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Budget Management Guide For Gen-Z

Looking at consumer behavior and targeted marketing by companies selling their brands, it is likely that a large chunk of sales is generated by the young spenders. Times may change, but all of us have been young and remember how difficult it is to manage money and the urge to spend on desires. 

Yet Gen-Z has advantages that were not available even to millennials. Most millennials have memories of sharing a single bedroom with the rest of the family, growing up in metro cities. And rest can never get over their parent’s frugal habits which in some odd way is the mantra of trending minimalism. Gen-Z has the power of information. Interestingly, as per reports, Gen-Z is far better savers than millennials. And it is not a surprise considering that we live in the age of information. 

Factors Affecting Gen-Z’s Financial Habits

  • Information 
  • Social media influencers
  • Targeted marketing by brands
  • Paradigm shift

There are pros and cons for all the four factors stated above and can either change someone in this generation to a saver or a spender. Let us examine each factor for its merits and demerits to understand the potential effects on generation Z:


The availability of serendipitous information can be a boon and a bane. The disadvantage of unfiltered information often leads to hedonic motives and compulsive consumption. But the same tool can be used for good results that influence DIY investing and the ability to manage budgets and debt prudently. 

With open resources, it is the perception and need of the person that will determine Gen-Z’s spending and saving patterns. At the end of the day, it all zeros down their perspective and ability to filter and use information logically. 

Social Media Influencers

Content creators and social media influencers are doing a great job in providing financial planning-related content in small bite-size information reels and stories. Nevertheless, not all of them have relevant qualifications or experience. They are probably talking about personal finance as it is a hot topic and will give them the visibility they desire. 

It makes sense to follow someone qualified to speak about niche spaces like personal finance, tax planning, and investments without any vested interest to upsell a product back to their viewers. If it is a paid partnership or collaboration with another brand, then one should enquire more about the product before signing up for it. 

Targeted Marketing

Brands are focussing on the browsing history of consumers. They gather this data and with the use of AI, immediately pop ads related to the browsing history appear in the end-user’s feed. A gullible consumer who was casually checking for new shades suddenly ends up making a mindless purchase online though he may not need one. 

Paradigm Shift

Gen-Z are born between 1997-2012. It was an era when their parents were witnessing the initial impetus of Indian globalization that opened doors for scores of opportunities. There was also a dotcom rush and new jobs that increased the purchasing power of the middle-class Indian. 

Owning a car became a necessity and not a luxury. Eating out and shopping more often replaced frugal spending. As a result, Gen-Z in most households did not experience living on a budget, unlike their parents. 

If it was not for the abundance of information and improved products, Gen-Z in every manner will have difficulty managing their money. But since youth is blessed with incessant energy and they have an advantage of information, most young are taking sound financial planning steps early on. Even pandemic-induced remote working gave enough time for most to think and explore information, listen to podcasts, and read blogs on personal finance. 

Since the new generation is taking on the mantle of better personal finance practices than their predecessors, it is advisable to check a few strategies that will help them stick to a budget, namely:

  1. Maintain A Log

Referring back to bank statements is not a conclusive solution to tracking expenses. If you don’t know your ‘outgo’, your income may never suffice. A traditional diary/organizer is sufficient to note the expenses. Still a sticky note or organizer app on smartphones will be more practical. You can also download budget manager apps that not just help you track but display infographics to show the statistics of your spending pattern. 

As most of us spend using net banking, debit and credit cards, UPI and cash, unless we have an efficient system of tracking expenses, we will not be able to manage our budget. An expense or budget manager app helps the user set limits for each category akin to the ‘cookie jar’ money or category spending. If one is going overboard in one category, immediately an alert notifies you about the overshoot. Steadily, mindful spending becomes a habit when expenses are tracked in this manner and helps us stick to a budget. 

  1. Ascertain Spending

Our regular expenses can be categorized into non-discretionary and discretionary spending. All the payments that are utilitarian in nature or form part of our commitments are part of non-discretionary expenses. EMIs of home loans, insurance premiums, investments SIPS (though not an expense, it is cash outflow), and regular utility bills for sustenance are examples of non-discretionary expenses. 

Discretionary spending refers to expenses that can be controlled and are usually the area where budgets can be exercised. Expensive fine dining, multiple vacations, luxury cars, and other objects of desire are examples of discretionary expenses. Compulsive shopping for things we can buy later or without planning usually leads to not just budget issues but even compound debt issues.

Here are few effective steps that can control not just discretionary but even non-discretionary expenses:

  • Eat in budget-friendly places that serve fresh but good food. Fine dining, if limited to special occasions,will be a memorable experience and pinch the pocket less in future. 
  • A functional car is a practical option over a luxury car that needs a higher loan EMI to be paid and demands expensive showroom servicing. 
  • Don’t use consumer loans and credit cards to buy the latest versions of phones if your existing phone is working fine
  • Buy gadgets only for utility not because it’s trending or a fad. 
  • Take breaks but plan to avoid peak season high prices and rush.
  • Live a simple life and do things that matter to you. Striking a balance between achieving FI and YOLO is important. 
  1. Product Due Diligence

While being financially savvy is great, you have to ensure that you are on the right track with your DIY investing. If you have doubts, it is sensible to hire a financial planner. Everyone cannot comprehend the financial terminology or have the time to research the products they are interested to invest in. To avoid an undesirable result it makes sense to hire a fee-only financial planner, who will advise, and guide you to execute and monitor your plan. 

To Sum It Up

Let us consider the case of a Gen-Z IT developer from Bangalore; like most people, he loved the purchasing power that was determined by his first job. A new job and staying away from family also meant that he had to make financial decisions himself. The first few months were spent absorbing the new-found freedom. Soon the entire salary was spent within the first ten days of the month. A stage came where all the flatmates started rotating payments between rent and credit card bills. As per him, “ After spending 18 months from paycheck to paycheck, realization caught up when I met someone who earned half my salary and yet was saving moderately.”

He decided to locate the budget holes. Discretionary spending that is not utilitarian or can be avoided was prioritized. Partying, eating out and mindless shopping were reduced. It is not that he does not have fun now, but not as much. He also started traveling on budget weekend vacations which involved trekking and physical activities. 

He toyed with the idea to relocate to a place that had lower rent but the time and money spent on commuting were neutralizing the benefit if any. Slowly, he started sorting by disengaging from past mistakes and then spending time learning about investments. After a few years of DIY investing, he decided to hire a financial planner. A few years into this arrangement, he is more confident about his finances and hopes to achieve FI soon without attracting too much debt for life goals like ‘his own house. 

The path can be different, but Gen-Z can turn out to be smart investors and wise spenders than previous generations with little help and focussed minds. 

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