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Gone are the days when people believed that hard work would make the “American Dream” possible. Working hard is no longer enough. In fact, nearly half of Gen Z believe they will never build enough wealth to reach the middle class.
“Generation Z has experienced a lot of financial trauma, so their fears of missing out on financial security are completely justified,” says Charlie Pastor, a certified financial planner and contributing expert at The Motley Fool Ascent. “During their formative years, these young savers have lived through two recessions, record inflation, the climate crisis, the weakening of Social Security, and more. But while it may be tempting to ignore it all, it’s crucial that Gen Z avoids financial fatalism.”
Learn more: Here’s how much salary you actually need to earn $100,000 in each state
Let’s find out: 7 reasons why you should consider a financial advisor even if you’re not wealthy
Reaching the middle class is no easy feat, but experts say it’s possible — all it takes is some smart money management.
Below are their key funding moves to get there.
Retirement planning: Whether you’re planning for retirement, dealing with a major life event, or simply want to make smarter financial decisions, a financial advisor can provide the expertise and guidance you need. Here are some compelling reasons to consider a financial advisor, even if you’re not wealthy.
Think long term
For young investors, keeping a time perspective is crucial.
“While those who entered the stock market in 2021 may not have recovered their investment losses yet, the data shows that a diversified portfolio will deliver higher returns in the long term,” Pastor said.
Recent trends: States with declining and thriving economies
And Gen Z’s financial superpower is the amount of time they spend in the markets.
“The money you find hardest to invest is often the one that will have the biggest impact on your financial future, so don’t get discouraged,” Pastor said.
Track your expenses
“We always say the best way to improve your financial future is to track your spending,” says Harry Kraus, a certified financial planner at Humphreys Group.
Whether you use a spreadsheet or an expense tracking app like Monarch, Kraus recommends taking a cold, realistic look at your cash flow and asking yourself if your money is being spent on important needs or if you could make changes to better reflect your priorities.
“Don’t judge, just approach it with the mindset that this is just data. The data will inform spending shifts that will align your spending with your values and free up some savings for your future self,” Kraus said.
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Stick to your budget
Set a personal spending policy, especially if you are determined to avoid consumer culture.
“For example, you could create a policy where you only buy something after thinking about it for a week, or set a monthly goal for eating out,” Kraus says.
The pastor agreed that budgeting is crucial to maintaining middle-class status.
“For those who are just starting out in the workforce or who haven’t started yet, now is the time to really think through your budget,” Pastor said.
Getting into the habit of tracking your spending now will make it much easier to manage it in the future, he adds.
“During periods of rising income, a disciplined spending strategy can put people on a very strong financial footing,” Pastor explained. “One of the pillars of success is living within your means, and Gen Z has a huge advantage if they start now.”
Budgeting roars
“You may have heard the term ‘loud budget,’ which is a new term for our long-standing recommendation to talk openly about money,” Kraus says. “Don’t be afraid to say to your friends, ‘I’m on a tight budget this month, so can we go on a picnic instead of going to that new restaurant?’ If talking about money without feeling embarrassed becomes the norm, we’ll all benefit.”
Start investing
If you’re Gen Z, he suggested taking advantage of the fact that time is on your side.
“There’s an old saying in the financial services industry that it’s better to be in the market long than to time it,” Kraus says. “Even if you only have $25 or $50 to spare each month at first, if you start saving for retirement as soon as you can and make consistent contributions over time, you can take advantage of the power of compound interest to reap big rewards over the long term.”
Build good credit
Building good credit is crucial because your credit score determines your eligibility for everything from buying a new home to getting a business loan.
“A good tip for maintaining a high credit score is to always pay your credit card bills on time and keep your outstanding balance below 30% of your credit limit,” Kraus says.
save one year’s salary for retirement
Yes, that’s right: Experts say one thing Gen Z and Millennials can learn from previous generations is to over-prepare when it comes to planning for retirement.
“If your employer doesn’t offer a retirement benefit, it’s your responsibility to open an IRA or 401k where you can invest for retirement,” Kraus urged. “If your employer offers benefits like a retirement plan or 401k matching, make sure you take advantage of them.”
Be an active participant in the conversation
Experts say younger savers should continue to be active participants in the discussion.
“More than any other generation, Gen Z is breaking down the stigma around talking about money, primarily through social media,” Pastor said.
Learning from your peers and savers from other generations will give you a wealth of information and enable you to make better financial decisions.
“But be careful about taking advice from strangers.”
Understand that money is a tool
“No one can argue with the importance of money,” Krauss said. “We need money to eat, pay rent, get gas, travel — but at the end of the day, money is just a tool.”
He said it’s important to understand the value of money, be smart with it and think about the future as much as the present.
“But don’t let money control your life.”
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This article originally appeared on GOBankingRates.com: Nearly Half of Gen Z Thinks the Middle Class is Out of Reach: 9 Money Moves to Change That
