Extramile Finance

According to Finder.com statistics, “individuals aged 18-24 have savings less than £5000. In comparison, individuals aged 25-34 have an average savings of £9357 monthly.  Moreover, Millennials and Gen Z have almost 1 in 5 individuals with no savings. It is the highest percentage across the generations. Besides, 12% of Gen Z and 2% of the silent generation do not have any savings.”   

Although savings grow with every phase, middle-aged individuals (35-44) have less savings.  The primary reasons you depend on guardians’ money could be financial illiteracy and poor spending habits. The blog discusses the issues affecting savings in both generations.

Why do millennials and Gen Z struggle to save?

According to Forbes, “50% of Gen Z generation is worried about not having enough money. Considering the economic turmoil, fears of recession, artificial intelligence, and corporate downsizing regulate the thoughts.” Moreover, the generation is worried about making poor financial decisions with hard-earned money. About 70% of Gen Z report that their financial condition is worrisome.

Another source reveals “16-27 year olds are less confident in their personal finance knowledge.” 39% reveal that they lack the knowledge to make wise investment decisions”. They don’t know whom to seek for financial advice. They may fall into scams and identity theft than other generations.

Millennials are worried about not having home ownership. The rising cost of living and mortgage rates make it impossible for a person to save enough.

 Moreover, student debt concerns, rent, and high interest rates (on credit cards and mortgages) are the primary concerns. Expenses – like childcare, maternity periods, and employment shifts make it impossible to save for the millennials. Millennials prioritise meeting short-term needs first over saving for retirement in the pension account.

How to save money as a millennial for a comfortable living?

Most millennials entered the workforce after the crisis of 2008. It shaped their cultural and economic perspective. The first thing for the millennials is – financial planning.  It is about creating a plan that aligns with your life goals and aspirations.

You must focus on meeting aims alongside strengthening future investments. You can build wealth, navigate challenges, and achieve financial goals by analysing the following tips:

1)     Analyse your financial situation

It is the first thing to analyse while developing the financial plan. Check where you stand from the saving, investing, and earning perspective. Calculate your total earnings. It may include income, dividends from investments, and part-time income (if any).

Next, check your debts like- student debts, payday loans, car loans, etc. Determine your monthly expenses against the total income. If you are saving less than 30% of your income, you must ditch extra expenses. 

Individuals with low income or unemployment suffer the hardest. You may not have the surplus to meet your goals. Instead, you may only fulfil the basic needs. How would you tackle an emergency in this case? 

Don’t, worry you may get cash help if you leverage unemployment benefits.  If you are on benefits and need a loan today from a direct lender, provide the slip. You get one after registering and receiving your first benefit income.  Genuine ones may get up to 1500 for their needs. Use it for critical financial needs or purposes.

2)     Set short and long-term saving goals

Determine the immediate goals and the long-term ones before developing the financial plan. It may mean repairing the car and saving for the home mortgage. Having clarity on objectives will help you achieve life goals at a better pace. 

How do you want your life to look like after 10 years? Do you want to start your business, renovate, and sell your home, or save for your child? Knowing such things and approximate costs will help you save money accordingly. You can set Junior ISA before the birth of a child. It helps you save for the children before they are born. Alternatively, set separate saving accounts to meet other needs.

You can also consider setting up emergency and retirement funds. These grow as the time passes. You may get a huge amount after maturity. Starting such funds early in your 20s reaps you the most benefits.

3)     Budget for debt payments

According to The Guardian stats,    “35% of millennials aged 25-34 reveals signs of financial challenges. 15% use credit cards, loans, and overdrafts to survive until payday. It is in comparison to 10% young adults.”  Most individuals struggle with repaying credit card debt timely followed by student debt. Moreover, the pressure of childcare costs is the highest.

However, you cannot just do away with the credit card debt. Counter it and develop a repayment plan. Check how much of your monthly income can you dedicate to credit card payments.

Additionally, check ways to pay down multiple credit card debt by consolidation. It reduces your liabilities and helps you get debt-free quickly. Moreover, you can check for student loan forgiveness if you lack any further financial goals.  It is because clearing the student loan is important to meet big goals like a mortgage. You may not get the mortgage then.

Strategies to budget well as Gen Z individuals

Most Gen Z individuals struggle with a credit card and Buy Now Pay Later debt (18%). According to a source, “48% of Gen Z have credit card debt to clear in addition to 10% on a payday debt.”

So, it is easily visible that Gen Z struggles the most with credit card debt. Alternatively, most individuals fall for Buy Now Pay Later offers due to BNPL promotions. Thus, you may be an active influencer follower.

However, you must not believe every tip or suggestion that the person makes. It may or may not align with your finances. Instead, you can check on small loans to meet your small purchases requirement. It is more feasible and affordable for you.  Here are some strategies to budget as a Generation Z individual:

a)     Set budget alerts

Understand your usual monthly expenses and earnings. Prepare a list by analyzing your recent bank statements, receipts, and credit reports. Identify how much you spend per month and cut the non-essential expenses. You get an optimised number to achieve savings every month.  You can even use the budget calculator and applications that help you separate needs and wants. 

Set budget alerts by setting a bar on the maximum you can spend monthly. It helps you save the rest money as savings. However, if you encounter an urgent cash need and cannot tap the account with restriction, don’t worry. Check quick loan facilities. Yes, you may get loans with no guarantor from a direct lender for your needs. It will help you meet the requirements timely without uninvited interference. However, it requires you to hold a regular income with stable finances to qualify.

b)    Update your financial knowledge

As mentioned above financial literacy is the primary reason behind high debt. It affects financial management significantly. Therefore, analyse the ways to boost your financial knowledge. You can read specific books and follow financial guides and pages online.

Explore through the personal finance forums to understand how others save and invest money wisely. Do small experimentation and try to handle it well. Gradually, you will be able to understand financial terms.

c)     Don’t “soft save” always

Soft saving is the term that Gen Z uses to prioritise current needs over future savings. Yes, it is important to meet your needs now. However, you cannot compromise on the latter also. Understand and establish a balance between current needs and future savings.

You can begin small by setting up an emergency fund. You can just save £50 initially per month in the account for at least 8-9 months. Don’t tap it unless in extreme financial conditions. It will help you meet current needs and save for future uncertainties.

Bottom line

These are some of the best budgeting tips for millennials and Gen Z to follow. Determine your current expenses and eliminate the extra. Prioritise debt payments and avoid indulging in uncontrollable credit card usage. It only hampers your financial affordability and credit score. Besides that, try to improve earning potential and educate yourself on financial management. Improvise, experiment, and initiate what may works the best for you.