How to Weather the COVID-19 Financial Storm in Your 20s and 30s

For millennials, the volatile economy presents a unique set of challenges. So, what should your financial priorities be?

working woman on the phone

Medically reviewed in April 2022

Updated on May 19, 2020

In just a few months the COVID-19 pandemic has drastically changed national and global economies. Stay-at-home orders have resulted in millions of U.S. workers applying for unemployment, and one recent study estimates that more than 100,000 small businesses have closed for good.

Each age group has its own set of unique money challenges during the pandemic. But people in their 20s and 30s can be hit particularly hard by employment troubles. They may have less seniority in companies where “last hired, first fired” is the general rule, for example, or they might be paying off student loans. What’s more, they haven’t had much time to build a healthy financial cushion or emergency fund.

Since no one knows where the economy is headed, money experts are changing the advice they typically give young adults. And as the months roll on, the advice planners give now could change yet again.

In the meantime, here’s what a trio of Certified Financial Planners (CFPs) have to say about the top money priorities for people in their 20s and 30s during the COVID-19 crisis.

Analyze your spending
Not everyone has a household budget. For many of us, money comes in and goes out without much planning.

If you don’t have a clear idea of what you spend in a typical month, review your last few months’ worth of bank and credit card statements. Then, decide what non-essential expenses you could cut, or at least reduce. You may want to slash your media subscriptions or rethink your living situation. That might mean finding a cheaper place, moving in with a roommate or even temporarily going back to live with your parents.

All three CFPs report that some clients are surprised by how much they’re saving during lockdown: no trips to bars, clubs, sporting events, restaurants or theaters. “But then they check their credit cards and find out they spent $200 on toys from Amazon,” says Michael Izbotsky, a CFP based in Los Angeles.

Minimizing this kind of debt should be a top priority, and not just because money is tight. Debt carries major opportunity cost: Every dollar spent to repay it (with interest) is a dollar that can’t work for you any other way.

Save, save, save
The more money you can squirrel away, the better prepared you’ll be if the unemployment crises worsens. If you’ve lost your job, under the Coronavirus Aid, Relief and Economic Security (CARES) Act, unemployment includes a $600-per-week federal payment until July 31 along with state benefits, which are extended to 39 weeks. But unemployment won’t last forever, and there’s no guarantee you’ll find a job that pays what you’re earning now.

And if you’re still working? There remains a possibility the job might ultimately disappear. Izbotsky says a friend made it through early May and was feeling optimistic. Then she got laid off.

If you’re not working steadily and not eligible for unemployment, these tactics can help you find the cash needed to get by:

  • Part-time jobs. Retailers in particular are hiring both for in-store and delivery positions.
  • Replacement work. Landscaper, tutor, dog-walker, Instacart shopper, virtual assistant, contract tracer, selling face masks on Facebook Marketplace—depending on your skills, you might be able to find jobs outside of your regular line of work during the pandemic. A review website called SideHusl can help you vet the pros and cons of some of these potential gigs.
  • Selling stuff. Finally clearing out closets or the garage? Consider selling some of your surplus belongings or items you just aren’t using. Sites like Tradesy and thredUP (clothing), Trademore and Gazelle (electronics), or sites like Facebook Marketplace, OfferUp and letgo (general goods) could help you find buyers for little-worn designer clothes or the mountain bike you rarely ride.

However you earn money, try to save what you can. “This is the time to stockpile cash. You can’t spend everything you get,” says Delia Fernandez, a CFP in Los Alamitos, California.

It’s important to have cash on hand for unexpected expenses such as car repair or illness, she says. But there’s another big reason to stash extra cash: next year’s tax bill. While it’s possible to withhold 10 percent from unemployment benefits for taxes, that might not be enough to cover all you ultimately owe.

“Some people are going to be very unhappy next April,” Fernandez says.

Consider postponing bill payments
Many lenders are willing to lower minimum amounts due or even pause payments completely on auto loans, credit card debt and mortgages. Federal student loans have already been put into “administrative forbearance” through the end of September, and no interest will accrue during that time.

Not paying bills could be a savvy tactic for young adults who:

  • Are currently working but could still be laid off  
  • Still haven’t received their unemployment benefits 
  • Don’t have much of a financial cushion

Putting bills on hold can help preserve available cash until money starts coming in again, whether that’s through unemployment or a new job. Remember, though, that eventually you’re going to owe it all.

Pause or cut back on retirement savings
Suppose your financial plan was to save 15 percent of your salary for retirement. That’s a good strategy, but right now, it’s more important to build short-term cash reserves than to stick to a long-term plan.

“You have to be able to adjust the short term in order to get to the long term,” says Ian Bloom, a CFP in Raleigh, North Carolina. “If you can’t make the contributions the same way, we do what makes sense for now.”

Thanks to compound interest, those in their 20s and 30s have years to make up for missing contributions. Best-case scenario: Your finances even out before the end of the 2020 tax year, and you are able to put money into a retirement vehicle like a Roth IRA or SEP IRA. You could also add a little extra money to your normal monthly retirement amounts throughout 2021.

Focus on what you can control
You can’t make COVID-19 go away or guarantee that you’ll remain employed. Nor can you change the impact the pandemic has had on the economy. What is in your control is the way you react to the situation.

“I like the term ‘pivot’,” Bloom says. “It’s not that you’re giving up on your dream. It’s that you’re recognizing reality.”

The bottom line, then, is to gather your available resources, create a spending plan to keep expenses low, and hold off on extra debt payments and retirement savings.

And remember this isn’t forever. One day you will get back to saving for retirement, building an emergency fund and planning for your future. Until then, take steps to position yourself to ride out the turbulence. Doing so makes it more likely that you won’t just survive, but ultimately thrive.

Article sources open article sources

“Unemployment Benefits under the CARES Act (Coronavirus Aid, Relief, and Economic Security Act).” H&R Block. April 2, 2020.
“Small businesses used to define America’s economy. The pandemic could change that forever.” The Washington Post. May 12, 2020.
“19 companies hiring during the coronavirus pandemic.” April 14, 2020.
Allison Anne Hoyt, JD, CLU. Director, Advanced Consulting Group, Nationwide. “CARES Act provides relief for many student loan borrowers.”
“How are unemployment benefits taxed?” U.S. News & World Report. April 22, 2020.
“Out of work – and cash – millions of Americans are still waiting for their first unemployment check.” The Washington Post. April 23, 2020.

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