53% of Gen Zers think small daily purchases will impact their finances

There’s no one right way to manage your finances, especially since everyone’s financial situation and goals are different. Even so, many people find it helpful to learn money management tips that have become popular over the years, such as cutting back on expenses you don’t use and redirecting that money to the things you actually love.

In other words, it’s fine to spend money on simple pleasures like your favorite iced coffee once in a while, as long as you remember to get rid of that gym membership you never wanted. never use or anything else that brings you no more joy.

That said, a recent report based on Northwestern Mutual 2022 Planning and Progress Study found that 53% of Gen Zers surveyed believe that making small daily purchases — like that favorite cup of coffee — will have a long-term impact on their finances. The report also revealed that Millennials were roughly even with Gen Z, with 52% sharing the same sentiment.

Many of the money movements we make today can impact the financial future we want to have. This idea, however, seems like something of a double-edged sword.

On the one hand, it is stimulating and even exciting to think that a better financial future awaits us. On the other hand, the realities of the rising cost of living, high amounts of student debt, and other factors contribute to a widespread concern that people are currently unable to make enough money moves. positive to get closer to their financial goals.

If you’re worried about what the future holds for you financially, one of the best ways to feel a little more prepared is to keep your financial foundations covered at all times. This includes having an emergency fund and continuing to pay off any debt as well as perhaps getting your feet wet with the stock market.

Build your emergency fund

Have a emergency funds can help offset any unexpected expenses that could otherwise jeopardize your overall financial health. For example, you can use money stored in an emergency fund to replace a damaged car part or pay for a last-minute medical procedure. Emergency funds can also help you make ends meet if you are laid off without notice.

Keep your emergency fund in a high-yield savings account such as a Marcus by Goldman Sachs High Yield Online Savings account or a Ally Online Savings Account can also help your balance grow a little faster since you’ll receive monthly interest just for maintaining a balance.

Even if you can only contribute $20 a week to your emergency fund, something is better than nothing. If you set up automatic weekly transfers from your checking account to your emergency savings account, you’ll build your emergency fund without even thinking about it.

Pay off the debt

Although you can use debt to acquire an asset or opportunity, such as taking out a mortgage for a house or a credit card to fund a move to a new city for a job opportunity, paying down your balance can help. to feel a little better financially. comfortable.

Debt repayment also allows for a bit more flexibility in the face of difficult circumstances. For example, if your credit card limit was $5,000 and you had a balance of $4,500, you would only have $500 left to cover the cost of an unexpected car repair or leak. roof if you didn’t have an emergency fund to draw on. If, however, you were to pay off that balance, you would have even more room to cover necessary expenses should your emergency fund not suffice.

Many people choose to pay off their debts using the debt snowball method or the debt avalanche method. The popular snowball method is to eliminate the smallest debt balance first while only paying the minimum on your other debts. This way, seeing the smaller balances disappear keeps you motivated as you work your way up to the bigger balance.

The debt avalanche method, on the other hand, involves eliminating your highest interest debt first while making minimum payments on the others, and working your way up to the debt with the rate of lowest interest. This method helps you save the most on interest charges.

Get skin in purse

Keeping only your money in a traditional savings account means that your money loses value every year due to inflation. Investing that money instead can help it grow over time, even if you don’t add extra dollars to your balance – depending on the assets you choose to invest in, that could also outpace inflation.

Of course, that’s not to say you should only invest your money – keeping some of it invested and some in an accessible savings account will save you from having to dip into your investments to pay for a large expense. If you’re already retired, having cash reserves to fund your living expenses during an economic downturn can give your investments some time to bounce back before you withdraw them.

If you’re stressed about not having much room in your budget to invest right now, you might want to consider using an app like Tassels, which allows users to invest spare change left over from daily purchases such as food and clothing. In other words, you can always invest small amounts of money just to buy the things you need to buy anyway.

Of course, investing just your spare change probably won’t earn you a substantial amount of money each month, but it’s a good way to start building your confidence in investing. That way, if and when you have a windfall or move into a higher paying position, you can start investing even more money.

You can also consider making small automatic contributions to a Roth IRA through a brokerage like loyalty. These tax-efficient accounts are great for retirement, can help you build long-term wealth, and lower your taxes when you make withdrawals.