For the third year in a row, research shows that the cost of living is the top concern for Gen Z and millennials. Deloitte’s 2024 Gen Z and Millennial Survey found that 56% of Gen Z and 55% of millennials live paycheck-to-paycheck. However, nearly half of Gen Z (48%) and 40% of millennials expect their financial situation to improve within a year. Financial freedom is about controlling your finances to enjoy spending today without compromising long-term goals. Daily financial decisions, from routine expenses to long-term investments, shape our financial well-being.” As Warren Buffett said, “Do not save what is left after spending, but spend what is left after saving.”
Here are Four Steps Gen Z and Millennials Can Take to Achieve Financial Freedom, according to Alpha Wealth:
1. Track Your Current Financial Status
The first step to financial freedom is understanding your current financial situation. Track your spending by categorising it into fundamental expenses (rent, groceries), fun expenses (dining out, entertainment), and savings. Aim for fundamental costs to consume less than 50-60% of your take-home pay. Use budgeting tools, like the Alpha Wealth free budget calculator or simple spreadsheets, to monitor your habits and make informed decisions. As Dave Ramsey says, “A budget is telling your money where to go instead of wondering where it went
2. Save and Repay
Given the high cost of living, it can be challenging for Gen Z and Millennials to save and repay debt. However, small steps can lead to big changes. Start by saving at least one month’s worth of living expenses as an emergency fund. Focus on paying off high-interest debt, such as credit cards, and automate your savings to ensure consistency. My advice is to automate savings. This fosters disciplined financial habits, ensuring you save before spending. For example, Sarah, a 28-year-old, tracked her expenses with an app and redirected dining-out funds to savings. She built an emergency fund and started saving in a high-interest account. Three years later, she enjoys financial security and less stress.
3. Invest Wisely
Investing is crucial for building long-term wealth. Allocate at least 10% of your income towards investments. Invest in yourself through education and training to boost your earning potential. Explore passive income opportunities, like high-yield savings accounts, and leverage compounding interest for substantial growth. Take advantage of employer-matching pension schemes to maximise your savings. Never underestimate the power of compound interest. For example, if you start investing €500 per month at age 35, you could have over €190,000 by age 50. Starting at 40, you’d need to invest €1,000 per month to reach the same amount by 50. The key is to start early.
4. Manage Your Finances Wisely
As your income grows, manage your finances wisely and resist lifestyle inflation. Benjamin Franklin warned, “Beware of little expenses; a small leak can sink a great ship.” Instead, increase your investments proportionally. Continuously review and adjust your financial plan to stay on track towards your goals – tracking finances, saving, investing wisely, and managing income. As Robert Kiyosaki said, “Financial freedom is available to those who learn about it and work for it.”
Conclusion
In conclusion, achieving financial freedom requires discipline, strategic planning, and continuous effort. By tracking your current financial status, saving and repaying debt and investing wisely, Gen Z and millennials can build a secure financial future. Remember, the journey to financial freedom is a marathon, not a sprint. By taking small, consistent steps and staying committed to your financial goals, you can enjoy both the present and future without compromising your long-term dreams.
