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It could take some Gen Zers, millennials years longer to get a car or home: How Covid delayed financial goals

"They have time on their side; they've got many, many earning years in front of them."

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When the pandemic began in earnest 18 months ago, many Americans did a hard reset on their spending habits.

Even for people who didn't see hits to their incomes, with so many Covid restrictions in place, there just weren't as many places to spend money. But as terrible as the pandemic has been on almost every facet of our lives, spending less has actually been really good for many people's wallets, especially for those who were lucky enough to keep working and not lose income. The personal savings rate went up, and overall credit card debt started going down.

Now, nearly two years into the pandemic, it looks like those good habits are sticking, according to Northwestern Mutual's annual survey about American financial habits. Nearly half, 45%, of people surveyed say they've reduced their living expenses in the last year with moves including canceling subscriptions and dining out less, and 34% are better able to pay down debt.

These habits have helped people mitigate the financial impacts of the pandemic. Even so, 45% of respondents say that the pandemic pushed back their timeline for achieving long-term financial goals, like buying a home or getting a new car. That percentage is much higher for people under 40: Nearly two-thirds of millennials and Gen Zers, 65% and 63% respectively, say the pandemic has set them back by at least a few years.

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That isn't surprising, particularly given the relatively short amount of time many millennials and Gen Zers have been in the workforce, and they've accumulated less for retirement and other goals, says Christian Mitchell, chief customer officer at Northwestern Mutual. However, for younger workers, time can also be the biggest asset in helping their young portfolios recover.

"The most important thing for them to keep in mind is time," Mitchell says. "They have time on their side; they've got many, many earning years in front of them."

Making the most of that time means starting to save and invest early, even if initial contributions are small. "The decisions they make today get amplified through time as well," Mitchell says. "So the decision to save a little bit more in their 401(k) or to be more balanced in their use of debt, those relatively small decisions today have these huge reverberations across their lives."

One of the easiest ways to increase your savings is to be smarter about your spending, experts say, and even small changes in your spending habits can help you achieve your financial goals faster, regardless of what happens with the pandemic.

Tally 'what comes in and what goes out'

When you're making a spending plan for yourself, it's imperative that you know exactly how much money you bring home, says Chantel Bonneau, a certified financial planner with Northwestern Mutual in San Diego.

"A financial planning principle that you want to carry through into the future is having a clear grasp on what comes in and what goes out, and making sure that you're spending money on purpose," she says.

And once you know your take-home pay, use that number to inform your spending. Some experts recommend the 50-30-20 rule as a framework: One-half, 50%, of your income goes to essential bills, 30% goes to discretionary spending, and 20% goes toward long-term financial goals.

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Discretionary spending, the 30% category, is often where you can see big results with some simple but thoughtful changes. You don't need to start a spreadsheet or use another budgeting tool (although they do help, Bonneau says). Start small by keeping an eye out for categories where you tend to spend more.

"Look at the one or two areas that you know are your biggest weakness and track that," she says. "If you know your weakness is dining out and takeout and DoorDash and Uber Eats and all of those things, just decide what is reasonable [to spend] on a monthly basis."

Knowing your cash flow "helps you save more thoughtfully, and be prepared for the next step when you're buying a car, or trying to refinance a student loan, or buy a house," Bonneau says.

Spend money on 'the things you value'

Having a clear understanding of what your budget should be doesn't just mean you'll spend less; it can also have the bonus effect of making your spending more enjoyable. The pandemic made almost all of Bonneau's clients look at their expenses and realize there was a lot of fluff in them.

It "opened up people's eyes to realizing that maybe they were spending more than they needed to," Bonneau says. For example, on subscriptions or services they weren't really using.

"They didn't really value those things, they'd just become habits."

The result of reprioritizing can free up more room in your budget to save and invest more of your income — and feel less guilt over your splurges.

"If you are a self-proclaimed foodie, and you really love trying a new restaurant every month, that's OK," Bonneau says. "Just make sure that you are spending money on the things you value and you're not spending without caution just because it's something you've always done."

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