As the global COVID-19 pandemic rages, another “health” crisis has plagued the United States
Nearly 4 in 10 Americans say they feel “financially unhealthy” as prices remain high after a year of record inflation. However, how much you think you need to get financially healthy depends more on what year you were born than how much is in your bank account.
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Gen Z say they require an average salary of $171,633 to feel financially healthy — the highest income compared to older generations — according to a survey by personal finance company Personal Capital and retirement plan provider Empower, conducted by The Harris Poll.
But while Americans remain worried about their economy, experts say they shouldn’t lose hope.
“In a turbulent market, there are plenty of opportunities to take control of your money,” said Craig Birk, chief investment officer at Personal Capital. “Knowing your net worth puts you in the driver’s seat because you need a real-time gauge of your financial health to make smart moves.”
How much does each generation need to feel ‘financially healthy’
Here’s how much each generation says they need to earn to feel comfortable:
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Gen Z: $171,633
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Millennials: $133,758
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Gen X: $112,222
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Baby boomers: $78,317
But when it comes to how much savings these generations think they should stash away, the numbers are drastically different.
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Gen Z: $105,299
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Millennials: $349,784
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Gen X: $566,975
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Baby boomers: $764,999
While Gen Z has the highest salary expectations for being financially healthy, they have the lowest expectations when it comes to how much to spend in savings — and vice versa for boomers.
Paul Deer, vice president of advisory services at Personal Capital, theorized to CNBC that this could be linked to the housing market. Younger generations may feel they need a higher income to afford expensive mortgage rates and to plan for their retirement.
“Lower savings for younger generations basically means you have a stronger need to be able to build a nest egg,” Deer said.
Read more: Here’s how much the average American 60-year-old has in retirement savings — how does your nest egg compare?
Deal with the immediate first
Even if you can’t quite reach the salary level you need, you still have options when it comes to maximizing your income and strengthening your savings.
“Yes, it’s great to make more money, but it’s what you do with your earnings that makes the real difference,” says Lacey Cobb, director of advisory solutions at Personal Capital.
“No matter the number on your paycheck, avoiding high-interest debt and saving a meaningful percentage of your income can put you in a better place in the long run.”
One of the first steps toward financial wellness is dealing with your debts—especially those with the highest interest rates. Thanks to exorbitant consumer prices, Americans are increasingly dependent on their credit cards and household debt is rising.
But with credit card interest rates rising to record highs in response to the federal funds rate, now is not the time to let your monthly payments slip. Make sure you do your best to pay them in full and on time.
So plan for the future
Once you’ve got your debt under control, make sure you also put some savings aside. The Personal Capital survey found that 58% of Americans are putting more into their short-term savings and retirement savings. But if the pandemic taught us anything, it’s incredibly important to have some emergency funds in place for an unexpected expense.
And with many predicting they’ll need $1.25 million in savings to retire comfortably, you’ll want to start preparing for your financial future right away.
While investor sentiment may be low right now, Birk advises against panic selling your investments.
“Stocks can be a secret weapon because they give you one of the best chances to cushion the impact of inflation, and in the long run you’re well positioned to beat it multiple times.”
Consider building a well-diversified portfolio with sectors that traditionally perform well through economic cycles, such as consumer staples and utilities.
With a little focus and a little hard work, you will soon feel financially strong again.
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This article provides information only and should not be construed as advice. It is supplied without any kind of warranty.