The youngest generation of Americans has made some ambitious New Year's resolutions for 2022: Exercise more, eat healthier and be more organized. But one of the most popular goals for Generation Z — who are 24 years old and younger — is to improve their finances.
That's according to Student Beans, which surveyed more than 2,000 Americans ages 16 to 24 to identify their 2022 resolutions. The survey found that 57% of Gen Z consumers with a New Year's resolution want to save more and spend less money.
If you've made a resolution to build better money habits in 2022, here are 5 ways to achieve your goals:
- Track your spending
- Build your credit score
- Start an emergency fund
- Find ways to cut expenses
- Pay off credit card debt
Read more about each financial strategy in the sections below.
Budgeting can give you invaluable insight into how you spend and save money, but it can feel like a time-consuming task. Thankfully, there are plenty of free budgeting tools available on your computer or smartphone to help you automatically track your financial progress.
Budget apps like Mint, Goodbudget and Personal Capital give users a way to track spending, invest their savings and set financial goals at no cost. Some of these apps connect securely to your bank accounts to automatically categorize your purchases into buckets like groceries, restaurants and utilities, which can help you identify where you might be overspending.
It may be possible to set up push notifications or email alerts, so you can get insight into your monthly budget in real time. Visit your device's app store to find a budgeting app that works for your needs.
Young consumers who are just getting started in the labor market may not have a well-established credit history, which means they could be missing out on the many benefits of having good credit. A high credit score can help you qualify for the best offers on several financial products, such as credit cards, student loans and even mortgages.
Improving your credit can be as simple as paying your bills on time, but it can take time to build your credit score using this strategy alone. You might consider opening a secured credit card or becoming an authorized user on a family member's credit card to establish credit history quickly.
It's also important to keep an eye on your credit history to find areas of improvement and identify fraud before it becomes a bigger problem. Request a free copy of your credit report from all three credit bureaus — Equifax, Experian and TransUnion. You can also enroll in free credit monitoring services on Credible.
Having a robust emergency fund can avoid taking on debt in the event of a financial emergency, such as unexpected car repairs or medical bills. Experts recommend that you should have enough money to cover about 3 to 6 months' worth of expenses in your emergency fund.
You can automate your savings contributions by setting a direct deposit from your paycheck into a separate bank account. Better yet, a high-yield savings account can help you grow your emergency fund with interest over time, all without any effort on your end. Visit Credible to shop around for high-yield savings accounts for free without impacting your credit score.
Once you've established a budget and started tracking your spending, you may find that you're spending more than you're saving. The 50/30/20 budgeting rule indicates that you should spend 50% of your income on necessary expenses like rent and utilities; 30% of your income on discretionary purchases like restaurants and entertainment; and 20% of your income on savings or debt repayment.
Discretionary spending is the first category where you should look to cut spending, such as limiting dining out to once per week or opting for happy hour at home instead of the bar. If you've cut back on discretionary purchases as much as possible and you're still struggling to meet your savings goals, it may be possible to save money on your necessary monthly expenses using the following methods:
- Shop around for cheaper insurance coverage. It may be possible to reduce your monthly premiums by bundling your renters insurance and auto insurance policies. You can shop around for auto, home and life insurance policies on Credible.
- Refinance your private student loan debt. Student loan refinancing can help you lower your monthly payments, pay off debt faster and save money on interest. Visit Credible to compare student loan refinance rates while they're near record lows.
- Lock in a lower mortgage rate by refinancing. While not many Americans under 24 are likely to have a mortgage, those who do could consider refinancing to a lower interest rate on Credible in order to reduce their monthly mortgage payments.
High-interest credit card debt is an expensive burden that can prevent you from achieving your financial goals. If you can't afford the minimum payment on your credit card balances, there are a few strategies for paying down credit card debt:
Debt avalanche or debt snowball. The debt avalanche method is when you focus on paying off the credit card with the highest interest rate in order to save the most money over time. The debt snowball method involves paying off the smallest credit balances to gain momentum while you become debt-free.
Nonprofit credit counseling. Credit counseling agencies offer free or low-cost financial education services for consumers who are struggling to manage debt. They can set you up on a debt management plan (DMP) to restructure your debt repayment, and they may even be able to negotiate with your creditors to lower the amount you owe or the interest rate you're paying.
Debt consolidation loans. Getting out of debt by taking out another loan may sound counterintuitive, but this strategy can help you save money on interest while paying off debt on a consistent repayment schedule. Debt consolidation loan interest rates are typically much lower than credit card rates, which can translate to hundreds or thousands of dollars worth of savings over time. Visit Credible to compare debt consolidation loan offers to see if this option is right for you.
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