A Beginner’s Guide to Financial Health for Gen Z 

Saver Life’s preliminary research reveals that young adults, born between 1996 and 2012, are spending more on necessary expenses year over year. Only 38% of these adults increased their savings by any amount in 2023, a 3% decrease from the previous year. This highlights the need for better understanding of financial health among Gen Z members.

Gen Z, despite facing increasing financial threats such as rising living costs, debt repayments, and climate change, are taking steps to prepare for their financial futures, finding ways to work around these challenges, despite the potential unavoidable nature of these challenges.

Building future financial health involves creating a plan and taking consistent steps towards goals. It’s important to be aware of unexpected expenses and financial shifts, and give yourself grace and understanding to adjust plans if necessary.

Achieving lasting financial health is a multifaceted process, but some tips can help prepare your budget, stay on track during your career, build savings, and plan for long-term goals, as discussed in a beginner’s guide for Gen Zers.

Your cash flow is crucial for maintaining financial stability and generating income

Understanding cash flow is crucial for financial health, as it helps manage budgets, save, and create a spending plan, ensuring financial stability and progress.

Analyze your past spending and income for three to six months, focusing on monthly income. If earning an hourly wage, find the average income to determine monthly savings, spending, and investment.

Ensure your monthly income is accurate by reviewing your expenses and bills to create a comprehensive spending plan for upcoming paychecks and expenses.

Create a Spending Plan

To create a budget, it’s essential to understand your monthly income and expenditures. A spending plan helps you decide where your money should go and ensures you live within your means. To create a plan, group your expenses from the last three to six months by type, such as rent, groceries, credit card payments, or socializing. Divide these expenses into two categories.

• Essential spending : The expenses include bills, rent, groceries, insurance, child care, debt payments, and other living costs.
• Optional spending: This includes expenses like recreational activities, social events, or other items that you typically budget for but don’t necessarily need.

Calculate the average monthly total for essential and optional spending by grouping past expenses and comparing it to your monthly income.

If your expenses exceed your income, consider adjusting your spending plan. If you enjoy a recreational activity but don’t need it, consider rescheduling it every other month to see how it affects your budget.

If expenses cannot be reduced, contact service providers to explore alternative options. SaverLife members Roshelle and Mercedes have both found ways to cut costs, such as creating payment plans for electricity bills and using the Public Service Loan Forgiveness program to decrease student loan payments.

Set Up the Right Accounts

Building a financial foundation involves understanding cash flow and creating a spending plan. It’s crucial to consider your accounts, as having the right ones can secure your financial future. At least, everyone should have a checking account, which is where income is deposited and bills are paid. Having a comfortable checking account is essential for financial security.

To maximize your savings, consider opening a savings account alongside your checking account, either at the same bank or a high-yield savings account (HYSA) at another institution, as a HYSA earns more interest, making your saved money more effective.

Applying for a credit card can help maintain good credit, qualify for better loan interest rates and lower insurance premiums, and build your credit history. However, it requires additional responsibilities, such as paying your credit card statements on time and in full each month to show reliability.

When choosing your first credit card, consider options without annual fees and those with valuable rewards like travel points, cash back, or special discounts. Ensure to only spend what you can afford to repay to maintain your spending plan and stick to your budget.

Create Goals

Gen Z is starting their financial health journey, and there are numerous opportunities to take advantage of. As they build their budget, savings, and assets, set personal goals. Whether it’s paying off bills or saving for a home, setting benchmarks and taking steps towards them will build confidence and resilience, despite financial challenges.

The individual plans to save $100 monthly for the next twelve months to afford a $1,200 vacation, by transferring $50 from each bi-monthly paycheck to their savings account.

When setting financial goals, consider your budget and the amount you need to save for each goal. Instead of setting multiple goals simultaneously, focus on one or two. This approach allows you to allocate resources effectively and see progress quicker. Achieving these goals can motivate you to continue tackling the next one on your list.

Manage Your Debt

Saver Life members have found ways to manage their financial health, including student loans, medical bills, and car payments, while keeping their debt obligations in check, highlighting the significant role debt plays in their financial journeys.

Calculate the monthly minimum payments required to meet your monthly obligations by adding up all your debts.

Calculate monthly debt payments and review your budget. If you have excess money, use it to pay down debts faster. Remember that interest can accrue on the remaining balance, even if you pay the minimum monthly payment.

To pay off debt quickly, focus on one debt at a time using the debt snowball method. First, pay the minimum on each debt, then apply any extra money to the smallest debt. Once the smallest debt is paid off, move on to the next one, building momentum and motivation during the debt payoff journey.

To manage debt effectively, it’s crucial to avoid borrowing more than your budget can afford. When considering a loan, work the payment into your monthly budget to ensure it doesn’t disrupt your spending plan, preventing you from getting over your head.

Track Your Progress

To build a strong financial foundation, it’s crucial to track your progress. Use a method that works for you, such as an app, bank software, spreadsheet, or pen and paper. This helps maintain your budget, progress towards goals, and celebrate your successes. Ensure to track your progress regularly to ensure a healthy financial foundation.

To maintain a consistent tracking habit, schedule weekly check-ins instead of daily to avoid overwhelming the process.

Don’t hesitate to seek assistance

Understanding cash flow, creating a spending plan, setting goals, and managing debt are crucial for establishing a solid financial foundation. However, in times of uncertainty or feeling overwhelmed, seeking help is essential. Talking about money can be challenging, especially if you feel you’ve made a mistake.

Making mistakes is a natural part of life, and addressing them promptly can significantly improve your financial health and goals. It’s essential to find someone trustworthy to discuss your finances, whether it’s a family member, friend, religious advisor, or a professional financial counselor. It’s crucial to ensure they understand your financial situation openly and comfortably. The SaverLife community is also available to support you, providing resources for financial questions, stories, and information on building your financial health future.