It’s a tough world right now for young people trying to save money. Grocery prices and rents keep rising, and even fairly financially stable Gen Zers can feel hopeless and worse off than they truly are, thanks to “money dysmorphia.”
Many are “just trying to keep their head above water,” Kate Norris, a certified financial planner at Sun Life, told Business Insider.
“Sometimes at the end of the month, you’ve paid all the bills, the groceries, and there’s not a lot left over,” she said. “It is tough, I get it.”
Norris said there is a widespread lack of financial literacy among all generations, and not just Gen Z.
When it comes to young people figuring out their future, she has these four key pieces of advice.
1. Pay yourself first
Norris said her first piece of advice is to set up automatic payments to a savings account at the start of each month.
“Once it’s out of the account, you’re less tempted to spend those surpluses,” she said.
“Don’t overthink it — just get the money somewhere. You might need it in an emergency sooner than later.”
2. Monitor your budget
Norris said people of all ages can lose track of the money inflows and outflows to their accounts, which is why budgeting is essential.
“You’re like, oh, I budget $500 for groceries, and then it turns out it’s $800, well, then we can’t really do any cashflow planning or budgeting to know what’s left over,” she said.
Many banks have services to help you budget, Norris said, and categorize your expenses, which can help you feel more in control.
“Taking time to actually look at those three to six months of expenses and saying, Where is the money going? What am I spending?” Norris said. “Once you’ve created that habit early on, I think it sticks with you.”
3. No unsustainable monthly payments
Norris said it’s a good idea to be very aware of consumer debt rather than just seeing it as a number you’re disconnected from.
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People are drowning in car debt, for example, not realizing how much interest they are paying over time.
“It’s not just about your monthly payment — what is the debt? What does that debt mean for your net worth?” Norris said. “If you actually break it down, you could be spending $10,000 in that time period on interest.”
It’s better to assess what the debt looks like over time for your long-term situation, rather than thinking about the individual monthly payments, Norris said.
4. Start small
Many people struggle with delayed rewards, which can make saving money so difficult.
“It’s like we can’t see that future we want, so we gratify ourselves now with what’s in front of us,” Norris said. “Or you set up Apple Pay and credit cards on your phone and it’s just like tap, tap, tap.”
This is how people live beyond their means and fall further into debt, she said.
You can take small steps toward being more frugal, and it starts with seeing your net worth grow, even if it’s just by $100 per month.
“This magic of compound interest and compounding growth says that if you just put $100 away today, that could be a huge amount at retirement,” Norris said. “Versus if you start in 20 years from now, when you might have to save £1,000 a month.”
If you make these small changes, you can spend the rest of your paycheck “guilt-free,” Norris said.
“I think a lot of people are feeling a little bit in despair with the world and the interest rate and the economy. But our grandparents went through this, and it’s a cycle, so keep pushing forward.”
