‘Time is on your side’: How Gen Z can find financial success in 2023

Canadian families of all ages felt the sting of decades-high inflation, rising interest rates and a brutal year on the stock market in 2022.

But while it was a year to forget for many Canadian pocketbooks, for Gen Z and younger millennials trying to get ahead, 2022 was especially filled with financial anxiety.

Ipsos polling conducted exclusively for Global News throughout the year consistently showed concerns were higher among youth aged 18 to 34.

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Polling conducted in November showed that two-thirds of respondents (67 per cent) from this age group were concerned they wouldn’t have enough money to feed their families, compared with 53 per cent from the general population.

That level of anxiety is also higher than the same time last year, when similar Ipsos polling showed 55 per cent of respondents aged 18 to 34 shared the same level of concern.

This age group was also more likely than average to feel that interest rates, which have surged this year as the Bank of Canada attempted to tamp down inflation, would rise faster than they could keep up, according to the most recent survey.

Some 62 per cent of youth feared they’d lose their job if the economy didn’t improve, compared with 42 per cent of all-age respondents.

Personal finance expert Rubina Ahmed-Haq says 2022 was a hard year for many starting out in their careers, noting recent graduates who did part of all of their degrees online are entering the workforce without the traditional networking opportunities discovered through in-person college or university programs.

“There’s been a lot of roadblocks, which people who were in their job and just continued to do it just never have had to face,” she says.

With some economists forecasting a recession in 2023 and uncertainty about where inflation and interest rates are headed, here are some steps to help young Canadians take stock after a rough 2022 and set themselves up for financial security in the year ahead.

5:55 Financial outlook for 2023

Student loans, as well as credit card debt, are significant obligations for many young Canadians, Ahmed-Haq says.

A strategy she uses to get a handle on debt levels is to write down “the big number” — adding up each debt obligation on your books and breaking them down according to the highest interest rate.

There’s a tendency to “compartmentalize” debt into different cards or accounts, but Ahmed-Haq says by putting the daunting number in one place, it’s easier to come up with a strategy to eliminate it.

“That gives you a roadmap of how to tackle that debt. And it also gives you a realistic idea of how much debt you’re in,” she says.

Calgary’s Alyssa Davies knows the challenge of escaping consumer debt first-hand.

The writer behind Mixed Up Money tells Global News she started her career in personal finance as an “accountability” mechanism to right her own ship, and has since written two books on managing the emotional side of money and the value of setting up emergency funds.

Davies says that having such a reserve — it can be as modest as putting aside $10 a month — helps to relieve the burden when you find yourself faced with an unexpected expense or consistently higher grocery bills for a few months.

“If you don’t have a security blanket of some sort, like an emergency fund or a rainy day fund … most of us go to our credit cards first because it’s accessible,” she says. “But unfortunately, with the high interest rates there, it makes it really difficult to kind of climb your way out of debt.”

If the idea of putting all of your outstanding debts in one place is scary, that’s completely understandable, Davies says. People might avoid taking stock because they’re scared of how bad things in their bank accounts might look, she says.

Finding external supports like a friend you trust or an online community of people going through the same situation can be the first step to digging yourself out of the hole, she says.

“If you’re feeling like you’re in a tight spot, leaning on community is OK,” Davies says.

“Remember that you need to focus on your mental health, because if that is suffering at the same time that your finances are suffering, it can become an extremely overwhelming position.”

Once you have the scope of your financial challenges in front of you, experts say it’s a healthy practice to scrutinize where you’re spending your dollars.

Davies says we often know how much money is coming in from our regular paycheques, but we’re fuzzier when it comes to how much is going out each month. To start, she recommends tracking the last three months for an average of what you’re spending and where.

Ahmed-Haq says subscriptions and other regular payments are quick to erode your savings and are prime places to cut back.

Some fixed payments for utilities such as internet bills can be renegotiated for savings without significant changes to your lifestyle, she says.

When it comes to streaming services and other monthly subscriptions, take stock of which ones you’re actively using and which ones are not living up to their monthly cost, Ahmed-Haq says.

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If you’re not going to the gym or have multiple fitness memberships and use one only a couple times a month, reconsider whether you’re getting the bang for your buck.

“It really comes down to what you’re using. It’s not about cutting back, it’s about getting full value,” she says.

Despite swirling uncertainty in the economic forecast for 2023, Davies says it’s a good time of year for financial check-ins and “reset” based on what’s in your control, and what’s not.

“There isn’t too much you can do to manage external factors like a recession. So you kind of have to focus on what you can control with your money,” she says.

Davies says that once you know more about what you’re spending and what’s expendable, use that knowledge to create a few different spending scenarios for yourself.

One budget could be for the status quo, another could be for needing to trim back on 20 per cent of your monthly costs, and a third could be the worst-case scenario of a job loss or other significant disruption.

Having these paths in front of you can set you up for stability if the worst comes to pass, Davies says, rather than reaching for your credit card and getting “yourself into a stickier situation.”

Looking ahead to your calendar in the new year, Davies recommends identifying times when you know you’ll be pressed for cash, like a wedding or two in the summer.

Start putting aside money in a high-interest savings account now so that you have a fund to draw from when that expense arrives, rather than scrambling for cash when it’s near, she recommends.

For those setting New Year’s resolutions related to personal finance, Ahmed-Haq says that, like any goal, “achievable” is the word to keep in mind.

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“Some of us get a little enthusiastic at the beginning of the year. We say, ‘OK, we’re going to lose 50 pounds, we’re going to save $50,000 and we’re going to read 50 books,’” she says.

“All these sort of lofty goals that when you really get into your day-to-day life, are just simply not attainable.”

What’s attainable might also be more fruitful than you’re expecting, she adds. Putting away just $100 per month into a stock index fund can generate thousands of dollars over the next 25 to 30 years of your life, she says, given the historical rates of return in the market.

While mountains of student debt and modest paycheques early in your career might make you feel like your financial growth is stunted, Ahmed-Haq says the opposite is true. Starting a modest savings habit in your 20s has a much greater earning potential than starting with a larger amount in your 40s, she said.

“It’s hard to sometimes see this as being your financial reality, but you’re never going to be in a more powerful financial position than you are when you are under the age of 30,” Ahmed-Haq says.

“You have time on your side.”

In the interest of achievable goals, don’t put pressure on yourself to completely turn around your financial position, she adds. This might not be the year you strike it rich — but it could set you up for success down the road, she says.

“Look at the long game, not the short game. It’s not about what you’re going to achieve in 2023,” she says. “It’s about how you’re going to get on track in 2023 so that you can just have a more financially well life.”