​​Gen Z Have It Tough Financially. These 3 Moves Could Help

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Many people are struggling money-wise at the moment. Credit card debt is increasing. Savings account balances are decreasing. Inflation has slowed, but we are all still feeling its effects on our wallets. Sadly, Gen Z has been hit harder than other groups in the economic wake of the pandemic.

According to a study by The Washington Post, Gen Zers are spending significantly more on essentials than other generations did at the same age. That includes housing, insurance, and other living costs.

Gen Z's finances are being hammered from all directions

The Washington Post analysis shows that Gen Z feels the impact of inflation more. Born roughly between 1997 and 2012, Gen Z spend a higher proportion of their income on the basics. Rather than building the financial security that would help them do things like buy a house, save, or invest, they are instead carrying burdens that will take a long time to shake.

The numbers show that housing alone costs Gen Z 31% more than it would have a decade ago, adjusting for inflation. Similarly, health insurance is up 46%. Wages have risen, but not enough to cover significantly higher costs. Put simply, millennials have it hard, but Gen Zers have it worse.

Those financial struggles are visible in the high levels of debt Gen Z carries. According to the report, 1 in 7 Gen Zers are maxed out on their credit cards. With typical credit card rates of 20% or 25%, paying back those balances can quickly feel impossible.

You can take control of your finances

One issue for Gen Zers is that a lot of financial advice doesn't speak to their specific challenges. For example, there's no point telling people to start saving for retirement early when they can't afford to pay the rent.

But don't throw the baby out with the bathwater. Other generations have faced financial difficulties too, and there is useful wisdom to be gleaned from how they handled them. Particularly when it comes to managing spending and tackling debt.

1. Track your spending

No matter how much (or little) money you have, tracking how you spend it is powerful. Use a budgeting app to find out where your money goes. If you're tired of people criticizing Gen Z for their money habits, you might smile to know that a study by a U.K. bank showed Gen Z is more likely to have a budget than any other generation.

A budget puts you in the driving seat and means you can make decisions. For example, if you're saving to buy a car, you might decide that's more important than some take-out coffees or subscriptions. You might also decide the cost of your latte is worth it for the joy it brings to your day.

Budgeting isn't about cutting back on everything, it's about being conscious. That, and ensuring you spend less than you earn.

2. Set yourself financial goals

Once you know how you spend your money, use that information to set some achievable financial goals. If you don't have emergency savings -- money you can use if something goes wrong -- you might make this a goal. Look at how much you can spare each month and set up a transfer to a savings account. Even a small amount can add up over time.

The trick with financial goals is to make them doable and to try to reward yourself when you meet them. So, you might look at your income and spending and decide that saving $50 a month is reasonable. You could celebrate each transfer or specific milestone by doing something low-cost but fun. I sometimes share my achievements with friends so we can encourage each other.

3. Pay down debt

Carrying credit card debt can feel like swimming with a huge weight pulling you underwater. According to a study by TransUnion, the average 22- to 24-year-old has a card balance of $2,834. Worryingly, more and more Gen Zers are falling behind with their payments.

There are a few strategies you can use to tackle credit card debt. The debt snowball method involves paying down the smallest balances first so you get the satisfaction of clearing one debt before moving to the next. With the debt avalanche method, you focus on the highest interest debt first as that's the one that is costing you the most money.

Whatever approach you take, the real power is in putting as much money as possible toward your debt repayment. That might mean taking a side hustle to earn more money, selling things you don't need, or aggressively cutting your spending.

These measures don't have to be forever. But the sooner you can get out from under the weight of high-interest debt, the less you'll pay in interest.

Key takeaway

The financial pressures of high housing and living costs can be overwhelming. And it likely doesn't feel fair that your generation has it harder than those before you. Unfortunately, sometimes all we can do is play the hand we are given, no matter how unfair it is.

Try to focus on the steps you can take to strengthen your financial foundations. It isn't easy, but use your budget to make sure you don't spend more than you earn.

If you can master the art of living within your means today, it will serve you for the rest of your life. Not only that, you'll be financially better equipped than people in other generations who never learned that skill.

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