Archive for ‘post-college life’

September 2, 2014

Millennials — narcissistic or nice?  cynical yet empathetic?

by Grace

The millennial generation, those born after 1980 and before 2000, have been criticized as narcissistic and entitled.  But some recent press suggests this is a bum rap, and that these young people are nice, compassionate, and hard working.

Psychology professor and author Jeffrey Jensen Arnett defends millennials, and recently shared his “warm and benevolent views” of these “emerging adults”.

One of the most common insults to today’s emerging adults is that they’re lazy. According to this view, young people are ‘slackers’ who avoid work whenever possible, preferring to sponge off their parents for as long as they can get away with it. One of the reasons they avoid real work is that have an inflated sense of entitlement. They expect work to be fun, and if it’s not fun, they refuse to do it.

But millennials are hard workers.

“So, yes, emerging adults today have high and often unrealistic expectations for work, but lazy? That’s laughably false. While they look for their elusive dream job, they don’t simply sit around and play video games and update their Facebook page all day. The great majority of them spend most of their twenties in a series of unglamorous, low-paying jobs as they search for something better. The average American holds ten different jobs between the ages of 18 and 29, and most of them are the kinds of jobs that promise little respect and less money. Have you noticed who is waiting on your table at the restaurant, working the counter at the retail store, stocking the shelves at the supermarket? Most of them are emerging adults. Many of them are working and attending school at the same time, trying to make ends meet while they strive to move up the ladder. It’s unfair to tar the many hard-working emerging adults with a stereotype that is true for only a small percentage of them.”

Society’s elders, meaning anyone older than 35, are encouraged to accept the new normal that is defined by the emerging adulthood stage of life.

The origins of the many prejudices against today’s emerging adults are complex, but maybe one key reason is that many of their elders still use old yardsticks to measure their progress. The pace of social, economic and technological change over the past half-century has been mind-boggling, and what is ‘normal’ among young people has changed so fast that the rest of society has not yet caught up. Many observers are still finding them wanting if they are not married and settled into a stable job by age 23 or 25, even though that would be unusually early by today’s standards. Understanding that a new life stage of emerging adulthood is now typical between adolescence and young adulthood, and that it is a time when change and instability is the norm, will help make it possible to ease up on the negative stereotypes and learn to appreciate their energy, their creativity, and their zest for life.

The New York Times tells us “The Millennials Are Generation Nice”, at least according to Pew research that found they are not entitle but rather “complex and introspective”.

What Pew found was not an entitled generation but a complex and introspective one — with a far higher proportion of nonwhites than its predecessors as well as a greater number of people raised by a single parent. Its members also have weathered many large public traumas: the terrorist attacks of Sept. 11, costly (and unresolved) wars, the Great Recession. Add to those the flood of images of Iraq and Katrina (and, for older millennials, Oklahoma City and Columbine) — episodes lived and relived, played and replayed, on TV and computer screens.

Both cynical and empathetic

There’s something to be said for experiencing  “large public traumas” through digital media that makes us relive them in a more personal way than previous generations did.  It could have the effect of making a person more cynical, yet more empathetic in some ways, an apt description of millennials I know personally.

———

Jeffrey Jensen Arnett, “Growing-ups”, Aeon, April 17, 2014.

Sam Tanenhausaug, “Generation Nice”, New York Times, August 15, 2014.

Tags:
August 6, 2014

Gloomy outlook on recovery from loss of net worth suffered during Great Recession 

by Grace

Median net worth declined by 36%  and wealth inequality substantially increased over the ten years ending in 2013.  The Great Recession of 2007 and the slow subsequent recovery can be blamed for much of this economic pain.

The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline, according to a study financed by the Russell Sage Foundation. Those are the figures for a household at the median point in the wealth distribution — the level at which there are an equal number of households whose worth is higher and lower. But during the same period, the net worth of wealthy households increased substantially.

 

20140728.COCNetWorthDecline2

These numbers come from a study, “Wealth Levels, Wealth Inequality, and the Great Recession”, released by the Russell Sage Foundation.  According to the authors, the outlook for the “coming years” does not look much brighter for prosperity among the overall population.

Through at least 2013, there are very few signs of significant recovery from the losses in wealth experienced by American families during the great recession. Declines in net worth from 2007 to 2009 one large, and the declines continued through 2013. These wealth losses, however, were not distributed equally. While large absolute amounts of wealth were destroyed at the top of the wealth distribution, households at the bottom of the wealth distribution lost the largest share of their total well. As a result, wealth inequality increased significantly from 2003 through 2013; by some metrics inequality roughly doubled.

The American economy has experienced rising income and wealth inequality for several decades, and there is little evidence that these trends are likely to reverse in the near-term. It is possible that the very slow recovery from the great recession will continue to generate increased wealth inequality in the coming years as those hardest hit may still be drawing down the few assets they have left to cover current consumption and the housing market continues to grow at a modest pace.

———

Anna Bernasekjuly, “The Typical Household, Now Worth a Third Less”, New York Times, July 26, 2014.

Fabian T. Pfeffer, Sheldon Danziger, and Robert F. Schoeni, “Wealth Levels, Wealth Inequality, and the Great Recession”, Russell Sage Foundation, June 23, 2014.

August 4, 2014

Millennials favor privatization of Social Security

by Grace

Millennials favor privatization of Social security even if it means that current recipients receive less.

20140726.COCMillennialsPrivateSocialSecurity2
This majority appears to believe that senior citizens are taking an unfair proportion of the benefits offered by the Federal government.

53% of Millennials believe Social Security is “unlikely” to be there when they become older.

Education decreases the likelihood one believes Social Security will continue in the future. A majority (54%) of those with high school degrees or less expect Social Security to exist when they retire, compared to 36 percent of college graduates.

Nearly two-thirds (62%) of white millennials say Social Security is unlikely to remain in the future. In contrast, 55 percent of African-American, Latino, and Asian millennials instead say it’s likely to continue. Nevertheless, strong majorities of all race/ethnic groups expect that government will not provide the same level of retirement benefits to them as it does for current retirees.

Millennials’ lack of confidence perhaps explains why 73 percent support “changing the Social Security program so younger workers can invest their Social Security taxes in private retirement accounts. ”

———

Emily Ekins, “Millennials Favor Private Accounts for Social Security Even if Benefit Cuts to Current Seniors Required”, Reason.com, Jul. 17, 2014.

July 11, 2014

Parents help sustain their adult children’s extended financial adolescence

by Grace

Most parents are providing some financial support to their children even after they graduate from college, thereby promoting a period of sustained adolescence among 20-somethings.

… nearly 85% of parents plan to offer their children monetary aid after graduation, according to a survey Tuesday from Upromise by Sallie Mae. Almost one-in-three parents plan to provide their grad with financial assistance for up to six months, and around 50% plan to foot bills anywhere from six months to more than five years.

The new normal means that adult children continue to rely on mom and dad.

So, what has changed since my son graduated a few decades ago? Sure, new graduates are entering a much more difficult job market than he did, and even those who do secure jobs are unlikely to have the job stability he’s enjoyed. But a difficult job market is only part of the story. Social norms have shifted so that accepting help from Mom and Dad well into your 20s is “OK.”

Psychologists call this trend “emerging adulthood.” As Eileen Gallo and Jon Gallo note in their paper “How 18 Became 26: The Changing Concept of Adulthood,” for a certain socioeconomic set, growing up and moving out—permanently—means downgrading your lifestyle. The authors quote sociologists Allan Schnaiberg and Sheldon Goldenberg as stating:

“The supportive environment of a middle-class professional family makes movement toward independent adulthood relatively less attractive than maintenance of the [extended adolescence] status quo. Many of the social gains of adult roles can be achieved with higher benefits and generally lower costs by sharing parental resources rather than by moving out on one’s own!”

Keeping their 20-something children on the family cell phone plan is one common example of how “sharing parental resources” makes it easier on young adults as they transition to financial independence.  Another example is health insurance, where Obamacare now requires family policies to continue coverage for children up to age 26.  Individually these are small examples, but in total many parents are heavily subsidizing their adult children’s lifestyle.

Retirement expert Dennis Miller says parents should consider tough love instead of risking their own future financial security.

Retiring rich is hard enough without paying for your child’s extended adolescence. The job market may be tough for new graduates, but forcing your child to navigate it anyway might just be the best way to help.

Miller believes it’s possible to be supportive without hindering a young adult’s financial and emotional independence, and has some tips that can be read at the link above.

———

Kathryn Buschman, “The New Normal? Some Parents Plan to Aid Children 5 Years after Graduation”, FOXBusiness, May 27, 2014.

Dennis Miller, Paying bills for adult children? Try tough love instead, MarketWatch, July 8, 2014.

July 3, 2014

Advice for surviving, and even enjoying, your boomerang kid

by Grace

Many millennials are living at home with their parents.

Graduating with major student debt but without plans, as well as dropping out of college, unemployment, underemployment, poorly paid first jobs, sky-high rents and breakups or emotional upheavals can all create a perfect storm and send 20-somethings seeking shelter with mom and dad.

Thanks to closer parent/child relationships, smaller families, a later marriage age and the pressures of hard economic times, that’s a sharp shift since today’s boomer parents were launching their lives. Back then, one of the major milestones en route to adulthood was moving out of your parents’ home after high school.

Forbes offers five tips for surviving your 20-something child’s return to living at home.

  1. Encourage a plan.
  2. Treat grown-up kids as the young adults they’ve become.
  3. Let them know your expectations…before they move in.
  4. Have the money talk.
  5. Consider couple relationships — yours and theirs.

Are most adult kids who live at home paying rent to their parents?

… About half the boomerang kids who move home pay some sort of rent, and almost 90% help with household expenses, according to a 2012 Pew Report. But there are many ways to divvy up what it takes to run a household.

I have a boomerang kid at home, and two things I’ve found very helpful are making sure to treat him like an adult and finding agreement on a plan toward self-sufficiency.  I give some advice, but I also try to understand that he is in charge of his life.

Until a few years ago, I was resistant to the idea of a college graduate returning home to live.  But the high cost of living in my area along with the sorry state of the jobs market have softened my stance.  In fact, living at home is sometimes the better choice since it may be a way of getting a head start on saving for retirement.

Related:  “Parents have lower expectations for kids becoming financially independent” (Cost of College)

———

Elizabeth Fishel and Jeffrey Arnett, 5 Steps To Survive Your Adult Child’s Return Home, Forbes, 6/26/2014.

Tags:
June 30, 2014

Advice for getting your first credit card after graduating from college

by Grace

A new college graduate has some questions about getting a credit card.

How do I get a credit card? You can’t qualify for a card unless you can prove you’re worthy by having a credit history, but how can you have a credit history when you don’t have a credit card?

Kerry Hannon, personal finance and work blogger, offers some answers.

First, some advice to pay off your balance each month.

Sure, you typically need a credit card to pay for big expenses from hotels to airline tickets. I get it. But repeat after me: “I will always pay my credit card bill each month when it’s due — and in full.” If you only make the minimum monthly payment, you’ll likely be slammed with a high interest rate.

Twentysomethings these days often pay credit card rates of 22% or higher (!) because they lack a credit history and may have a low credit score. The average credit score for Millennials, according to the Experian credit bureau, is 628; for boomers, it’s 700.

So when you do get a card, pay your balance each month and be happy that you get about 30 days to make the payment (that’s called the “float”).

Do your homework before applying for a credit card.

… if you don’t have a credit history to speak of, you might want to hold off applying for a card until two months or so after you start working. Card issuers want to see an income stream before they’ll approve you, so by waiting a bit you’ll boost your chances of getting plastic.

Before applying for a credit card, get your latest credit report (free from Annualcreditreport.com) and credit score (free from sites like Credit.com, CreditKarma.com, CreditSesame.com and Quizzle.com). These will let you see what a card issuer would find out about your credit history and prepare you for your chances of being approved. If you see a mistake in your credit report, fix it by following the advice in Next Avenue’s article, Why You Must Check Your Credit Reports for Errors.

Piggyback on your parent’s reputation.

An easy way to build a credit history is to ask your parents to add you as an authorized user on one of their cards. The card will then show up on your credit report, and it’ll have your name on it. Your parents must make on-time payments to the account to protect your credit record and theirs. After about six months as an authorized user, you can then apply for a card on your own.

Or check out secured credit cards that do not depend on a credit history, but require a security deposit.

… With a secured card, you’ll get a credit line of generally one to three times the amount of your deposit. Manage your card responsibly and you may earn credit limit increases. After several months, you can apply for a regular card from the same issuer or from another one.

Once you obtain an unsecured credit card, close your secured card account and your deposit will be returned.

Some recommended sites:

… CardHub.com, which just published its 2014 list of the Best Credit Cards for High School and College Graduates … also has a list of cards for people with no credit history.

…Visit Lowcards.com to find the best deal. In general, look for cards with no annual fees.

———

Caitlin Bonney, “What New College Grads Need To Know About Money”, Forbes, 6/04/2014.

April 22, 2014

College IDs offer discounts, sometimes indefinitely . . .

by Grace

Apparently some college student IDs can be used long after graduation.

20140419.COCCollegeID1

I’m not endorsing this, but using old IDs may be fairly common.  Sometimes a cashier does not notice expiration dates, or in some cases the college IDs do not even have expiration dates.  Movies, public transportation, museums, clothing stores, and ski resorts are a few examples of places that offer students discounted prices.  Every little bit helps when making those student loan payments.

One Redditor imagines a future where he can enjoy double-dip discounts.

Imagine the savings when you’re in your 70’s. Student AND senior discounts. You can see a movie for only $49,99!

April 1, 2014

Turbo Tax being used to promote income-based student loan repayment

by Grace

The federal government has begun to use Turbo Tax to promote income-based and other income-dependent college loan repayment programs.

The new push from the Departments of Treasury and Education uses tax time to promote the opportunity for a borrower to have their entire debt repaid after 20 or 25 years. The agencies are partnering with TurboTax, the tax software used by more than 18 million Americans, to advertise the deal….

Turbo Tax users will see information about loan repayment options and a link to the Department of Education website in a section of the program called “My Money Tools.”

They are provided with a link to a calculator that uses tax information, including their adjusted gross income, marital status and household size to determine eligibility for income-based and other income-dependent repayment programs.

The options allow qualified borrowers to lock-in monthly payments that are determined by how much they make, not how much they owe.

This new marketing push coincides with the upcoming introduction of more generous taxpayer subsidies for student borrowers.

Those graduating after 2014 will have the option of applying to an even more generous program Congress passed in 2009 that would set payments at 10 percent of discretionary income for 20 years. After that, the loan is forgiven.

The Turbo Tax promotion comes after the Obama administration and other supporters expressed concern that not enough borrowers were taking advantage of Income Based Repayment (IBR), a student loan forgiveness program.

Kelsey Snell, “Student loan debt deal comes with tax catch”, Politico, 3/26/14.

Related:  Federal student loan programs create perverse incentives (Cost of College)

March 31, 2014

Start saving for retirement in your twenties, if you can

by Grace

The power of compounding is a reason to start saving for retirement as early as possible.

J.P. Morgan offers an illustration of “the importance of saving sooner than later”.

Their example consists of three people who experience the same annual return on their retirement funds:

  • Susan, who invests $5,000 per year only from ages 25 to 35 (10 years)
  • Bill, who also invests $5,000 per year, but from ages 35 to 65 (30 years)
  • And Chris, who also invests $5,000 per year, but from ages 25 to 65 (40 years)

Intuitively, it makes sense that Chris would end up with the most money. But the amount he has saved is astronomically largely than the amounts saved by Susan or Bill.

Interestingly, Susan, who saved for just 10 years, has more wealth than Bill, who saved for 30 years.

That discrepancy is explained by compound interest.

You see, all of the investment returns that Susan earned in her 10 years of saving is snowballing — big time. It’s to the point that Bill can’t catch up, even if he saves for an additional 20 years.

 

20140327.COCPowerOfCompounding1


Saving for just 10 years now works out better than saving for 30 years later

Saving “$5,000 per year only from ages 25 to 35 (10 years)” will generate a larger retirement nest egg than saving “$5,000 per year, but from ages 35 to 65 (30 years)”.


It’s often hard for 20-somethings to save.

Many young college graduates are unable to start saving in their twenties because they are pursuing graduate degrees.  Others may be woefully underemployed or working in low-paying internships, understandable in light of the fact that we are experiencing worst unemployment rates for college graduates in 50 years.  Some are struggling to support families.  Other 20-somethings may simply be squandering their paychecks by living the high life of frequent traveling and expensive dinners with friends.

ADDED:  Burdensome student loan payments prevent many recent college graduates from putting money away for retirement.

Business Insider recommends that “Every 25-Year-Old In America Should See This Chart”.  Considering that decisions about how they will be spending their twenties are often made at a younger age, I think every 18-year old in America should also see this chart.  Realistically though, all this is much more clear in hindsight.

Sam Ro, “Every 25-Year-Old In America Should See This Chart”, Business Insider, Mar 21, 2014.

Related:  A quick way to calculate how much you’ll need for retirement (Cost of College)

March 18, 2014

A quick way to calculate how much you’ll need for retirement

by Grace

It can be complicated to calculate how much you’ll need to save for retirement.  Here is a method that is relatively simple, and will help most people get a general idea of their needs.

Start with assuming that you will live 20 years in retirement, and then modify that number based on your health, family history, and other factors.

Then use a replacement ratio to determine the annual income you will need during your retirement years.  Use your current income or the income you expect to have during your peak earning years, and apply a percentage according to the following guidelines.

Simple lifestyle versus current; little-to-no-travel; inexpensive hobbies: 80% 
Moderate lifestyle versus current; upgrades to home and car expected; some travel and hobbies planned, but nothing lavish: 90% 
Maintain your current lifestyle: 100% 
Improved lifestyle versus current; increased travel and hobbies: 110%

If you expect to have remaining debt upon entering retirement, add 5 percent to 10 percent to your replacement ratio depending on the amounts you still owe.

Once you know your replacement ratio, use this calculation:

(current income x replacement ratio) x 20 = your retirement savings goal

For example, if you currently earn $100,000 annually and determined your replacement ratio to be 90 percent:

($100,000 x 0.90) x 20 = $1,800,000

Again, this assumes you’ll spend 20 years in retirement, so adjust accordingly if necessary.

This method is streamlined, and excludes Social Security income as well as explicit inflation assumptions.  But it serves to give most people a sense of what their retirement savings goal should be.

ADDED:
This method does not account for families that live well below their means.  For example, a dual-income couple may live on one income and save the rest.  For these frugal families, it would be better to substitute “living expenses” for “current income” in this calculation.

For information about two other approaches, one more simple and another more complicated, go to this article at US News Personal Finance.

Related:

Tags:
Follow

Get every new post delivered to your Inbox.

Join 177 other followers

%d bloggers like this: