Welcome.

RFG is the place to find practical, real world information on personal finance, real estate, investing, stock options and more.

Millennial recession survival guide

Millennial recession survival guide

How do you survive a recession if you've never been through one before?

You'll have to forgive the somewhat click-baity title of today's post. I know... everything these days is millennials this and avocado toast that. All the same, I was struck commuting to work the other day and looking at the scores of young people around me; I realized that the majority of my fellow commuters had never known a recession.

With the current expansion nearing its tenth year, it's actually possible that someone could have worked a fourth or even a third of their professional career knowing nothing but an expanding economy. I figured it might be interesting to describe the experience of a recession for all of those that have never known one (who by definition are all millennials) and provide some tips to soften the blows of living and working in a contracting economy. You can think of this as an extension of my previous post on how to prepare for a recession.

My own recession experience

As a relatively young person at 32, I won't pretend to know everything there is to know about recessions, but I certainly experienced the negative aftereffects of the housing crises and it's recession. My senior year in college coincided with the worst moments of the sub-prime mortgage collapse. It wasn't great for my professional life, but it was an educational benefit: my advanced macroeconomics course was reading through the Great Depression as Lehman Brothers collapsed. There's no better way to understand history than living through it repeating itself.

Although I was insulated from the crash that fall, the recession wouldn't really begin in earnest until I graduated in June of 2009... as an economics major intending to go into wealth management. 

Things weren't looking good for me. There were no jobs. I guess that might be a little dramatic... there were a few jobs but only 1-2 at any given moment that were available in my desired profession in my hometown of Seattle. The Washington Mutual bankruptcy didn't make things any easier, dumping thousands of highly qualified finance and economics specialists into the mean streets of Seattle. Entry level jobs were being filled by people with 10-15 years of experience.

Just getting a response from a recruiter was reason for celebration, as one could easily go through months of applications without any visible result. Eventually, it came down to a couple of difficult choices. 

  • Insurance: I could take a commission only job selling insurance. My starting point would be every single relative and acquaintance I had ever known. Yikes.
  • Temp work: One slight benefit of the recession (from my perspective) was that companies were being forced to fill what should have been permanent positions with temp jobs. Since more experienced people weren't too keen on temp work, it was mine for the taking.
  • Something outside of my area of expertise: I started applying to EVERYTHING that even slightly resembled my qualifications. 

By August of 2009, after searching for a job for nearly 6 months (I had been looking well before graduation), I really needed a job. I was basically completely broke, even though my expenses were low. Because I needed the money, I accepted a temp job at a wealth management company doing reporting. This is something I had done previously in my internship, which I assumed got me in the door, but I imagine my minimum-wage rate sealed the deal. If you're willing to work for nothing, what's the incentive not to hire you?

Although the temp job was supposed to be "temp to hire", they definitely had no intention of extending my employment past the busy reporting season. It was pretty crushing after coming so close to a long term role in the profession I had chosen.

This defeat actually turned out to be a huge positive, though. Throughout the late Summer, as a hedge I was applying to anything and everything with data, analytics or reporting in the title, and I was hired to start at Tableau in October of 2009 as a data analyst on the marketing team.

Tech marketing has turned out to be a fantastic career, and probably a lot more lucrative than wealth management given the rise of robo-advisors, passive investing, and the general backlash against fees of every kind. Although I had a tough 2008 and 2009, the recession actually set me on a better path than the one I had chosen for myself. 

In the end, I was supremely lucky. I only had to provide for myself during the recession, and I found a GREAT job before things got truly dicey. I don't expect to be as lucky in the next recession, so I am thinking ahead about how I will react and what I will do to get through it. Although I don't expect there to be a recession imminently, when one does occur I know exactly what I am going to do to survive it. 

Three recession survival tips

1. Eliminate pride

As you saw in my own history, pride can be an incredibly expensive anchor during a recession. It's important to remember that even extremely talented people lose their jobs, or spend months looking for work, or have to take on additional work or reduced hours.

To succeed, or just survive, I had to be open to work that was less auspicious than I had hoped for. As a new college grad, it was pretty easy for me to take a temp job when it was the only thing on offer, but there were a ton of more experienced people who were taking entry level jobs as well. I am sure that was a difficult decision to have to make, particularly if they had to settle for less money than they were used to.

Hopefully, I will keep my job in the next recession. If I don't and I have to start looking, I'll be open to anything that fits my experience. I am also working on increasing my passive income as much as I can. I am sure it will be a big relief to have SOMETHING coming in the door, if the worst comes to pass.

2. Focus on cash flow

During a recession it's important to think like a business and preserve positive cash flow at all times, particularly when income and assets might be simultaneously decreasing. Using Personal Capital, I already have a really good idea of what my cash flow looks like month to month. I've also identified all of the expenses that I have that can easily be cut or reduced when the going gets tough, including:

  • Gym memberships
  • Food subscription services
  • TV/entertainment
  • Spending money

This isn't my report but it gives you an idea of what the cash flow report looks like in Personal Capital (which is free, BTW). 

Ideally, I would like to reduce my monthly expenses even more than just that list. My goal is to eliminate my car payment and reduce my short term debts over the next several years to shave another $1-2k per month off of my "mandatory" expenditures. 

It may seem a little dramatic, but it will definitely make going through a recession a lot less heartbreaking.

3. If possible, take advantage of opportunities

The biggest investment gains are usually locked in by the people who are most willing to buy when everyone else is running scared. I am not advocating trying to catch a falling knife, or buying into stocks the moment things start to look bad, but I will definitely be keeping a lookout for misalignment in the market. Panics are usually marked by indiscriminate selling of everything, which leads to some fantastic opportunities in the stocks and indexes that aren't as fundamentally affected by whatever is causing the fall in the first place. 

For instance, during the 2008 panic, financial stocks, real estate developers and insurance companies all got hammered... but so did everything else. In 2009 and 2010, there were tons of opportunities to buy broad market indices that were unfairly tainted by the overall market panic. Those that did are looking at some pretty incredible gains after this nearly 10 year bull market. 

Being able to take advantage of opportunities requires savings and foresight, so I am directing a lot of energy towards setting aside money for the future now, while everything is still good.  

Summary

Recessions suck. If you've never been through one before, the first one will seem even harsher than usual since the economy has been expanding so purposefully for so long. If you can follow this guide, however, it will take some of the sting out of a contracting economy.

The definition of retirement

The definition of retirement

Improving and expanding my sources of passive income

Improving and expanding my sources of passive income