Ultimate Open House

From the Daily Journal of Commerce 

Mayhem in the credit, stock and housing markets may look like bad news, but it actually presents some great opportunities for young adults.

The turmoil is bringing prices down to levels that might afford them an economic toehold and, perhaps, a house. By buying low, young people may decide to start a decades-long investing habit. They can take their medicine early and flourish later.

However, serious challenges await the generation that will be asked to repay the loans that the federal government is taking out now. College seniors are graduating into a recession that economists predict will last for a year or longer, and jobs are hard to come by. Benefits like health insurance and 401(k) plans are even scarcer.

If there is one word that best describes how twentysomethings can navigate these waters it is “invest.” Invest, invest, invest. Put money into retirement accounts and the stock market. Build a down payment and get into the housing market. Invest in yourself by continuing to add skills and knowledge. It’s hard to invest all over the place at once, especially if you’re earning a lousy salary, but it will all bear fruit.

It is good to take a long-term view. Everything you do now may seem small, but it will change where you are when you turn 30, 40 and 50.

Here are some specific ways that young adults can make the most of the current mess.

• Invest automatically. If your company has a 401(k) plan, participate to the fullest amount you are permitted. If it doesn’t, create your own automatic retirement savings plan by opening a Roth Individual Retirement Account (IRA) and authorizing a set amount to be deducted from your checking account every month. You won’t miss the money, and down the road you’ll be happy you have it.

• Put that money in the stock market. Recoveries always come after a fall, and they often move quickly. The market crashes of 2008 allow you the opportunity to buy in at low prices. You don’t have to learn to pick stocks; simply find a low-fee, broadly-based index fund from a no-load mutual fund company such as Fidelity Investments or Vanguard Investments and you’ll participate in that recovery.

• Create a savings account and stash something in it each time you get paid. Consider this your down payment/grad school/new car/wedding account. Keep it in the same bank as your checking account so you can easily transfer money into it.

• Start building your career, even if you don’t have a good job. Start networking in your field by joining a professional association and going to meetings. Take extra classes or learn skills on your own that will give you an edge over other job candidates. Apprentice yourself to a mentor.

• Build a solid credit profile. If you don’t have a credit card, get one. If you have one, make sure to make payments on time every month. Use the card only for items you can afford to pay in full at the end of the month, or for true emergencies. Check annualcreditreport.com to see your credit profile.

• Buy your own health insurance, if you don’t get it at work. Even a broken leg can wipe you out if you’re living hand to mouth. You’ll get better care when you do need it. And health insurance is typically cheap for young people. Shop at ehealthinsurance.com.

• Get real estate savvy. This may not be the best time to buy a house, but it is a good time, and that’s likely to last for a while. Start scouting neighborhoods and then use mortgage calculators to determine what you can afford.

• Get money savvy. If you start in your 20s, you’ll still be behind Warren Buffett, who was investing in his teens. But you could become a financial whiz by the time you’re 35, with plenty of time left to put that expertise to use. Start slow and learn a little bit more all the time.

• Defer gratification. You may feel like you’ve already delayed ‘real life’ and grown-up things long enough. But a few more years of living with student-caliber furniture, an older car, fewer restaurant meals and Netflix instead of movie theaters will pay off down the road.

• Get help. Even tightening your belt may not leave you enough cash to invest in a house, a career and a retirement all at the same time. But presented with those worthy causes, your parents or grandparents may be able and willing to help a bit.