The Gen Z Budgeting Guide

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Noyack Wealth Weekly
October 06, 2024

Est. Reading Time: 5 min

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Happy Sunday Noyackers – and welcome to another edition of Noyack Wealth Weekly.

Thanks to everyone who responded to last week’s polls. Starbucks barely edged out Dunkin’ Donuts, with 55% of you selecting the Siren for best coffee. 

And boy, did that poll evoke some strong emotions: 

“Starbucks literally burns their coffee so that you’ll buy the specialty add-ons. Dunkin’ coffee tastes and smells like cat ****…” – NWW Reader

😳 Remind me to bring my coffee from home next time.

As many of you know, I’m based in New York, and both of the city’s baseball teams recently clinched playoff spots. Just curious …

Which team is the Noyack community pulling for this postseason?

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Alright, enough of the fun stuff…

Today, we’re talking about budgeting & saving.

I know, I know – it might seem like there’s nothing new to say about such a widely discussed topic. 

But here’s the thing: for Millennials and Gen Z, the personal financial landscape looks so different that a lot of the classic budgeting rules of thumb just don’t apply anymore.

Today, we’re going to understand how younger investors can effectively budget and save in the modern world. 

Along the way, we’ll get expert guidance from Nate Hoskin, a Certified Financial Planner and financial advisor who specializes in working with HENRYs.

Finally, we’ll wrap up with the three best budgeting tools you can use to take control of your personal finances. 

Let’s roll! 

This Ain’t Your Mama’s Budget…

The problem with most budgeting & saving advice?

It’s designed for a world that doesn’t exist anymore.

For your parents, simple rules of thumb like saving 20% of your income might have worked great when student loan balances were minimal and home prices were still affordable. 

But today, the personal financial landscape is so different that many classic heuristics are overdue for an update. 

Let’s look at some of the numbers for Gen Z, courtesy of our friends at McKinsey:

$38K

Median annual salary

$21K

Average student loan debt

37.3%

Average monthly income spent on housing

Not exactly a recipe for easy budgeting. 

Housing costs are a particular issue here. The ratio of home prices to median income levels has shot up from around 4x in the 80s to around 7x today – which is even higher than the 2008 housing bubble. 

No wonder more than a third of Gen Z thinks that homeownership might be permanently out of reach. 

Home price to median household income ratio. 

Expert Interview: Nate Hoskin, CFP®

This data might seem a little daunting…

Is it still possible for Zoomers and Millennials to budget & save effectively?

Thankfully, the answer is yes – and don’t just take out word for it. To understand this question, we sat down with Nate Hoskin, a Certified Financial Planner and financial advisor at Hoskin Capital.

Nate specializes in advising younger HENRYs pursuing financial freedom, so this is a world he works in every single day.

Take a look at our conversation with Nate below – and if you’re curious for more, make sure to check out his free 7-day email course. He’s also active on TikTok where he shares financial insights with 230K+ followers. 

1. Are there any classic budgeting rules of thumb that are now out of date?

The ‘classic’ budgeting rule is to spend 50% of income on needs, 30% on wants, and 20% on savings. 

This rule is now completely out of date because it doesn’t take into account time or the relationship between expenses and savings. If you’re starting early, you may not need to save 20% of your income. If you’re starting late, you may need to save far more. 

2. How can younger individuals manage student loan debt without compromising savings and investments?

The biggest development here is the 401k matches on student loan payments. The SECURE 2.0 Act allowed it, but it’s only slowly rolling out. If you have student loan payments and your employer will match them, it’s a great incentive to pay more (so they match more) and get out of debt faster. 

3. What advice do you have for Millennial & Gen Z investors who want to save for their future but also don't want to miss out on life experiences today?

A Roth IRA is crazy versatile. You can take anything you contribute out tax and penalty free, you just can’t touch the gains (unless you take up to $10,000 of gains to buy your first house).

My girlfriend and I also take a “points trip” once a year. We use our credit cards to amass all sorts of travel points (we nerd out about it so we have several cards optimized for each travel expense). With our normal, necessary expenses, we get enough points for a 3-5 day trip. 2023’s trip was $26 out of pocket. I’d recommend it to anyone.


4. Are there any specific budgeting & saving strategies that you think are most helpful for younger individuals?

I love the “cash flow audit”. Traditional budgets create money stress by asking you to look at it all the time and punish yourself when you screw up. Instead, looking at the past 3 months and asking “did I hit my savings goal?” is often enough to determine if you’re on the right track. If you don’t hit your goal, then you can apply more traditional budgeting until you do. 

Top 3 Budgeting & Saving Apps

Now that we’ve seen the unique challenges younger individuals face in budgeting & saving and received some expert guidance to tackle those challenges, it’s time to put things into practice.

While you might be able to get by with nothing more than an Excel spreadsheet, there are some excellent digital financial tools that can make the process so much easier.

Below, take a look at our independent review of the top 3 budgeting & savings apps on the market today:

  1. PocketGuard

PocketGuard takes the top spot on our list. The app has excellent budgeting functionality, allowing you to link all your financial accounts in a single place and track your expenses over time.

The reason we like PocketGuard so much, though, is its dedicated debt management functionality. This is especially helpful if you’re navigating student loans or high mortgage payments – stay tuned for our deeper dive on debt management soon. 

Pricing starts at $6.25/month for an annual subscription. 

  1. YNAB

YNAB (pronounced “why-nab”) is a regular feature on best budgeting apps lists for a reason – it’s simple, approachable, and works very, very well.

YNAB is built on the concept of zero-based budgeting, where every dollar is given a “job” with nothing left over. The app offers a 34-day free trial with a $9.08/month annual plan.

  1. Monarch

Monarch rounds out our top three, ranking as another competitive budgeting app option.

Monarch offers a bit more flexibility than other budgeting apps, which can be both a pro and a con. If you need the discipline of a rigorous budget and plan, Monarch might not be the best fit – but if you prefer flexibility, definitely give the app a shot.  

Pricing starts at $5.83/month for an annual subscription. 

📺 WHAT WE'RE WATCHING

This video from CNBC takes a look at an interesting and underreported trend – Gen Z actually has higher homeownership rates at equivalent ages than Millennials and Boomers. The video explores the various factors making this trend possible. 

👂 WHAT WE’RE LISTENING TO

This episode of the Money Moves podcast from Gen Z for Financial Literacy features an interview with expert financial advisor Rachel Gottlieb, who oversees more than $1.5 billion in assets at UBS. The discussion explores a mix of personal finance topics, ranging from investing basics to how parents can teach their kids good money habits. 

📖 WHAT WE’RE READING

This white paper from Bank of America takes a close look at the financial health of Gen Z based on a wide survey. Notable findings include: nearly a third of Zoomers think they don’t make enough money to save and nearly half rely on some sort of financial assistance from parents. 

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