Financial planning for GEN Z

The biggest obstacle to many young people achieving financial security in the future is a need for financial planning and financial literacy. With costs soaring and an overheated property market, many in the GEN Y and most in the GEN Z categories believe owning a home or funding a healthy retirement is a pipe dream. The challenge is just making it through week to week. However, it doesn’t have to be that way. You can have an optimistic financial outlook with a clear, workable, and achievable financial plan.

In simple terms, a personal financial plan is a roadmap for your financial journey. It helps you set clear goals, track your progress, and make informed decisions about your money. By creating a financial plan, you gain control over your finances and position yourself to achieve your goals—whether it’s buying a home, traveling the world, or retiring early.

The first step is to set achievable targets. Start by asking yourself what you want to achieve financially. For some, it may be as gentle as moving on from surviving week to week. It may be to save a home deposit and, in doing so, have sufficient evidence that you can service a mortgage. It may be saving to move interstate or overseas or to begin saving for retirement. Whatever it may be, setting short, medium, and long-term benchmarks is an excellent way to get started.

Consider a short-term goal. It could involve paying off debt, such as a credit card, car, or other personal loan. This is a milestone, and for those living week to week, it is a financial weight off your shoulders, and you will appreciate the immediate impact. Paying down smaller and troublesome debt frees up money for a medium—or long-term goal; this is where the motivation takes off.

A medium goal may include saving for a house deposit, further education, an emergency fund, an overseas trip, or starting a business. A long-term goal would include retirement, funding your children’s education, and financial independence. If you’re a Gen Z, that may seem a long way off; however, keep it in your mind for now.

Be specific about your saving target and set a timeline. For example, saying “I want to save money” is a start however, it is easy to move away from when other things come up. Preferably you want to align your idea with an outcome. “I want to save $10,000 over the next two years to move interstate to finish my degree or start my master’s” – This gives you a specific objective and a timeline to achieve your goal.

To do this, you must understand where you are financially right now. This requires calculating your income over liabilities. Using our free budget planner is an ideal way to start. This will give you a snapshot of your financial health.

Look carefully at areas where savings can be made. You need to be ruthless, which will require cutting back on things. That extra cup of coffee during the day, going out for lunch during the week, streaming subscriptions, memberships you don’t use, and other seemingly small incidentals make a big difference to your saving power. Reviewing your income sources and tracking your spending habits will help you understand your cash flow and identify areas where you can save or invest.

Budgeting is the cornerstone of any financial plan. A budget helps you manage your money by allocating your income toward essentials, savings, and discretionary spending.

Include all sources of income, such as your salary, side gigs, or passive income streams. Break down your expenses into essentials (rent, groceries, utilities), savings, and discretionary spending (entertainment, subscriptions, memberships, dining out). Try the 50/30/20 rule as a guide—50% of your income goes to essentials, 30% to discretionary spending, and 20% to savings. You will find savings in the discretionary spending category, which can be allocated to savings, this is where you will find the pot of gold you’re searching for.

Review your budget regularly to ensure it aligns with your financial goals. Adjust it as needed to accommodate changes in your income or expenses.

Debt payments are in the essentials category. These include loans and credit cards. Prioritise paying off high-interest debt as quickly as possible. The avalanche method (paying off debts from highest to lowest interest rate) or the snowball method (paying off the smallest debt first) are popular strategies. Once you’ve paid off your debt, you can redirect those payments toward savings; you’ll be buoyed by how this strategy accelerates your savings.

The best advice for GEN Y and GEN Z is to start. Creating a financial plan might seem overwhelming, but it’s important to remember that small steps can lead to significant results. Start by setting one financial goal, creating a simple budget, or opening a savings account. As you gain confidence, you can tackle more complex financial tasks, like investing or retirement planning.

Step Up Financial Group is a team of qualified financial specialists. We help hundreds of young Australians create financial stability. Download our free budget planner to get you started. If you are considering or in a position to seek professional financial planning advice, don’t hesitate to contact us.