4 Ways Gen Z Spends Their Leftover Income and How They Could Save More Money

According to Bank of America’s 2024 Better Money Habits survey, 52% of Gen Z reported that they don’t earn enough money to live the life that they want to. The main reason for this was the expenses associated with a higher cost of living, as the stubborn inflation figures from the last few years have increased prices across the board.

Here are the top ways Gen Z spends their leftover income, according to the survey:

• 36% on dining out
• 30% on shopping
• 24% on entertainment
• 15% on paying down debt

We will examine the main categories in which Gen Z spends its money to provide tips on how to save and get ahead financially .

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How Gen Z Can Save Money

Before we break down the individual categories, it’s essential that we look at the idea of setting priorities to help Gen Z better manage their finances.

“As we can see, Gen Z is not prioritizing paying down their debt as much as they should be, ” said Erika Kullberg, attorney, personal finance expert and founder of Erika.com . “The fact that they are spending more on unnecessary expenses like dining out, shopping and entertainment is concerning.”

If Gen Z wants to save money on other expenses, they need to shift their priorities to focus on paying off their debt, which will lead to them paying less interest. By temporarily limiting spending on other areas, it will be easier to pay down debt, which would reduce financial stress in the long run.

“Once they are debt-free, they can create a new budget with a responsible amount of money allocated toward fun spending,” remarked Kullberg. “Having debt can be overwhelming, but prioritizing it is the only way to get out from under it.”

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Dining Out

Dining out is a major expense for many, as takeout food prices have increased greatly over the last few years. According to USDA research , food prices went up 25% from 2019 to 2023. Finance Buzz shared data showing how takeout food prices have shot up anywhere from 39% to 100%, with average prices at McDonald’s doubling.

How can Gen Z save money here?

Try Cooking More Often

“Cooking at home can save a significant amount of money compared to dining out,” said Taylor Kovar, CFP and CEO of The Money Couple . “Try meal prepping and planning meals in advance to reduce the urge to eat out.”

While cooking all of your meals won’t solve your financial woes, you can drastically cut back on your spending by getting creative with your meal prep. You want to find ways to spend less on your eating so that you can have the funds for other areas of your life.

Look Out for Deals

“Take advantage of restaurant discounts, happy hour specials and coupon apps to lower the cost of dining out when it’s necessary,” noted Kovar.

There will be situations where you may not have time, or you’re looking for a quick meal, so it’s crucial that you look out for deals. There are many coupon sites and apps available to help you find the best deals near you. This will help you reduce your spending in this category.

Shopping

It’s easier than ever to spend money on shopping because most online merchants will save your payment information, so you can have anything you desire within a few clicks. Kovar suggests that you create a shopping budget and stick to it. You should also do your best to track your spending to ensure that you don’t exceed your set limits. The good news is that there are various budgeting apps that can help you manage your expenses so you know what to work on.

Kovar added, “Shop at thrift stores, look for sales and use cash-back apps to make the most of your shopping budget. Avoid impulse purchases by making a shopping list and sticking to it.”

Entertainment

With almost a quarter of Gen Z’s disposable income going toward entertainment, this is one category where young people will have to try to find the perfect balance between enjoying the moment and trying to plan for tomorrow.

“Look for free or inexpensive entertainment options such as local events, community activities and outdoor adventures,” shared Kovar. “Many cities offer free concerts, festivals and cultural events.”

You can also take some time to review and manage your subscription services to ensure that you’re only paying for what you’re actively using and getting value out of.

Paying Down Debt

The best way to reduce the amount that you spend on debt payments is to pay off your debt. Here’s the best way to approach this.

Tackle High-Interest Debt First

While you can use the debt snowball method to tackle your debt with the lowest balance first, in this economic climate, you may want to think about handling the higher-interest debt first. Paying off high-interest debt before anything else will reduce the amount you pay toward your debts overall.

Create a Financial Plan

The goal is to create a plan to focus on paying down debt and eliminate this financial stress from your life.

Kovar added, “Consider consolidating or refinancing options to reduce interest rates. Develop a structured debt repayment plan with clear goals and milestones. Automate payments to ensure consistency and avoid missed payments.”

Reduce Spending in Other Areas

The best way to pay down your debt is to reduce your spending on dining out and entertainment so that you can make becoming debt-free a priority. It’s worth pointing out that anything you cut from your budget now can be added back in the future.

Kullberg concluded, “The sooner you are debt-free, the sooner you can get back to fun spending and working toward your other financial goals, like buying a home or retiring early.”

This article originally appeared on GOBankingRates.com : 4 Ways Gen Z Spends Their Leftover Income and How They Could Save More Money