Gen Z’s spending power is growing, thanks to a historic job market and strong starting salaries. But young adults can face financial problems, and quickly, if they don’t realize how much they’re spending.
Natalie Stanger, a member of the American Association of Daily Money Managers, recommends carefully monitoring your monthly income and expenses. Start with a budgeting app such as Mint, Honeydue, or You Need a Budget, or an online resource from your bank. But remember: “These apps are a tool,” she says. “You have to do the work to review and modify your cash flow.”
As you look through your finances, watch out for these four money traps.
Buy Now, Pay Later Plans
BNPL plans are alluring because they break up larger purchases into smaller payments, and some do so with no interest for, say, the first year. Nearly two-thirds of Gen Z buyers — more than any other generation — have used a BNPL plan, according to a March 2023 survey by LendingTree.
The risk is that these installment plans may cause you to lose sight of the total purchase cost and take on unnecessary debt.
Stanger recommends using BNPL strictly for items you need but may not have the cash on hand to buy in one transaction, such as appliances, and only if you can pay off the plan within the interest-free period.
“That way you have stretched out your money, and it hasn’t cost you anything in interest,” she says. If you extend payments beyond the introductory period, transfer the balance to a lower-interest credit card.
Americans spend $219 per month on subscriptions, according to C+R Research. From music streaming to curated clothes delivery, auto-renewing services quickly accumulate.
“Prioritize which subscriptions are best for you. You don’t need every service,” says Brian DuVal, a 22-year-old with severe hemophilia A. After considering his options for streaming services, for example, DuVal decided on YouTube Premium and opted out of others.
Stanger suggests periodically reviewing your financial statements to know what you’re paying for and canceling the subscriptions you no longer use.
Food Delivery Charges
The pandemic normalized food delivery services, but the convenience comes at a cost — more than 40% of the average meal price includes fees that go to the service provider and delivery person.
“These conveniences add up to a lot of money in a month’s time,” Stanger explains.
Next time you’re craving a carne asada burrito, walk or drive to your favorite spot to skip the delivery fees. Better yet, buy the ingredients from a store and make the meal at home. If you want food delivery, save it for a rare occasion.
Managing health insurance costs starts with selecting the best plan for you, which might not be the least expensive one, DuVal says. Plans with lower premiums might end up costing you more for the treatments you need.
DuVal recommends meeting with someone at your hemophilia treatment center or an insurance navigator to ensure your plan will provide adequate coverage for your care.
“People with bleeding disorders can face an additional financial burden,” he says. “We rely on expensive medication, and receiving access to medication should always be the first priority.”