9 Ways Generation Z Can Stay Proactive About Their Finances

As a member of Gen Z, you’ve grown up with an intuitive ability to adapt to technological innovation. At the same time, you’re well aware of the financial struggles of previous generations. As you try to find your footing on a rapidly evolving financial landscape, you and other “zoomers” are rewriting the rules of financial planning on TikTok and other platforms and leading an important shift in how money is managed, saved, and invested. For example, it was Gen Z who started the “loud budgeting” trend this year. Talent and tools aside, there are some tried-and-true ways to achieve financial success that apply to every generation. Keep reading for our top 9 tips on how to apply classic financial principles like discipline and goal-setting to your particular life experience and challenges.

1.  Manage Debt Strategically

Your generation is aware of the crushing effects of student loan debt on Millennials. However, with the rising cost of college, it’s not always possible to avoid taking out student loans. If you’re already dealing with student loan and/or credit card debt, choose a strategy for paying debt off as soon as possible. Your options include:

Debt Consolidation

If you have multiple federal student loans, you can consolidate them into one new federal loan. All types of debt, including credit card balances and federal and private student loans, can be consolidated into one new personal loan.

The benefits of consolidating debt include the convenience of having just one monthly debt payment instead of several. You could also potentially get a lower interest rate on your debt, especially if you’re consolidating high interest credit cards. Just make sure you can afford the new monthly payment and address the habits or situations that led you to accumulate debt in the first place.

Snowball vs. Avalanche

With this approach, you 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 you can towards that one debt while making minimum payments on everything else. When the first one is paid off, move on to the next lowest balance or highest interest rate.

The best way to deal with debt is to avoid taking on more than you can handle. Avoid the pitfalls of excessive student loan debt by Exploring College Costs by Major for students in New Mexico.

2.  Prioritize Savings for Early Retirement

Are you interested in joining the FIRE (Financial Independence Retire Early) community? The power of compound interest means that starting to save early can significantly impact your total savings over time. For example, starting at age 20 rather than 30 can nearly double your retirement fund by age 65, assuming a consistent annual return. According to a report from The Hill, however, many young adults aren’t saving enough to achieve this goal. Here are a few ways to prioritize retirement savings:

• If your employer offers a 401(k), make sure you’re contributing at least enough to get the full employer match. After that, set up an automatic annual increase or manually raise your contribution each time you get a raise.
• Whether or not you have a 401(k), you can also open an Individual Retirement Account (IRA).
• Traditional IRAs offer the same tax benefits as 401(k)s.
• Roth IRAs provide tax-free growth, tax-free withdrawals in retirement, flexible contributions, penalty-free early withdrawals, a wide variety of customizable investment options, compound interest, and the possibility of locking in a lower tax rate if you believe your tax rate will be higher at a later age.
• Familiarize yourself with the IRS’s annual contribution limits on tax-advantaged retirement accounts. These limits are usually increased each year. Aspire to max out your retirement account contributions one day!

Looking for details on the right retirement savings option for you? Check out DNCU’s IRA Share Accounts and IRA Certificates today.

3.  Leverage Financial Apps for Money Management

As a “digital native,” you have no problem using online and mobile banking apps. In fact, you may prefer digital banking to visiting a physical location. Did you know you can create and follow a budget digitally, too? A survey from Yahoo Finance found that apps like YNAB and Oportun are popular among younger people for the purposes of budgeting, investing, and keeping track of spending. Explore your options to find the app that best suits your needs.

4.  Avoid the Trap of Overconsumption

In the age of social media influencers and online shopping, it can be hard to resist overspending. 85 percent of Gen Z respondents said social media influences their purchasing choices, according to a report by the International Council of Shopping Centers.

To avoid temptation and stick to your budget, consider limiting your time on social media, using the 24-hour rule to wait and see if you still want it the next day, researching alternatives, or simply checking in with your emotional state. Are you bored, tired, unhappy with your job or something else in your life? These feelings can all drive impulsive spending, but they can also be redirected to something more constructive like taking a walk, starting a hobby, etc.

Other tips for avoiding overconsumption include:

• Ask if the purchase satisfies an immediate need or a future want (truly necessary purchases often meet an immediate or near-term need).
• Consider how the purchase aligns with your existing budget.
• Apply a cost-benefit analysis to your potential purchase.

Taking control of monthly spending is empowering. Get the Top 10 Tips to Reduce Monthly Spending in our Financial Fitness section.

5.  Seek Professional Financial Advice

According to the Certified Financial Planner Board of Standards, younger clients, including Gen Z, are showing increased interest in financial planning services to navigate investments, taxes, and retirement savings more effectively. A professional financial advisor can help you develop a personalized financial plan for building long-term wealth and meeting other goals along the way, such as homeownership. They can also help you set up retirement accounts, diversify your investments, choose a savings strategy, plan for taxes, manage debt, and identify insurance needs.

6.  Stay Informed About Economic Changes

In today’s rapidly evolving economic climate, staying informed is crucial. For instance, inflation has become a growing concern for Generation Z, with 73% of young Americans making significant changes to their lifestyles in response to rising costs.

Being aware of market trends and economic forecasts allows for more informed decisions regarding investments and savings, helping you avoid potential pitfalls. Some helpful resources include:

• Websites like NerdWallet, Motley Fool, Bloomberg, and Investopedia
• Podcasts such as “Planet Money” by NPR and “Freakonomics Radio”
• Subreddits like r/economics, r/personalfinance, r/investing
• Mobile apps like Yahoo! Finance and CNBC.

While financial information can also be found on YouTube, TikTok, and other social media platforms, be wary of influencers sharing flawed or untrue information in an effort to get more views, sell courses, etc. It’s always best to fact check tips with more than one source.

There’s a smart strategy for every financial challenge. Read our 5 Tips to Protect Your Savings from Inflation for a practical approach to combatting rising prices.

7.  Embrace Financial Literacy and Education

Financial literacy is a critical tool for making informed decisions. According to Greenlight® Financial Technology, 73% of teens want more personal finance education and a similar percentage don’t feel confident or knowledgeable about personal finance.

Seeking out financial education empowers you to make better financial decisions, leveraging your inherent tech-savviness to access online resources, webinars, and financial literacy apps.

8.  Invest with a Long-Term Perspective

An early start in investing is an inherent advantage for young adults who have enjoyed greater access to investment information and fintech than any preceding generation. When it comes to investing, keep in mind that it’s a long game. Instead of worrying about every fluctuation in the market, diversify your investments by choosing a mutual fund, ETF, or mix of different stocks and bonds. Adopting a long-term perspective can mitigate risks and leverage market growth over time, capitalizing on the potential for higher returns compared to traditional savings accounts.

9.  Consider Alternative Income Streams

In the face of an unpredictable job market, it can be hard to find your footing in the career you want to pursue. While working towards your dream job, consider exploring alternative income streams such as the gig economy, freelancing, and online entrepreneurship. These options all offer flexibility and the potential for additional income. Some popular ideas for generating additional income 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 via options like Tutor.Com or Chegg Tutors (or selling online courses with Udemy or SkillShare)
• Drop shipping
• Print-on-demand
• Renting out assets like a vehicle using a peer-to-peer car rental platform
• Part-time jobs or paid internships.

Looking for a robust and convenient checking account that can handle gigs of all sizes? Open a DNCU Business Checking Account today.

Del Norte Credit Union is your ideal partner for a better future.

Armed with a strategic approach to debt, a dedication to savings, the savvy use of technology, sensible consumption, professional guidance, and an informed perspective on economic trends, you have the toolkit to navigate the modern financial landscape. By embracing these strategies and being proactive on money matters, you can set the stage for a future marked by financial stability and success.

As a member-owned, not-for-profit financial institution in New Mexico with branches and ATMs throughout northern New Mexico and Rio Rancho, you can rely on Del Norte Credit Union for sound and unbiased financial advice that you can share with any generation in your family. Check out these Financial Advice and Help Resources, including how to set yourself up for financial success in 2024, for more information on financial solutions or call us toll-free at (866) 818-DNCU (3628) to join DNCU today.

Disclaimer: This article is for informational purposes only. For advice regarding your specific financial situation, please consult a financial planner or a trusted financial professional.