IN today’s world, where the cost of living continues to rise, financial stability remains a significant concern for Gen Z and Millennials.
For the third consecutive year, this issue tops the list of worries for these younger generations. According to Deloitte’s 2024 Gen Z and Millennial Survey, over half of Gen Z and millennials find themselves living from pay cheque to pay cheque.
Despite this, almost half are optimistic about their financial future, expecting improvements within the next year.
My advice to the younger cohort, generally between the ages of 25-35, is that financial freedom involves managing finances in a way that allows for current enjoyment without compromising future goals.
In the words of Warren Buffett, “Do not save what is left after spending, but spend what is left after saving.” This is what I advocate with my clients every day: save first, spend later.
I would highly recommend some of these tips to help Gen Z and millennials break the cycle of living from payday to payday, and achieve financial independence.
Nick Charalambous, Managing Director of Alpha Wealth
The first is to gain a clear understanding of your current financial situation. Look at where you are now and begin by categorising your expenses into three different buckets. The essential expenses (like rent and groceries), discretionary expenses (such as dining out and entertainment), and savings.
I do this with clients all the time as it gives a great understanding of where your money is going. The aim is to keep essential costs under 50-60% of your take-home pay.
Budgeting tools, such as the Alpha Wealth free budget calculator, can be extremely helpful in tracking spending habits and making informed financial decisions. This is available on our website www.alphawealth.ie. As Dave Ramsey famously said: “A budget is telling your money where to go instead of wondering where it went.”
The next piece of advice I give is to prioritise saving and repaying debt. While the high cost of living can make this challenging, small consistent steps can yield significant results.
Focus on repaying high-interest debts, like credit cards. Make this a priority, as these can typically cost you anything in the region of 20% interest. Start by paying these off first, as high-interest debt can be financially crippling. Once this is under control, set money aside each month for savings to ensure regular contributions. By doing this, you are ensuring that saving becomes a priority over spending.
Consider Sarah, a 28-year-old who used an app to track her expenses and redirected some of her discretionary budget to savings. Over three years, she built a solid savings with good returns, achieving financial security and reducing stress.
Once you have any debts under control, the third tip is to consider investing.
Allocate at least 10% of your income to investments. Explore ive income opportunities, such as high-yield savings s, and take advantage of compound interest for substantial growth. Employer-matching pension schemes can also significantly boost your savings. This is essentially free money from your employer.
The power of compound interest is immense. For example, starting to invest €500 per month at age 35 could result in over €190,000 by age 50. If you start at 40, you would need to invest €1,000 per month to achieve the same amount by 50. The critical lesson here is to start early.
Finally, the last piece of advice is as your income increases, manage your finances wisely and avoid lifestyle inflation.
Benjamin Franklin once said: “Beware of little expenses; a small leak can sink a great ship.”
Instead of succumbing to increased spending, proportionally increase your investments. Regularly review and adjust your financial plan to stay focused on your goals. Focus on tracking your finances, saving diligently, investing wisely and managing your growing income. My favourite book on finances is Rich Dad, Poor Dad. The author Robert Kiyosaki succinctly put it: “Financial freedom is available to those who learn about it and work for it.” You can do it, just take the first step and start now. Don’t procrastinate, as the longer you leave debt escalate, the more difficult it will become.
By following these steps, Gen Z and millennials can transform financial freedom and make savings and financial goals a reality.
ABOUT THE AUTHOR
Nick Charalambous is the Managing Director of Alpha Wealth, an impartial financial advisor.
With a Cypriot background and having been raised and educated in London, Nick has worked in investment and private banking for some of the biggest banks in the world.
With over 25 years of financial services experience in Cork, primarily as a financial advisor with AIB and Ulster Bank, Nick has built up an extensive knowledge of the financial services environment, which he shares with his clients in many areas of personal finance.
For further guidance and impartial financial advice, book a financial review with Alpha Wealth at www.alphawealth.ie.
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