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The Best Cities to Be Young and Broke

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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When you’re young and just starting out your career, choosing where to live can truly make or break your finances.

Young people today already have to manage a host of financial stressors, like student loan debt and rising housing costs, with the usual demands of early adulthood, like starting their first retirement fund and learning to balance work and play.

When you couple these competing responsibilities with a location that only contributes more financial obstacles, you could be setting yourself up for failure.

On the other hand, some cities are affordable enough to give even the lowest earners a fighting chance at a decent quality of life.

With this in mind, MagnifyMoney decided to take a look at some of the biggest cities in the U.S. and determine which cities are the best places to be young and broke today.

We started by analyzing more than 100 U.S. cities to find the most favorable and affordable places for people between the ages of 18 and 24. Among other data points, we not only looked at obvious expenses like housing and food, but also unemployment rates, income taxes and the rate of young adults who are living in poverty.

Key findings: The top 10 cities for the young and broke

Of the 10 best places to make the most of a tight budget, five were in the Midwest —  Madison, Wis., Grand Rapids, Mich., and Dayton, Ohio.

Although Midwestern cities did not score highest on all of the features analyzed, when they were put up against what young adults said matters to them the most, low rents and short commute times pushed these places ahead.

“It’s not that these cities necessarily scored the highest on all the features we analyzed, but when we weighted those features according to what the young adults we surveyed said mattered the most, the lower-than-typical rents and price combined with modest commute times to bring Midwestern cities to the top of the list,” said MagnifyMoney Senior Research Analyst Kali McFadden.

#1 Madison, Wis.

Overall score: 73.2/100

It stands to reason that a renowned university town would be a draw for the young and broke, but Madison stands apart, thanks to a relatively low cost of living (median rent is $950, and goods run almost 5% cheaper than the rest of the country) and a fairly robust public transportation system.

About 4% of the population use public transportation, which may not seem like a lot, but that’s enough to rank 21 among the cities reviewed. Moreover, the average commute is just over 21 minutes.

Only two other cities (Provo, Utah and Springfield, Mass.) have a higher proportion of young adults, yet no other big city has more young people who either attended or graduated from college (70%), and the city ranks in the top 10 for lowest youth unemployment.

The bad news is that there are more young adults living in poverty in Madison than other city analyzed, but this may have to do with how college students and their families file their taxes.  When considering what city features young people in our survey said they care most about, Madison still places 1st, with an overall score of 73.2.

#2 Grand Rapids, Mich.

Overall score: 72.4/100

With an overall score of 72.4, Grand Rapids misses 1st place by a hair. Grand Rapids shines in many of the same ways that Madison does, such as the price of goods, relative to the rest of the country (almost 5% less), average commute time (just over 21 minutes) and low youth unemployment rates (6.7%).

Grand Rapids is also full of young, educated citizens, with over 10% of the population between the ages of 18 and 24, and 59% of those young people either college graduates or on their way.  Most young people are local, with fewer than 5% newly arrived from out of state.

Fewer than 2% of people use public transportation, which is pretty middle-of-the-pack, and statewide and income taxes are lower than most, ranking 42nd and 44th out of the 107 big cities.  Grand Rapids exceeds Madison in a few areas, such as median rent at $812, fewer young people in poverty and over twice as many pizza joints per capita.

The other Midwest cities that made the top ten were Des Moines, Iowa (6) and Akron, Ohio (8).

#3 Dayton, Ohio

Overall score: 72.2/100

It turns out that Ohio is a great place to be young and broke. Statewide, income and sales taxes are low, ranking 23rd and 33rd among the 107 big cities we reviewed, and Dayton’s modest median rent ($761) and low cost of goods (over 4% cheaper than the national average) add to Dayton’s affordability.

Of the 10% of Dayton’s young population who are between the ages of 18 and 24, 63% have or are working toward an undergraduate degree (13th highest).  Average commute times also compare favorably with the rest of the nation, coming in at just under 23 minutes.  Dayton does fall short in the areas of youth unemployment (11%) and youth living in poverty, ranking in the bottom half of all cities we reviewed.

#4 Syracuse, N.Y.

Overall score: 71.4/100

Our first city outside of the Midwest is another university town in the northern reaches. With a score of 71.4, Syracuse compares very favorably with the rest of the country in average commute times (21 minutes), statewide sales tax (4th lowest), and percentage of the population between the ages of 18 and 24 (11%).

As one would expect for a college town, a lot of young adults are newly arrived from out of state or country (11%), and Syracuse ranks 11 out of 107 for number of young people who attend or have graduated from college (64%).

Rents are low at $790, as is youth unemployment (8%), but as seen with the other top cities on our list, a lot of young people live below the poverty line (26%).

#5 Durham, N.C.

Overall score: 70.9/100

Durham-Chapel Hill is home to two large schools, Duke University and University of North Carolina, which helps explain why over 11% of the population is between the ages of 18 and 24.

It also helps to explain why 68% of those young adults either have or are pursuing a college degree (the 3rd largest proportion in our study), and why 11% of them arrived in the last year from another state or country. Durham is also relatively affordable, with a middle-of-the-pack median rent of $947 and prices almost 4.5% lower than the national average.

Commute times are also middle of the pack at under 25 minutes, but almost 5% of the population use public transportation.  Again, 5% may not sound like a lot, but it’s actually the 15th highest among cities with populations over half a million. Some 30% of young people live below the poverty line, although that may be because so many college students don’t have much, if any, income.

It’s not all roses in the Midwest

Ironically, the best five cities for the young and broke also have a high rate of young adults living in poverty, comparatively. As we said, the reason these cities have an edge is that they tended to rank well in the factors that young people said mattered most to them, like rent costs and commute times.

Top-ranked Madison, Wis., for example, also boasts the highest rate of young adults living in poverty in Madison than any other city analyzed. Similarly, in Durham, N.C (5), 30% of young people live below the poverty line.

However, this doesn’t necessarily mean these cities are rife with homeless young adults. One explanation could be that these cities are home to several colleges and with a high volume of college students in the population, it’s easy to see how it could appear that young adults aren’t earning much.

“These two things are likely connected, as college students often have little or no income, but that doesn’t mean they’re not being supported through family assistance or loans,” McFadden said.

On the plus side, college towns are affordable

The list also boasts a number of college towns like the aforementioned Madison, Wis. (1) and Grand Rapids, Mich. (2). Rounding out the top five were college towns outside of the Midwest, Syracuse, N.Y. (4) and Durham, N.C. (5). The results suggest college towns may be more affordable destinations for young people who want to keep their expenses relatively low.

The 10 Worst Cities to Be Young and Broke

Methodology: What do young people want in a city?

To find city features most appealing to young people without a ton of disposable income, MagnifyMoney asked 100 young people (ages 18-24) to rank the importance of 12 city features that factor into quality of life for the young and broke. The responses were weighted according to which were the most important to the youth surveyed.

Here are the most important city features, according to this survey:

  1. Median rent
  2. Price of goods compared with the national average
  3. Average commute times
  4. Unemployment rate for young people
  5. Statewide income tax rates
  6. Statewide sales tax (we note that local sales tax may be higher)
  7. Percentage of the young adult population who live in poverty, by federal standards
  8. Percentage of the population between the ages of 18 and 24
  9. Percentage of young adults who have either completed or are pursuing a college degree
  10. Percentage of the population who use public transportation
  11. Percentage of young adults who moved from another state or another country in the previous year, and
  12. Availability of cheap food, as expressed in the number of pizza parlors per 100,000 residents.

Once we know what to look for, our team weighted the features of 107 metro areas with populations over 500,000 against what young people said they wanted most in the city.

Based on this information, the cities were then scored, for a highest potential score of 100 and a lowest potential score of zero to find the best places for broke young adults.

References

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at [email protected]

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How to Prepare Yourself for the Next Recession

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Anyone who lived through a recession knows that it can cause financial pain, no matter your level of wealth or employment status. This means that preparing for a recession is always the right move for your financial well-being.

It’s been more than 10 years since the Great Recession ended, which marked the close of the longest economic contraction since the Great Depression of the 1930s. Over the past decade, we have seen the longest economic expansion in U.S. history.

Many people wonder how much longer the current economic expansion will last and when the next recession might arrive. It’s impossible to know, so you should start to prepare for the next recession today.

How to prepare for a recession

The best way to prepare for a recession is to monitor and improve your financial health while the economic outlook remains positive. The list of things you should do to improve your finances isn’t long, and making solid financial plans isn’t a complicated formula.

“It’s the same advice you should generally always be following,” said Tendayi Kapfidze, chief economist at LendingTree, MagnifyMoney’s parent company. “The world is a risky place, and income is not always guaranteed. You should always be doing things to shore up your finances.”

8 things you can do to prepare for a recession

1. Build up your emergency fund

“The main challenge a recession creates is it could create some interruption to your income,” Kapfidze said. To protect yourself from a decline in income or a job loss, you should have enough money to pay at least three months of expenses stashed in your emergency fund — six if you have children.

Wherever you keep your emergency fund — in a savings account with a bricks-and-mortar bank, an online savings account or even a money market account — the most important thing is to keep the fund liquid. You don’t want to be forced to pull money out of the stock market during a recession.

According to Dennis Nolte, a certified financial planner who works for commission and fees in Winter Park, Fla., if you’re young and financially secure, you might consider investing part of your emergency fund in a Roth IRA. You can withdraw contributions from a Roth IRA at any time without paying tax penalties. You have to leave earned interest in the account, however, because withdrawing interest would trigger penalties.

2. Pay down debt

As a recession looms, one key strategy to protect yourself is to pay down debt. This helps to increase the amount of extra liquidity you have on hand when a recession hits.

“This is the best risk management tool,” Nolte said. He suggested that you prioritize paying off high-interest credit card debt.

In addition to directing available funds to pay off debt, consider refinancing or consolidating your debt at lower interest rates. This can reduce how much you pay in interest, decrease your monthly bills and increase the funds available for saving or paying down even more debt.

3. Review your investing strategy

It’s important not to let a looming recession dictate your investing decisions. In other words, don’t try to time the stock market. Instead, prepare for a recession by maintaining good habits at all times: Build a deliberate investing strategy, and stick with it.

“The best thing people can do now is verify that their portfolio is appropriate for them,” said Angela Dorsey, a fee-only certified financial planner based in Torrance, Calif. “If it’s too risky, you should make changes now.”

Determine that you have the right investment mix

Over the past few years, many people invested aggressively in equities as the stock market climbed higher and higher. Now, it’s time to ask yourself how you would feel if the market fell 20% in one year.

Be honest: If you believe that you can tolerate a loss of this magnitude, stick to your plan when the market falls, and stay on course. You should hold on to your investments particularly if you’re young, because time is on your side, and you’ll have lots of time to recover losses in a stock-heavy portfolio.

Dorsey recommends that you rebalance your portfolio if it strays too far from your strategic allocation, or mix of stocks, bonds and other securities.

Kapfidze agrees. “You want to have a balanced portfolio that meets your long-term goals,” he advised. That should be the goal regardless of where we are in the economic cycle.

For example, your plan might be to have 70% of your investments in stocks and 30% in bonds. The market has gone up, so a larger percentage of your portfolio now might be in stocks, say 75%. So, you should rebalance your portfolio — sell stocks and buy bonds — to reach your goal of 70% stocks and 30% bonds.

Change your strategy for peace of mind

Your portfolio should be appropriate for your risk tolerance. If you’re nervous about an economic downturn and believe that big losses in your retirement savings would keep you up at night, the time to reallocate is now.

Consider the strategy above: 70% in stocks and 30% in bonds. If you believe that you couldn’t endure a huge drop in the equity markets, now might be the time to change your allocation to, say, 50% stocks and 50% bonds. Just don’t wait for the market to tank to change it up, though.

“When you’re not emotional about it, when it’s not free falling like it did in 2008 or in 2001, 2002, you can make some adjustments,” said Scott Bishop, a fee-only certified financial planner in Houston. That’s because now “you can see if there [are] some flaws in your portfolio that might be subject to market risk by lack of diversification.”

4. Diversify your income with a side gig

When we think of diversification, we tend to focus on our investment allocation, but the idea can and should be applied to sources of income as well. Because a loss of income is one of the biggest threats during a recession, having multiple income streams can help to lessen the effect from a reduction in income or a job loss.

Millions of Americans have a side gig. If you don’t, now could be an excellent time to consider one. Do some research and identify a side gig you can pick up now to protect yourself against potential income reductions later.

5. Reduce your living expenses

Don’t wait for a recession. Now is the time to trim the fat in your spending. Review your recurring fixed monthly payments as well as your discretionary spending. See what you can eliminate, and reduce or downgrade services that aren’t vital to your household. Consider becoming conservative with your discretionary spending in favor of stocking up cash and paying down debt.

6. Assess your current job and employer

When you prepare for a recession, don’t monitor only national economic conditions: Take a closer look at circumstances close to home.

“Understand how well your employer is doing financially, because that may help you better assess your risk,” Kapfidze said. Trends in your company and your industry affect you more directly than what happens on a national level.

Employees of public businesses can stay abreast of company and industry happenings by listening to their company’s earnings calls.

In addition to knowing the state of your company, employees should find ways to insulate themselves against a potential job loss. Kapfidze suggested taking steps to increase your value to your company in your current role, such as increasing your knowledge and skills and taking on additional responsibilities.

7. Set aside cash for short-term goals

If you have money invested in the market for short-term goals, such as repairing your roof or buying a car, it’s time to shift gears. That money should be kept in an interest-bearing account, so it won’t be influenced by the stock market.

“[This] should be the case anyway,” Dorsey said. “But over the last few years, people have gotten a little too ambitious and say, ‘Oh gosh, I want to buy a house in five years, so let’s be super aggressive and put it all in stock, so it can grow.’ They can grow, but they can also go down.”

8. Don’t let fear drive your decisions

Recessions can be difficult, frightening times. A common pattern that financial planners see is that people act based on emotions and fears.

“When they are emotional, people tend to buy on greed when the market’s going high and sell on fear when the market’s going down,” Bishop said. “If you’re buying high and selling low, you’re doing exactly the opposite of what you need to do to make money in the market.”

A recession is a normal part of economic life. With your retirement savings, you have to keep a long-term perspective, because another economic expansion will arrive after a recession ends.

The bottom line: Don’t panic or allow your emotions to get in the way when the next recession hits. Instead, prepare for it now, and you’ll breathe easy later.

Recession FAQs

A recession is when the economy contracts, or gets smaller, for an extended period. Recessions are part of the economic cycle, and they’re followed by a period of economic expansion.

One marker of a recession is six consecutive months of negative gross domestic product (GDP). GDP measures the market value of all goods and services produced by the U.S. economy. However, six months of negative GDP isn’t the only determining factor for a recession.

The National Bureau of Economic Research (NBER), which designates recessions, also looks at real income, employment, industrial production and wholesale-retail sales.

Since 1945, recessions lasted 11 months on average. However, they can extend significantly longer. The Great Recession, for instance, lasted 18 months. History shows that the United States experiences a recession roughly every six years.

Although recent recessions last 11 months on average, consumers and businesses feel a recession’s effects for years or even decades afterward. Long-term unemployment or reduced wages can affect individuals and families in multiple ways.

For example, if a family no longer can afford to send their kids to college because of a job loss or depleted savings, the missed educational opportunity for that child can affect their earning potential and their future family.

In the last recession, many people lost their home to foreclosure, a blow to their personal finances that can take years to recover from. Long-term unemployment not only has a financial effect, but also an emotional one as well.

Plus, reduced earnings mean reduced buying and fewer dollars rotating in our economy, which results in further lost opportunities for consumers and businesses alike.

Trying to time a recession isn’t something the average person should try to do, Kapfidze said. “Professionals try to do that, and they lose money every day.”

Nevertheless, a recession can provide an excellent opportunity to buy assets at “discounted” prices. Kapfidze suggested waiting until the economy shows signs of recovery before you take the plunge, because trying to predict the bottom of the market also is risky.

“Don’t try to catch a falling knife, because you might grab it by the blade instead of the handle,” he warned.

“There are various things you can look at to assess the risk of recession,” Kapfidze said. One is the yield curve, which measures the difference between long-term and short-term interest rates. A lot of discussion about the risk of a recession in 2019 centered on the yield curve, but that chatter has died down.

“[That] doesn’t mean the recession risk is materially lower,” Kapfidze explained. “It’s probably a bit lower, but it could still happen within six to 18 months. That’s a pretty wide window.” Of course, there’s no guarantee that a recession will happen in that time frame. “Recently, the economy has looked a little bit better than it did a few months ago.”

Things can change rapidly. Earlier this year, the sentiment was negative, Kapfidze pointed out. “It can turn positive pretty quickly, and it can turn a little more negative pretty quickly.”

Again, Kapfidze stressed that instead of focusing on the timing of the next recession, consumers should take prudent steps to firm up their finances. “That increases the odds of success and certainly is way less stressful than trying to figure out where I am in the business cycle and what are the odds of a recession.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Alaya Linton
Alaya Linton |

Alaya Linton is a writer at MagnifyMoney. You can email Alaya here

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Survey: Consumers Hate ATM Fees Above All Others

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Paying an ATM fee can feel like a punch to the stomach. There’s nothing worse than having to spend money in order to access your money. With ATM fees typically running between $2.50 to $3, they can add up fast if you’re not paying attention to where you withdraw money.

A new survey of over 1,000 Americans by MagnifyMoney, a LendingTree company, found that Americans hate ATM fees even more than such widely despised charges as airline fees and shipping surcharges.

Despite ATM fees being America’s most hated fee, they are completely avoidable—it just takes a little legwork. We’ll even show you how easy it can be to skip out on your least favorite fee.

Key findings

  • Nearly 27% of respondents said they hate ATM fees more than any other fee—earning them the title as the most hated fee in the land.
  • The second most hated fee is the dreaded bank overdraft fee (22%), followed by credit card annual fees (7%).
  • Unsurprisingly, ATM fees are also the most commonly paid fees, with 37% of respondents having paid one or more in the last year.
  • Millennials and Midwesterners are most likely to fork over money to pay an ATM fee.
  • The second most commonly paid fee was a bank overdraft fee (18%), followed by shipping fees (15%).
  • Most people(76%) are willing to drive further out of their way to skip ATM fees. Nearly one in 10 would drive more than 10 miles out of their way to find an in-network ATM. However, most would only go one to five miles (48%) or six to 10 miles (19%) out of the way.

The top three most hated fees: ATM, overdraft and credit card fees

Out of all the annoying fees Americans get slapped with—from shipping fees to baggage fees to convenience fees for event tickets—people have the most aversion to ATMs fees.

One reason could be the staggering number of Americans who were forced to pay a surcharge to access their own cash. Our survey found that 37% of Americans have paid an ATM fee — either charged by the bank for out-of-network ATM use or by the ATM owner — in the past year, and 35% have paid one in the past month. Millennials and Midwesterners were the groups that incurred ATM fees the most often.

We found that the second most hated fee was bank overdraft charges, with 22% of Americans saying they hate those fees the most, followed by 7% who despise credit card annual fees the most. Interestingly, a whopping 18% of Americans were charged with an overdraft fee in the past year, while 13% paid a credit card annual fee.

While airline fees tend to get a bad rep, the number of Americans who hate those surcharges the most pales in comparison to those who hate financial fees: Only 7% of Americans hate airline baggage fees the most, 3% airline seat selection fees, and just 1% airline flight change fees.

What people do to avoid fees

Our survey reveals that most people would make a serious effort to avoid paying an ATM fees: Nearly half say they would drive between one to five miles to avoid an ATM fee, while one in 10 would really go the distance and over 10 miles to free themselves of an ATM fee. Not everyone is willing to put in the extra effort, though: A surprising 24% of Americans would not drive any distance to avoid an ATM fee.

Many Americans enroll in overdraft protection to avoid extra bank fees. In many cases, overdraft protection programs are effective shields against overdraft fees. It’s not surprising that since overdraft fees are the second most hated types of fees, nearly half of Americans are enrolled in some sort of protection plan. Other courses of action Americans took to avoid paying a fee included not signing up for a credit card with an annual fee (24%), making a purchase in-store instead of online (19%) and bringing only carry-on luggage (15%).

How to avoid paying ATM fees

While ATM fees are widely disliked, they are also completely avoidable. It might take a little bit of effort and inconvenience, but if you really don’t want to pay to access your own cash, there are simple steps you can take. For example:

  • Utilize your bank’s mobile app. Many of them have tools to help you find nearby in-network ATMs.
  • Next time you are paying with your debit card at a store, ask for cash back instead of using an ATM.
  • Consider a credit union that’s part of the CO-OP network. You’ll get fee-free access to nearly 30,000 ATMs.
  • Explore banks that reimburse you for ATM fees.

The best banks for people that hate ATM fees

A number of banks, particularly online banks, offer incentives that reduce or eliminate out-of-network ATM fees. If ATM fees are the bane of your existence (or if you just want to avoid paying cash to access your own cash), these banks could be a good fit for you.

Bank / account ATM fee policy
E* TRADE Max-Rate Checking AccountUnlimited ATM fee refunds. Must maintain an average monthly balance of $5,000 to waive $15 monthly fee.
Axos Bank Essential Checking accountUnlimited domestic ATM fee reimbursements.
TIAA Bank Yield Pledge Checking accountMonthly reimbursement up to $15 for U.S. ATM fees. Unlimited reimbursement for accounts with an average daily balance of $5,000.
State Farm Bank Checking and Interest Checking accountsUnlimited ATM fee reimbursement if direct deposit has been made to account during statement cycle. Or, if no deposit has been made, up to $10 ATM fee reimbursement per statement cycle.
Radius Bank Rewards Checking, Champion Checking, Superhero Checking and Hybrid Checking accountsUnlimited ATM fee reimbursements.
Schwab Bank High Yield Investor Checking AccountUnlimited ATM fee rebates.
Ally BankUp to $10 ATM fee reimbursement per statement cycle.
First Republic Bank ATM Rebate Checking accountUnlimited ATM fee rebates. Must maintain a minimum average balance of $3,500 to waive $25 monthly service fee.

Fee information is accurate as of November 5, 2019.

Methodology

For this survey, MagnifyMoney commissioned Qualtrics to conduct an online survey of 1,028 Americans. The survey was fielded September 11-13, 2019, with the sample base proportioned to represent the general population.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Sarah Berger
Sarah Berger |

Sarah Berger is a writer at MagnifyMoney. You can email Sarah here