Younger generations have been hearing the same financial advice for years, as if buying a home, saving for retirement, or achieving other financial milestones were as simple as cutting back on small luxuries. But are young people really hindering their own financial futures? Probably not, considering the tough financial environment they face: housing and education costs have soared, and inflation is taking a bigger chunk out of budgets.
There’s no doubt that Gen Z is feeling uneasy about their finances. Nearly one-third say they don’t feel confident managing money, and 82% report they aren’t where they want to be financially.
Fortunately, there are steps you can take to improve your financial situation—and they don’t require giving up everything you enjoy.
Here are five tips that can help you take control of your finances.
1. Create a Realistic Budget
Budgets often get a bad reputation as tools that limit your spending. But what if you saw your budget as a guide that shows you how much you can spend?
Start by making a simple budget that includes all your income, then divide your expenses into “needs,” “wants,” and savings. After setting aside money for savings and necessary expenses like rent, food, insurance, and utilities, you can use the “wants” category for things you enjoy, like self-care or a new video game.
If you’re like the 66% of Gen Z who know how to budget but haven’t done it, take action and create a budget today.
2. Pay Off Your Debt
While many are waiting for news on student loan forgiveness, payments are on hold for now. This gives you the chance to focus on paying off other debts you might have.
High-interest debt can be overwhelming, especially as interest rates rise. Making a plan to pay it off can help you feel like you’re making real progress.
One of the most effective methods is the “debt avalanche” approach. This involves paying off debts with the highest interest rates first while continuing to make minimum payments on other debts to protect your credit score. Once one high-interest debt is gone, move on to the next.
3. Set Different Financial Goals
Having clear goals can make managing your finances easier. Set goals in various areas and save money in accounts that match your needs. For example:
– For long-term goals like retirement, look into an IRA.
– Medium-term goals like a house down payment could go into a certificate of deposit (CD).
– For short-term goals like a vacation, consider a money market account.
– An emergency fund should be in a high-yield savings account for easy access.
Automate your savings so that money is transferred directly into your savings account and isn’t tempting to spend.
4. Improve Your Financial Knowledge
If some of these terms are unfamiliar, it’s because many young people haven’t had enough exposure to personal finance. But learning about money doesn’t have to be difficult.
Many in Gen Z are following financial influencers on platforms like TikTok and YouTube, where complex financial ideas are explained in simple terms. In fact, 79% of Gen Z and Millennials have turned to social media for financial advice, and 62% feel more confident because of it.
However, not everything online is reliable. Make sure you thoroughly research investments and always read the fine print. Beware of advice that seems too good to be true, and make sure to understand any investments you’re considering. It’s also a good idea to consult a professional, such as a fee-only financial planner, who can review your finances and help you set realistic goals.
5. Focus on Big Financial Decisions
We often focus on small expenses like coffee or avocado toast, but the bigger expenses in life can have a much greater impact. That’s what financial expert Ramit Sethi, author of *I Will Teach You To Be Rich*, calls asking “$30,000 questions” rather than “$3 questions.”
Some big questions to consider:
– Have you negotiated your salary?
– Are you paying too much in investment fees?
– Are you in a housing situation that’s affordable?
Many young adults are cutting major expenses, like housing. In fact, 25% of U.S. adults ages 25 to 34 now live in multigenerational households, compared to 9% in 1971.
While small purchases like a treat with a friend or a new item of clothing can be fun, be mindful of how they fit into your bigger financial picture. Instead of letting these small joys take over your budget, focus on saving money on big-ticket items and either invest the savings or spend them wisely on experiences that truly matter.
Synchrony Bank Can Help You Plan for Tomorrow While Enjoying Today
Managing your money out of fear can lead to overspending or over-saving, both of which can prevent you from reaching your financial goals. Taking control of your finances allows you to enjoy life today while still planning for tomorrow.