As financial advisors, we often hear younger clients express concerns about where to start with their financial journey. Gen Z and Millennials are navigating an ever-changing economic landscape, from student loans to inflation, fluctuating job markets, and now a falling interest rate environment. However, starting early—even with small steps—can make all the difference over the long haul. Whether you’re just beginning your career or thinking about ways to build wealth, it’s never too late to start and starting today puts you on a stronger financial path tomorrow.
One of the most powerful tools to take advantage of is compound interest. The money you invest today grows not just from the original amount but also from the returns it earns over time. Waiting even a few years to start would cut that amount by more than half. Even small contributions now can lead to significant rewards later.
Automation is one of the easiest ways to stay on track financially. Setting up automatic transfers from your checking to savings or investment accounts ensures you’re saving consistently without needing to think about it. Employer-sponsored retirement plans like 401(k)s often offer matching contributions, which is essentially free money. Taking full advantage of those matches is a no-brainer for building wealth over time.
Managing debt is also essential. Many in Gen Z and Millennials carry student loans or credit card balances, which can be overwhelming. Prioritizing high-interest debt, such as credit cards, should come first since it can spiral if left unchecked. Setting up a strategy to tackle your debt along with avoiding lifestyle inflation—where expenses rise with income— can help to ensure that debt doesn’t grow out of control.
Building an emergency fund is a crucial part of any financial plan. Setting aside a few months of potential living expenses in a high-yield savings account gives you a cushion for life’s unexpected expenses. It’s okay to start small—aim for $500 to $1,000 first and build from there. Having this buffer and cushion in place can prevent you from turning to credit cards when surprises arise.
Time in the market versus attempting to time the market is extremely important to keep in mind, especially as you begin your investment journey. Also, using retirement accounts like Roth IRAs or 401(k)s provides tax advantages and helps you stay focused on your long-term goals. While markets fluctuate, staying invested through the ups and downs is essential for growth.
Developing healthy money habits early is just as important as investing. Following a budget that is broken out into a bucket strategy, separating wants versus needs, helps you stay on top of your finances. Tracking your spending with financial software apps makes it easy to see where your money goes and where you can cut back. Establishing these habits now makes managing larger financial goals easier down the road. But don’t forget, it’s important to strike a balance between saving for the future and enjoying the present. For example, planning ahead for travel or big purchases allows you to enjoy life without stressing.
Financial planning can feel overwhelming, but you don’t have to navigate it alone. Seeking advice from a financial advisor or learning from personal finance communities can provide valuable guidance.
An important takeaway is to start early, and if you haven’t already, there is no time better than today! The sooner you begin building smart financial habits, the easier it becomes to achieve long-term success. Even if your progress feels small at first, every step counts. Whether it’s saving a little, paying down debt, or starting an investment account, consistency is what leads to financial freedom. If you have any questions or are looking to build a first time financial plan, email info@shermanwealth.com or schedule a complimentary intro call here.
