Yahoo Finance Nearly Half of Gen Z Thinks It Can’t Reach The Middle Class: 9 Money Moves To Change That
The days of believing you can achieve the “American Dream” by working hard are behind us. It’s no longer enough to simply embrace the grind. In fact, nearly half of Gen Z thinks they’ll never build enough wealth to reach the elusive middle class.
“Gen Z has been through a lot of financial trauma, so the fear of missing out on financial stability is completely reasonable,” said Charlie Pastor, certified financial planner and contributing expert at The Motley Fool Ascent. “In their formative years, these young savers have experienced two recessions, record inflation, the climate crisis, Social Security infirmity and more. But while it can be tempting to tune it all out, it’s vital that Gen Z avoids financial fatalism.”
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While reaching the middle class isn’t easy by any means, it’s possible, according to experts. All it takes is some savvy money management.
Below are their top money moves to get there.
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Think Long-Term
For young investors, keeping your time horizon in perspective is vital.
“While those who entered the stock market in 2021 may still not have recovered their investment losses, the data shows that diversified portfolios have strong returns over long periods,” Pastor said.
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And Gen Z’s financial superpower is the amount of time they’ll have in the market.
“Oftentimes, the dollars that feel worst to invest are the ones that make the biggest impact on your financial future, so don’t get discouraged,” Pastor said.
Track Your Expenses
“We say this all the time: The single best thing to improve your financial future is to track your expenses,” said Hallie Kraus, certified financial planner at The Humphreys Group.
Whether via spreadsheet or an expense tracking app like Monarch, Kraus recommended taking a clear-eyed, realistic look at your cash flow and asking if your money is going towards important, necessary things or if you should shift to better reflect your priorities.
“Try to do this without judgment and instead approach it with the mindset that it’s just data — data that informs spending shifts that align your spending with your values, freeing up some savings for future you,” Kraus said.
Stick To A Budget
If you’re especially determined to avoid consumer culture, set personal spending policies.
“For example, you may set a policy of not purchasing something until thinking it over for a week, or you may want to set a monthly target for dining out,” Kraus said.
Pastor agreed that budgeting is crucial for staying on track toward middle class status.
“For those in their early working years–or who have not yet started working–now is the time to drill down on your budget,” Pastor said.
He added that getting into the habit of tracking your spending now will make it much easier to manage expenses in the future.
“As you get into your higher earning years, a disciplined spending strategy will set you on very strong financial footing,” Pastor explained. “One of the pillars of success is living below one’s means, and Gen Zers will have a massive advantage if they start now.”
Loud Budgeting
“You may have heard of ‘loud budgeting,’ a new term for a long-standing recommendation of ours: talk openly about money!” Kraus said. “Don’t be afraid to say to friends ‘I’m on a tight budget this month, can we go on a picnic instead of going to that new restaurant?’ If talking about money without shame becomes the norm, we’ll all be the better for it.”
Start Investing
If you’re in Gen Z, he suggested taking advantage of the fact that time is on your side.
“There’s an old adage in the financial services industry that ‘time in the market beats timing the market’,” Kraus said. “Even if at first you only have $25 or $50 to spare each month, saving for retirement as soon as possible and making consistent contributions over time will harness the power of compound interest and yield significant benefits in the long-term.”
Establish Good Credit
As your credit score dictates your eligibility for anything from buying a new home to taking out a business loan, it’s incredibly important to build up good credit.
“A couple of tips for keeping your credit score up are to always be sure to pay your credit card bill on time and to keep your outstanding balance below 30 percent of your credit limit,” Kraus said.
Have A Year’s Salary Saved for Retirement
Yes, you read that right. According to experts, if Gen Z and Millennials can learn anything from previous generations, it’s to over-prepare when it comes to retirement planning.
“If your employer doesn’t offer retirement benefits, it’s your responsibility to open up an IRA or a 401k, both of which allow you to invest money for retirement,” Kraus urged. “If your employer does offer benefits–employer retirement plans, 401k matching, etc. — be sure to take advantage of them.”
Lean Into the Conversation
Experts say young savers should continue to lean into the conversation.
“More than any other generation, Gen Z is breaking the stigma around talking about finances, mostly through social media,” Pastor said.
Learning from your peers and even savers from other generations can give you a wealth of information, and guide you to make better financial decisions.
“However, be sure to exercise caution when it comes to taking advice from strangers.”
Appreciate That Money Is A Tool
“Nobody is going to argue with you about the importance of money,” Kraus said. “We need it to eat, pay rent, fill our gas tanks, travel — but at the end of the day, it’s just a tool.”
He said it’s critical to understand the value of money, to be smart with your finances, and to think about the future as much as you think about the present.
“But try not to let money control your life.”
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This article originally appeared on GOBankingRates.com: Nearly Half of Gen Z Thinks It Can’t Reach The Middle Class: 9 Money Moves To Change That
