you are joining to compile possible scenarios over the next 10 years from as many angles as possible. This personalized advice will allow you to easily select the best compensation option.
Funding financial goals, like a home
Homeownership may remain out of reach for millennials in the coming years due to COVID-19 and the over 50 million Americans who filed for unemployment.
However, it is predicted that as housing prices continue to lower with the recession, the barrier to entry will also lower. It could become a prime market for millennials who have never purchased a home.
When you need a down payment and the job market is unpredictable, it’s best to consider all your resources before making such a milestone purchase. Exercising and selling some stock options to fund a new home purchase has real tangible lifestyle benefits and corresponds with achieving a significant financial goal for many people.
Some people accumulate company stock options over their careers, be it through options, restricted stock awards or employee stock purchase plans. The equity grows with the company, and it’s easy to feel an emotional attachment to it. Even still, selling some of this stock to purchase a home offers tangible lifestyle benefits and can help you reach your homeownership goal.
Individual stock positions might have been better used as a piece of a diversified portfolio before the coronavirus. Now, with a recession looming, a very viable consideration is whether they may be a means to achieving your goals that have an entirely new value in the world of today.
What to do when you feel hopeless
Make a structured plan that accounts for both good and bad outcomes. It should include specific, measurable steps and deadlines.
It is important to be prepared for the worst, including job loss, losing money in the stock market and losing equity in your home. On the other hand, be prepared for the positive effects of recessions, like lower home prices, lower entry points to the stock market and a chance to reassess and find a better job.
As you get started, you may find you don’t know enough to make a plan on your own. A great approach to finding the answers to your questions is to sit down with a trusted adviser. Good advisers prepare you for the worst while providing practical tools to boost your chances of meeting your goals.
If you feel like the pandemic has thrust you into unknown financial territory and you're facing some financial firsts, use this time to re-evaluate your goals and plan ahead. With a good plan and a trusted adviser, you can learn to adapt during times of uncertainty.
-
Which Generation Pays the Most Taxes in the US?Tax Burden Polls show that most people feel like taxes are unfair. But which age group bears the brunt of the tax burden in the United States?
-
How Much Will Car Prices Go Up With Tariffs?Tariffs could drive car prices up even higher, for new and used cars, as well as for American brands.
-
A QLAC Does So Much More Than Simply Defer TaxesHere are the multiple ways you can use a QLAC, from managing retirement risks to creating income for specific retirement needs and wants.
-
Self-Directed Brokerage Accounts: Retirement's Hidden Gem?SDBAs are often overlooked, but they can offer more flexibility and growth potential inside your 401(k) when actively managed by a professional.
-
Early-Stage Startup Deals: How Does a SAFE Work?Investing in an early-stage startup can get complicated fast, so the venture capital industry turns to other investing options. One is a SAFE.
-
Should You Hire a Public Adjuster for Your Insurance Claim?As natural disasters strike more often, insurance clients are asking, 'What should I do, or who should I hire, if my insurance company is jerking me around?'
-
Tips to Help Entrepreneurs Create Self-Sustaining BusinessesWith the right processes and people in place, a truly sustainable business can be efficiently passed on to a successor and run profitably on its own.
-
Navigating Annuity Taxation: A Guide for Financial AdvisersUnderstanding the essentials of taxation in retirement income strategies involving annuities helps ensure positive outcomes for clients.
-
How Google Reviews Can Help (or Hurt) Financial AdvisersDon't leave your Google Business Profile unclaimed — someone else can make changes if they claim it. Also, here's what you can (and cannot) do with the reviews.
-
How Baby Boomers and Gen Xers Are Redefining Retirement LivingBoth generations need to embrace change and leverage real estate as a dynamic asset in their retirement planning. Here's how financial advisers can help, too.
