Since the Great Recession of 2008 and 2009, the financial rules that most Americans operated under have changed and it might be the fact that Generation Y was in the sweet spot of the economic downturn that has caused them to redefine their beliefs about money.
Putting actual date ranges on the different generations is difficult, but Generation Y, also called the millennial generation or "eighties babies," are said to have birthdates ranging from the 1970s through the mid-to-late 1990s and may number as many as 70 million. If you're in your twenties, thirties or early forties, then you may be part of Generation Y.
What's more important is your role in the workforce. You're most likely in the early or middle stages of your work life but because of the Great Recession, you may have had to redefine your rules for money, and if you haven't done so already, then you should. We have a few rules you should consider as you move forward into unknown financial territory.
Don't Count On the Degree
Parents tell their children that they have to have a college degree to be successful and in large part, that's still true. According to the Bureau of Labor Statistics, the current unemployment rate among college graduates is 4.2%, compared to 8.3% for those with only a high school diploma.
However, that doesn't mean that a college degree assures you a job once you graduate. The Washington Post reports that the unemployment rate among Architects is 13.9%, and 11% for people with arts degrees.
New rule: do something that you enjoy, but research the job outlook for your field before committing to the degree program.
Be Afraid of Credit
Credit cards might be as American as baseball, but with jobs scarce and the economy only slowly improving, holding a lot of debt is a dangerous endeavor. When you take on debt, you're betting on your future ability to pay it and as many households have found, that isn't always true. The average household debt for those with credit cards is more than $15,000, and 3% of those households are at least 30 days delinquent.
New rule: don't think of your current job as safe. Many have been laid-off, leaving them with no way to pay their debts. Keep debt at a much lower level than in the past.
A Home Isn't an Investment
If you're an investor purchasing homes at almost ridiculously low levels, hoping to rent and later sell the properties, a home is an investment. For those who are purchasing a home as their primary residence, the old idea that a home is not only a place to live but also a money-maker, is no longer true. First, homeowners generally stay in their homes from five to seven years, which isn't sufficient time for their homes to appreciate. Next, the collapse of the housing market has left nearly one out of every four homeowners owing more on their home than it is worth. It may take many years for housing values to return to fair value. As a result, many now consider renting as a better option.
New rule: if you purchase a home, don't do it because it's a good investment. Do it for other reasons, like a low interest rate and a great price. Don't count on making money from your home when you move.
Invest Early and Often
The Great Recession hit the baby boomer generation hard. Many baby boomers believed that they would have enough money to retire, but the collapse took much of that money from them, forcing many boomers to continue working well into their sixties.
There is no risk-free investment, but the best way to protect against losses such as these, is to save and invest larger amounts earlier in life. As the balance grows and your portfolio is more diversified, you'll have greater flexibility to handle the ups and downs of the markets.
New rule: think about your retirement plans on the first day of your career and continue investing more than you think you should.
The Bottom Line
When our grandparents spoke of the Great Depression and how they learned valuable financial lessons from that era, we probably didn't understand what they meant until we weathered the storm of 2008 and 2009. As a result, we've changed how we think about money, and that's a good thing.