Answering Gen Z’s Most Pressing Financial Questions

For many in the Gen Z cohort, your early 20s are a time of self-discovery, independence, and newfound financial responsibilities. As those first paychecks hit your account, questions inevitably arise – How should you budget and save effectively? What's the best way to kickstart your retirement savings with a 401(k)? What should your financial priorities be at this early stage of your career?

In this episode of Capital Conversations, CERTIFIED FINANCIAL PLANNER™ professional Colin Day sits down with Sophia Steinbecker, one of Correct Capital's newer additions, to answer some of the pressing questions people just starting out in their careers have about finances, budgeting, retirement saving, and more.

For recent investment news and our take on the current market, retirement planning, and investment, listen to our podcast Capital Conversations or view our recent blog posts.

Below is the transcript of our most recent episode of Capital Conversations, "Answering Gen Z's Most Pressing Financial Questions."

Colin Day: Welcome to another edition of Capital Conversations. I'm Collin Day, CERTIFIED FINANCIAL PLANNER™ professional, and with me today is Sophie Steinbecker. Sophie, thanks for joining us.

Sophia Steinbecker: Thanks for having me.

Colin Day: Sophie is newer to the firm. She's been here for about seven months now?

Sophia Steinbecker: Seven months, yeah.

Colin Day: She's our front desk associate, and she also assists me with podcast stuff. So I took her from behind the camera and forced her to sit down in front of the camera today. And we are going to have a cordial, fun conversation about being new to the workforce and learning a little bit about finances. Because Sophie, you graduated from the College of Charleston?

Sophia Steinbecker: Yes.

Colin Day: Your degree was in?

Sophia Steinbecker: Business Admin.

Colin Day: Business Admin. She's doing administration for us, so obviously this is a natural fit. But, in this role, this is the first time you've worked in financial services.

Sophia Steinbecker: Yes.

Colin Day: Okay, so if you had to think about your experiences with finance previous to this job, what was your background before sitting down in our front desk over here?

Sophia Steinbecker: With my major, I think I had a couple of finance classes, but just kind of the basics, I would say. I do have a credit card.

Colin Day: Okay.

Sophia Steinbecker: And that's pretty much the extent of my financial background, I would say.

Colin Day: Okay. Well, the finance classes you took. Anything to do with personal finance or was it more just corporate finance?

Sophia Steinbecker: It was more corporate finance. I will say I did take a personal finance class, I think junior year of high school. But I can't say I remember a lot from that class, unfortunately.

Colin Day: Well, I'll say this – I know what school you went to, we won't get into high school although this is a St. Louis area podcast, [and that] is a notorious question. If you're not from the St. Louis area, you probably don't know the joke there. We won't talk about what high school you went to. But, I do commend your high school for at least offering a class.

Sophia Steinbecker: Yes.

Colin Day: On financial planning or just personal finance because that is something that is sorely lacking.

Sophia Steinbecker: Yes.

Colin Day: And I think just sitting here you probably learn a lot of stuff.

Sophia Steinbecker: I do.

Colin Day: That maybe you didn't even learn there.

Sophia Steinbecker: Yes. Lots, lots.

Colin Day: Well, good, because that's part of your job – in your career development we start to think about, "Hey, what are some other things that interest Sophie, right?"

Sophia Steinbecker: Yes. Yes.

Colin Day: So to lead off this podcast, the whole reason that Sophie is on this side is obviously to introduce the audience to somebody that you might be talking to. If you're a client or thinking about kicking the tires on Correct Capital, Sophie's our frontline woman, so to speak. She does a lot from the marketing perspective, but also she helps with a lot of the administration of the office.

But, as a newly minted professional, this is the first foray into financial services. I wanted to have Sophie on, because she's got questions. And I consider myself a professional.

Sophia Steinbecker: Yes.

Colin Day: A CERTIFIED FINANCIAL PLANNER™ professional, maybe. And what we wanted to do today is maybe get some of the questions that have been on her mind, out of her mind, and onto paper. So that we can talk about them. And we can learn a little bit, right?

Sophia Steinbecker: Yes. Lots of questions.

Colin Day: Did you have any trouble creating questions for me?

Sophia Steinbecker: No. Because I have a lot of questions and they go far beyond this list.

Colin Day: Okay, and I told her, "Let's start with three and then we'll work off from there." I think we will have a total of four questions. There's a bonus question. That's number four. But let's start with, with question number one. We'll work our way down. So why don't you read the the prompt that you gave me?

Sophia Steinbecker: All right. So my first question is what are some tips on budgeting and saving as I'm just beginning my career?

Colin Day: Yeah, and it's pretty common. Just so happens that yesterday I was out of the office. I was two hours west of here doing some 401(k) education and there's a theme. And it just seemed that everybody I was talking to is one or two years out of college. And many of those folks were in some kind of engineering profession, let's say, and they make pretty good money and they're just looking for answers to some of their outstanding questions. Because while they can be great savers, the biggest question I hear is, "Where does the next dollar go?"

So when you think about your paycheck, when that paycheck hits your account twice a month. Personally, do you do anything with that? Do you say, "Hey, okay, I'm gonna pay myself first, I'm gonna put this money over into this savings account, and then I'm gonna pay off my credit card, and then I'm gonna put this aside for my rent check." Are you going through that process?

Sophia Steinbecker: A little bit. I'm not great at it yet, but I think the first thing that is in my mind is saving. I put some money to save away – and kudos to my mom, she was the one that initially told me to start doing that. And then I would say the second biggest expense is rent. That's where my mind goes making sure I have enough money set aside for that. And I guess bills and things like that.

Colin Day: Right, yeah. Those are also important. So that you have electricity and internet and stuff.

Sophia Steinbecker: Right, right, yes.

Colin Day: Okay, I got it. And your dog has food to eat and other things.

Sophia Steinbecker: Yes.

Colin Day: Toast, her lovely, what do you call it, pug?

Sophia Steinbecker: French bulldog.

Colin Day: French bulldog. Gosh, I'm sorry. I degraded toast, I'm sorry. We want to make sure that everything is taken care of. What I had written down here the first thing that we start off with with everybody is making sure that we have some kind of emergency fund. So, regardless of what account that's in, we just need to make sure that we're saving enough so that when the next expense comes down the pike, that we have the funds available for that emergency.

For example, as a single income household, so to speak, we would suggest six months of your expenses in cash. So, if you can think about how much you spend on a monthly basis, we want to build that up to six months. And that could be quite a sizable sum, right?

Sophia Steinbecker: Yeah.

Colin Day: And the reason is because – and again, you're never going to leave us – but if for whatever reason you did, and you were out of work for a time. Maybe you say, "Hey, Colin, I need to take some time off and I just want to be out of the office for three to six months," or something like that, we need to make sure that we have those expenses taken care of for you.

And the easiest way to handle that is in some kind of cash account of some sort. So for some folks, that's the checking account where all of your cash sits, and then sometimes it's the savings account.

So, do you have two different bank accounts? Do you have a checking and a savings?

Sophia Steinbecker: I do.

Colin Day: Do you know what your savings rate is on that account?

Sophia Steinbecker: Ooh, I don't think I know.

Colin Day: Something to look into tonight. To see, "Hey, what am I earning on this account?" Because depending on where you're banking, there might be a more lucrative option for you. Because if you're just sitting on a bunch of cash doing absolutely nothing, you're actually losing money against inflation. Because, all the goods and services, Toast's dog food is going up. Unfortunately, you're just not producing enough income off of that. And so that's why it's important that we are productive with that money still.

Sophia Steinbecker: Okay.

Colin Day: Okay? So from a savings perspective, it's three to six months. After we have some savings built up – maybe it's not all the way up to that six month mark, but we feel comfortable – that's when we start to attack things like where you're incentivized to put money. And that's like your 401(k). That's probably the best example of that. Same thing with a health savings account if that was available to you. So if your employer is providing some kind of match on those dollars, that's the next logical place because if I put money in, my employer's also giving me money on the side too.

The third thing that I had written down here is more of a just a general guidance. Our credit card. So you've already told me you have a credit card, right? And I think you told me you think you have cash back on that card.

Sophia Steinbecker: Yes.

Colin Day: Okay, would you happen to know if you get different percentages depending on what you buy with that money?

Sophia Steinbecker: I think food might be a higher percentage compared to other things, but I don't know the specifics.

Colin Day: If you have a family going forward, you'll understand that "Hey, there's the card that's for the grocery store, and then there's the card for gas, and then there might even be a third card for everything else. It just depends on how thick your wallet is really. And as somebody who just keeps their wallet in their front pocket I only have a couple cards, but there is intention behind those things.

So, pay off your credit card every single month. I don't think I need to tell you that but I will say it. You don't carry a balance on your credit card if you can help it. Because it does not improve your credit score to carry a balance. I have talked to many people over my career that say, "I just keep a little bit of a balance, Colin, to keep the credit cards and the credit industry happy."

And we say, "That's a big time out there. Stop doing that." Carrying a zero balance is very important. Because it shows that you're able to pay off the entire thing. So, the credit bureaus will appreciate that.

So, from a savings perspective again, building the emergency fund, making sure we have cash, making sure we're productive with that savings cash, and then also attacking what is available to us from a matching perspective from my employer, "Where am I incentivized to put money?" Then making sure that we're making smart decisions as we use our credit card every month. All right. Have I floated your brain too much already?

Sophia Steinbecker: Okay, got it.

Colin Day: All right. Have I flooded your brain too much already?

Sophia Steinbecker: I don't think so. Let's keep going.

Colin Day: Because we got at least three more left. Why don't we read number two?

Sophia Steinbecker: So, number two, what is the best way I can contribute to my 401(k), and when should I start contributing?

Colin Day: Newly eligible, right?

Sophia Steinbecker: Yes.

Colin Day: For the 401k plan, so congratulations.

Sophia Steinbecker: Thank you.

Colin Day: Depending on who you are watching or listening to this podcast, you may or may not be eligible for your 401(k). Every 401(k) is different. You might have to work for 3 months or 6 months or maybe even a year. Maybe you're 19 years old and the plan doesn't let you in until 21, so everybody's gonna be a little bit different in this regard.

But to answer the question, "When should I start contributing?" Well, we would encourage you to do it as soon as you're able to. Get the safety net first. Get the savings in place first because with a 401(k) plan there's a lot of restrictions on how you can use those funds. With many of the people that I was chatting with yesterday, it was, "Hey, you're eligible for your 401(k) plan, but you also just told me that you have significant debt. You've got pretty big credit card debt." Maybe you've got only 500 bucks in the bank account, period. I'm not talking savings. I'm just talking period. And that makes me very nervous for you to put money into an account like a retirement account, which is designed for, guess what? Retirement. It's not designed to dip into all the time and not every plan allows you to dip in all the time. So that's why we say start with the emergency fund, get that safety net build up, and then we can look at the 401(k).

In terms of, "What is the best way to contribute to my 401(k)?" Well, there's likely two different ways to contribute. There's pre-tax and there's Roth dollars. There's probably not enough time in this podcast to go over why one might be more favorable than the other. But pre-tax contributions, which is what literally is called traditional contributions, that is the way where we're paying the taxes later when we withdraw those funds. So I get the money in, I'm not paying taxes on it, I'll pay them later, when I'm in retirement likely. Roth contribution is, "I'm going to pay taxes now." Because I think it makes sense for me to pay the taxes now, so I don't have to pay them later. Because I think in my career, I'm going to make beaucoup bucks. I'm going to become CEO of Correct Capital or what have you in the future. I'm going to make a lot more money, so I'm in a lower tax bracket now. I'd rather pay the taxes currently.

It also allows that money to grow on a tax deferred basis. So, what that means is that you're not paying taxes on all that money as it grows, and then the IRS is so thankful that you paid your taxes up front, that they'll forgive you on the back end for paying taxes on those earnings.

So, fast forward 30, 40 – well in this case 40 years – in the future for you, when you're thinking about retirement, that whole bucket of money, in theory, should be tax free. Which is pretty lucrative for folks. So for many younger people Roth makes more sense than pre-tax. But if you have a significant other and you're jointly filing on your taxes and that person's making four hundred thousand dollars a year, pump the brakes because now we're in a different tax situation just from what you're making within your role. So it's a balancing act between the two.

So to put it more plainly, once you have your savings built up, then we feel like we can attack the 401(k) and take advantage of the free money. And then from your contribution resource, you're likely incentivized to do more Roth than pre-tax contributions. One last thing I'll mention here is that matching dollars from your employer are normally pre-tax. Probably [in] 99.9% of all 401(k) plans, any kind of matching dollars, profit sharing dollars, are on a pre-tax basis. So you will have to pay taxes on those. And the reason I say 99.9% now is because now in 2024 plans are able to offer Roth contributions on the employer match. So you could actually say, "Hey, Correct Capital, that money you're putting in, I'd like that to be Roth, or after tax dollars."

It's not yet available even on our plan. I'm pushing for it. But that is something that's gonna come about and might be available to you in other career opportunities.

Sophia Steinbecker: Okay, all right.

Colin Day: All right, so that was the best way I can contribute to my 401(k) and when should I start contributing. What's question number three?

Sophia Steinbecker: All right, question number three. What would you say the priorities in my life should be being so early in my career? And what are the top things I should be paying attention to or aware of?

Colin Day: Yeah, so obviously I'm not you, and everybody is a unique snowflake, right?

Sophia Steinbecker: Yes.

Colin Day: So when it comes to making decisions about what matters most to you, ultimately your priorities come first. As a financial advisor, I'm listening to our clients to figure out what their priorities are, and then making a decision after that. So when it comes to you, if you are a blank slate, I take the dry eraser and erase the entire board, what I would encourage you to do is – you're in your early 20s, right?

Sophia Steinbecker: Yes.

Colin Day: Most of the stuff that we attempt to do is build good habits, right? And a lot of the stuff is super boring. It's building the emergency fund, it's putting the money in the 401(k), it's not racking up credit card debt, it's kind of the basic stuff. And I know I'm active on social media, you might be as well. You might have heard of an app called TikTok or Instagram Reels, and there's certainly some good follows, but then there are definitely some bad ones. And so when I say boring stuff, it's not some of the stuff that you see out there. Because we don't want you to be thinking about like, well this one video is talking about purchasing real estate. Or you'll get rich over time by buying this one insurance product. We want to ignore those types of things. Is your algorithm running you into those types of videos or is that just me?

Sophia Steinbecker: I maybe get one in a blue moon.

Colin Day: Well lucky you. When you post a lot of content focused on finances, I guess I just get a lot more of that. This is outside of the questions that you put here, but in terms of big things that you want to do in the next two to three years, that could be buying a house. I think you just bought a new car, maybe just paying down the car. Are there big things that you want to do in the next couple of years that might be a priority for you?

Sophia Steinbecker: I don't think I would like to buy a house in the near future. But the car is a big one. That was my first big purchase, so paying off the car is a big – that was one of my other bills. I would say next to rent is paying the car bill. But, not really [not] right off the top of my head, no.

Colin Day: Well, and if that's the case – it's interesting because, as a financial advisor, I'm interested in where the next dollar goes for you. We talked about basic savings, we talked about 401(k), but then the next logical thing is, "Okay, well, do I think about other kinds of accounts? Do I think about other kinds of savings?" Again, more boring stuff. We're not talking about doing esoteric, weird strategies. We're talking like you're gonna open up a Roth IRA. You're going to open up a brokerage account. But one of the things I would encourage you to do is that – even though you're not a financial advisor and you're not giving advice, of course – one of the things I would encourage you to do is maybe try to do some of this on your own. For example, I got a lot of value in opening up an account for myself, putting the money into an account and then figuring out the investment.

And of course, you've got a whole office here, right? "Can you double check my work, please?"

Sophia Steinbecker: Yes, yes.

Colin Day: But I find there's incredible value for those people that have done the work. Maybe this predates you maybe by just a couple of years, but when [GameStop's stock] was going off, and AMC, and all those meme stocks were going nuts. Well, the worst thing that happened is that people lost money. But I think the best thing that happened to most people that did that was that they learned a lot about the stock market. They learned how to perform, how to choose things, and how to make decisions. They probably learned a lot of valuable lessons, let's be honest here, as opposed to positive ones. But they did learn a lot. Have you been thinking about opening up anything to yourself besides like the 401k?

Sophia Steinbecker: Not really. I know some friends that have some accounts, but I feel like I don't know enough yet to think that far in advance.

Colin Day: Well, that's okay. And again, the nice thing is for someone like yourself, is that you've got guardrails, so to speak, in the form of shooting ideas by me or Brian or anybody else. Or talking to the portfolio managers and you don't have to get complicated with this. I'm of course not saying, "Hey go buy one particular stock or something like that." You can just purchase a very broad market index mutual fund or ETF. You can keep it very simple. I think the process of just opening up the account, you're gonna have to think about things like beneficiaries, which is pretty weird when you're in your early 20s, right?

Sophia Steinbecker: Yes.

Colin Day: But it's a reality that we have to think about like, "Oh, wow, who do I want this money to go to? What family member is gonna receive this? Who's important in my life that I want to make sure I take care of you with my last expenses?" It starts to creep open some doors that are a little dark on the other side. But it does start to make you think a little bit more about adulting or however you want to put that.

So again, trying new things I think is really important. You said that you weren't ready for certain things, but I think a lot of people that are in their early 20s probably feel the same, right?

Sophia Steinbecker: Yes.

Colin Day: So I have a question for you. This is a bonus question. This is question number four. From a career development perspective and what you've learned working here for the past seven months. You've heard a lot of conversations. You've sat in marketing meetings, you've sat in our team meetings. You overhear conversations, you hear client calls, and you have to route them to the right people, understanding what we all do that's different in the firm. What do you think you could teach other people in your age bracket as they're starting to build their earnings and savings journeys?

Sophia Steinbecker: I'd say the big thing that I've learned, there's lots of terminology. If I hear someone on the phone and I hear a certain word, sometimes I'll wander into Colin's office and ask, "What's a Roth IRA?"

Colin Day: You do.

Sophia Steinbecker: I do; just curious. So I think that I can pass along some of that information to my friends. I think I've learned a lot just from everybody in the office, just little random things. Because I'm curious, and I don't think I learned that much in my finance classes in college that was that useful. We were doing lots of equations and things like that, that I don't use here. But I think it's been really beneficial to me to just overhear the conversations in the office, and I've learned a lot. I've gotten really good at asking questions, because if I hear a conversation and I don't understand something, it's sometimes fun to learn about something that I'm not familiar with. I've tried to ask my parents certain questions. "What's a 401(k)?" was a big one for me before I came in, that I tried to ask my parents. They weren't too great at explaining that to me.

Colin Day: I'll say this. I've been doing this for a while now, and I've been out of college for too long, and my first job when I was starting off being a contractor for a 401(k) call center, I got my big boy 401(k), and my first phone call was to my mom, and my mom is the one that told me about what I should do in my 401(k).

Mind you, what was I doing professionally? I was talking to people on the phone about their 401(k) plans, and I still went to my mom. So there is absolutely no shame in anybody doing it, because over time you can learn a hell of a lot of good things by just asking good questions and reading. There was a term we talked about actually in the other podcast we just recorded, the "Magnificent 7." I did not know who the Magnificent 7 stocks were until two days ago. So there are things that, it's like, "Oh, that terminology has been around for a couple of years now, Colin." It was new to me. There are things, there are new products that come out, new technologies that result in new equations to determine your financial health or whatever it is. We're always learning.

So even those people that are frustrated, or even if you feel frustrated that you're at the ground level of knowledge and you're trying to build the first story, so to speak, it's important to continue to struggle through it, learn, come out a lot better on the other side by continuing to pursue that.

Sophia Steinbecker: Yes.

Colin Day: Sophie, thank you for being a candidate. Thank you for being a guinea pig, so to speak, in this kind of format with your questions. You learn anything? You learn anything good?

Sophia Steinbecker: Yes. I've got lots of notes to take and things to put into action.

Colin Day: Okay. Good. Well, I'm just down the hallway when you have questions.

Sophia Steinbecker: You know that I always wander down there and have questions. All the time.

Colin Day: Well, that's fine. That's what we're here for, right?

Sophia Steinbecker: Yes. Okay. Everyone, thank you so much for joining us for another edition of Capital Conversations. If you found this valuable, we hope that you like and subscribe and all that good stuff for us. And if you have questions, to reach out to us directly. So on behalf of Sophie, I'm Colin Day. Thank you again, and we will chat soon. Take care.

The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing.

As always, please remember investing involves risk and possible loss of principal capital. Please seek advice from a licensed professional. Correct Capital Wealth Management is a registered investment advisor. Advisory services are only offered.

Capital Conversations | Correct Capital Wealth Management

As you journey through your 20s, financial literacy and planning are powerful tools that can help you achieve your goals and dreams. Whether you're curious about budgeting, saving for the future, or just wondering what a Roth IRA is, asking the right people the right questions is a great way to ensure you're making progress. If you're ready to speak to a financial advisor about investment and retirement savings, call Correct Capital at 877-930-4015, contact us online, or schedule an appointment with a member of our advisor team. It only takes 15 minutes to understand if we're a good fit.