Yahoo Finance 9 Frugal Money Habits Helping Gen Z Save Money
It’s never too soon to start building healthy financial habits. In fact, the earlier you get started, the easier it’ll be to maintain these habits for the long haul. This can make it easier to save money, prepare for emergencies and plan for other long-term goals, like retirement.
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While most Gen Zers are still in school or just starting out in their careers, it’s still a good idea to start implementing some frugal money habits right now. While this can take some financial discipline and consistency, it’s worth it in the long run.
That said, here are nine frugal money habits that Gen Z can use to start building their savings and work toward a financially secure future.
Understand Cash Flow
Levi Sanchez, founder and financial planner with Millennial Wealth, said that the key to building savings and working toward a financially secure future is for Gen Zers to understand their cash flow.
“First, review all income sources and determine what amount of income you have on a monthly basis,” Sanchez said. “Then start tracking spending using a finance app to determine average monthly spending. That should include housing, variable lifestyle expenses and other fixed expenses.
“If earning income outside of a W-2 job, you should also include expected tax liablity as an outflow. Finally, you’ll determine what your net cash flow is on a monthly basis by subtracting all outflows (expenses, taxes, etc.) to understand whether you’re operating on a surplus or deficit from a cash flow standpoint monthly.”
Sanchez said that, ideally, you’ll need to operate on a surplus to provide opportunities for savings and investments.
“Once a surplus is achieved, start automating the savings or investments so they occur every month without any manual work,” he said. “This ensures you stick to your plan.”
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Invest Extra Cash
When you’re working and earning a paycheck, the last thing you might want to do is save or invest it. But if you take even a little bit of your income and start investing it, you could see some significant savings over time. Then, by the time you start wishing you had more money for things like a down payment on a house or retirement, you’ll already have a nice nest egg.
“Even if it’s just a small amount, investing early means your money has more time to grow — thanks to compound interest magic,” said Kelan Kline, personal finance expert and co-owner of The Savvy Couple. “Invest in low-cost index funds or robo-advisors to create a smart and diverse investment plan.”
However, don’t stop there. Sanchez said that as your income grows over time, you should be diligent about increasing your automated savings and investments so you don’t succumb to “lifestyle inflation”.
“A good rule of thumb may be to take 50% of future income increases to set aside for savings or investment and the remaining 50% can be spent,” he suggested.
Embrace a Minimalist Lifestyle
“Encouraging a minimalist approach to lifestyle and spending can lead to significant savings,” said Benjamin Stroh, financial advisor with CNY Advisors. “This means valuing experiences over material possessions, making mindful purchasing decisions and seeking cost-effective alternatives without compromising on quality of life.”
Use Credit Cards and Loans Responsibly
“Credit cards and loans can be handy, but they can also bite back with high-interest fees,” said Kline. “If you do use them, make sure to pay off the balance every month to avoid getting stuck in a debt trap.”
Shop Generic
“Gen Z is building their financial foundation, which means any small opportunity to save can have a long-term impact,” said Cody Sparks, director of retail banking at UMB Bank.
But no matter how frugally you try to live, certain expenses can’t be fully avoided, such as groceries. That’s why it’s important to think about what you buy.
“When shopping for the week, look for off-brand products,” said Sparks. “The grocery store might have their own brand that is less expensive, and typically the product quality is exactly the same as the name brand. It also helps to stick to your list and meal plan as much as possible to avoid food waste.”
Use Loyalty Programs
Many major grocery stores have loyalty programs that come with discounts or promotions on certain in-store products. Certain gas stations have similar programs, which can save you money on fuel.
“Check to see if your most-frequented gas station offers loyalty or rewards programs which can lead to dollars off at the pump,” said Sparks.
Track Your Expenses — Especially Your Utilities
Creating a budget early on in life can help you build healthy money management habits. It can also help you stay on track with your financial goals, while giving you a better sense of where your money is going each month. You can tailor your budget to your needs and adjust it as your income or expenses change over the coming years.
“Use an app,” suggested Sparks. “It can also be helpful to track your financial goals, spending and saving in an app that you can check regularly on your phone. This puts your finances at your fingertips.”
Utilities are another thing to be aware of, since this is an expense that can cut into your available funds and make saving harder.
“Your utility provider might have an assistance program you can opt-in to or a payment plan that can help you better budget and predict these costs,” said Sparks. “You can also contact the company to see if you can negotiate your bills — especially for your cell phone plan. There might be a part of the plan you are no longer using but still paying for. Review your bills carefully to see if there is an opportunity to contact them to get your bill reduced.”
Use Technology To Save Money
Much of Gen Z has grown up in a highly digital age, but not everyone’s taking advantage of the free, readily available technologies that exist to help them save money or shop frugally. One such option is to use a free browser extension that helps you find the best deals when shopping.
“As the generation that grew up in a digital age, Gen Z can greatly benefit from developing specific frugal habits. One highly effective habit is utilizing money-saving browser extensions,” said Jonathan Prescott, the VP of e-commerce at CouponBirds. “By incorporating [these tools] into their online shopping routine, Gen Z individuals who are more inclined towards gaming and digital services can make wise choices and save a significant amount of money over time.”
Prescott added, “Given the economic uncertainty and high burden of student loan debts, practicing frugality through browser extensions helps Gen Z individuals stretch their limited budgets and make smarter purchasing decisions. By utilizing these extensions, they can easily access and apply discount codes and coupons, ultimately resulting in money saved on their online purchases.”
While online extensions are one way to save money using technology, they’re not the only option. Other tools include online budgeting apps, high-yield savings accounts and digital cash-back programs.
Automate Your Finances
Juggling multiple bills with different due dates can be tricky, especially in the early days of adulthood. If you find yourself missing — or almost missing — payments, you might want to consider automating your bills.
But if you don’t feel comfortable with automation, consider inputting all of your regular expenses on a spreadsheet or on a budgeting app.
“If your bills are due at different points throughout the month, it could help to write down the amount due and date in a calendar or budget app to help you plan,” said Sparks. “By seeing everything down on paper or in an app, you can keep track of when withdraws are going to happen and allocate your spending appropriately.”
Cynthia Measom contributed to the reporting for this article.
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