As a member of Gen Z, you’ve grown up embracing technological innovation and understanding the financial struggles of previous generations. As you navigate the changing financial landscape, you and other “zoomers” are pioneering new financial planning methods on platforms like TikTok, reshaping how money is managed, saved, and invested. For instance, Gen Z initiated the “loud budgeting” trend this year. Despite your unique talents and tools, some timeless principles for financial success apply to everyone. Here are our top 9 tips on how to incorporate classic financial principles like discipline and goal-setting into your life.
1. Manage Debt Wisely
Your generation is aware of how student loan debt has affected Millennials. With the rising cost of college, student loans can be unavoidable. If you have student loans or credit card debt, choose a strategy to pay them off as soon as possible. Options include:
– Debt Consolidation: Consolidate multiple federal student loans into one new federal loan. You can also consolidate credit card balances and private student loans into one new personal loan. This simplifies payments and may lower your interest rate. Ensure you can afford the new monthly payment and address the habits that led to debt accumulation.
– Snowball vs. Avalanche: Focus on paying off one debt at a time, either starting with the lowest balance (Snowball) or the highest interest rate (Avalanche). Pay as much as possible towards that one debt while making minimum payments on others. Once it’s paid off, move on to the next.
The best way to manage debt is to avoid taking on more than you can handle. Explore college costs by major to avoid excessive student loan debt.
2. Prioritize Savings for Early Retirement
If you’re interested in the FIRE (Financial Independence Retire Early) community, start saving early. Compound interest means that saving at age 20 rather than 30 can nearly double your retirement fund by age 65. Many young adults aren’t saving enough, but here are some ways to prioritize retirement savings:
– If your employer offers a 401(k), contribute enough to get the full employer match. Set up automatic annual increases or manually raise your contribution with each raise.
– Open an Individual Retirement Account (IRA), whether or not you have a 401(k).
– Traditional IRAs: offer tax benefits similar to 401(k)s.
– Roth IRAs: provide tax-free growth, tax-free withdrawals in retirement, flexible contributions, and penalty-free early withdrawals.
– Know the IRS’s annual contribution limits on tax-advantaged retirement accounts and aim to max out your contributions eventually.
3. Use Financial Apps for Money Management
As a digital native, you likely prefer online and mobile banking. You can also create and follow a budget digitally. Apps like YNAB and Oportun are popular among younger people for budgeting, investing, and tracking spending. Find the app that best suits your needs.
4. Avoid Overconsumption
Social media and online shopping can lead to overspending. 85% of Gen Z respondents said social media influences their purchases. To stick to your budget, limit social media time, use the 24-hour rule before buying, research alternatives, and check your emotional state. Redirect feelings of boredom or unhappiness to constructive activities like walking or hobbies. Other tips include:
– Ask if a purchase meets an immediate need or a future want.
– Consider how it fits into your budget.
– Apply a cost-benefit analysis.
5. Seek Professional Financial Advice
Many Gen Z individuals are interested in financial planning services to navigate investments, taxes, and retirement savings. A professional financial advisor can help you create a personalized financial plan, set up retirement accounts, diversify investments, choose a savings strategy, manage debt, and plan for taxes and insurance needs.
6. Stay Informed About Economic Changes
Staying informed about the economy is crucial. For example, inflation is a growing concern, and 73% of young Americans have made significant lifestyle changes due to rising costs. Being aware of market trends and economic forecasts helps you make informed decisions. Useful resources include:
– Websites like NerdWallet, Motley Fool, Bloomberg, and Investopedia
– Podcasts like “Planet Money” by NPR and “Freakonomics Radio”
– Subreddits like r/economics, r/personalfinance, r/investing
– Mobile apps like Yahoo! Finance and CNBC
Be cautious of financial information on social media and verify tips from multiple sources.
7. Embrace Financial Literacy and Education
Financial literacy is key to making informed decisions. Many teens want more personal finance education and lack confidence in this area. Seeking financial education empowers you to make better decisions. Use online resources, webinars, and financial literacy apps to enhance your knowledge.
8. Invest with a Long-Term Perspective
Starting to invest early is an advantage. Investing is a long game, so don’t worry about market fluctuations. Diversify your investments with mutual funds, ETFs, or a mix of stocks and bonds. A long-term perspective can reduce risks and leverage market growth over time for higher returns compared to traditional savings accounts.
9. Explore Alternative Income Streams
The job market can be unpredictable. While pursuing your dream job, consider alternative income streams like the gig economy, freelancing, and online entrepreneurship. These options offer flexibility and additional income. Popular ideas include:
– Skills-based freelancing (e.g., graphic design, web development on platforms like Upwork or Fiverr)
– Gig economy jobs (e.g., TaskRabbit, DoorDash, Uber)
– Online tutoring (e.g., Tutor.Com, Chegg Tutors) or selling courses (e.g., Udemy, SkillShare)
– Drop shipping
– Print-on-demand
– Renting out assets (e.g., a vehicle on peer-to-peer car rental platforms)
– Part-time jobs or paid internships