Breaking down the generational divide in financial perceptions and what it means for your wallet.
My buddy sent over a recent article that said that Gen Z expects they need to make over a half a million dollars a year to feel they are financially successful. I practically choked on my carrot stick and hummus! “This is ridiculous!,” I thought. What the heck are they talking about? This data came from a study called the Secret to Success published by Empower. This study explored the pursuit of financial success and offers some insights into Americans’ definitions of financial success, what actions to take to reach it, and what barriers may prevent people from obtaining it. Let’s dig into this data and try to understand how this generation may be so disconnected from reality to think this.
Clash With Reality
I know you may think that this post is an old man “get off my lawn” angry type of post. I just think this is so unrealistic I want to discuss it. This Empower’s Secret to Success study revealed that Gen Z believes they need a salary of over $500,000 to feel financially successful. Yeah, Crazy, right? This number totally exceeds the national average individual salary of around $63,000 per year. Almost 700% more! This study shows that overall, across all generations, the average American salary would have to be about $270,000 per year for them to feel successful. Older generations seem to focus on more tangible achievements like owning a home or retiring comfortably. Gen Z’s aspirations, I think, highlight a growing disconnect in how financial success is perceived.
Let’s explore why Gen Z may feel this way, how this mindset could be unhealthy, and what we can learn from generational differences in financial success. As we have discussed in the past. I have Gen Z children, and I’ve asked for their input. They have refused lol. So, if you or someone you know was born between 1997 and 2012, and would like to have a conversation about financial success, retirement, or a relationship with money. Let me know! Email me at chris at heavymetal dot com.
Generational Perspectives on Financial Success
Gen Z Have Big Goals And Bigger Expectations
Gen Z is entering adulthood in a time of some economic uncertainty, we have had skyrocketing housing costs, high inflation, and an election year. They also live through viral social media comparisons. Their perception and expectations of financial success is influenced by:
Social Media Pressure: Platforms like TikTok and Instagram showcase influencers with lavish lifestyles, creating these crazy and unrealistic expectations. Flying private, luxury vacations, dining out every meal, leasing the latest vehicles, and renting the best condos in the upperclass neighborhoods are what is seen.
Economic Instability: Growing up during the 2008 financial crisis and the COVID-19 pandemic has made Gen Z hyper-aware of financial vulnerability.
Cost of Living: Housing, healthcare, and education costs have risen significantly compared to previous generations, leading Gen Z to believe a higher salary is necessary just to keep up with the cost of living and to keep up with their peers.
Millennials Are Bridging the Gap
Millennials are slightly more grounded in their expectations, citing $180,000 as the salary benchmark for success, per the Empower study. This generation focuses on:
Recovering from Recession Fallout: Many started their careers during or after the Great Recession, which shaped their financial priorities.
Balancing Aspirations with Reality: While Millennials still value financial independence, they’re more likely to pursue side hustles or flexible work to achieve it.
Gen X and Boomers Use Traditional Metrics
Older generations define success through tangible milestones, such as:
Owning a Home: 52% of Americans see homeownership as a key marker of financial success.
Retiring on Time: For 40%, retiring at a goal age is critical, reflecting traditional financial planning values.
Financial Stability: Boomers are less likely to chase sky-high salaries and more likely to prioritize living within their means.
The Problem with Unrealistic Expectations
The Psychological Toll
Believing you need a $500,000 salary to feel successful can lead to so much unnecessary stress and dissatisfaction with life. Constant comparison to others, especially through social media, can create feelings of inadequacy. I think this is dangerous and leads to poor health and well being.
The Impact on Financial Behavior
This mindset can also lead to poor financial habits, such as:
Overspending to “Keep Up”: Trying to emulate influencers’ lifestyles can lead to living beyond one’s means. Spending more money than you earn using credit cards, leases, or personal loans can cause financial hardship later.
Procrastinating Financial Planning: Unrealistic goals may discourage Gen Z from taking small, actionable steps, such as saving for retirement or building an emergency fund.
Losing Sight of What Truly Matters
Only 27% of Americans rank wealth as the top measure of financial success. Instead, happiness (59%), free time (35%), and the ability to pursue passions are more meaningful indicators. If Gen Z is only fixating on such a high, and mostly unattainable high salary distracts from these other aspects of a fulfilling and meaningful life.
Why Gen Z Feels This Way
Economic Pressures
As we mentioned, the average cost of housing, education, and healthcare has skyrocketed in recent years. While it has stabilized some, Gen Z continues to feel these pressures. This leads to the belief that a six-figure salary is a bare minimum for a comfortable life.
The “Factor of Four” According to Empower’s research, Americans believe financial success comes from a mix of of these four factors:
- Hard Work (84%)
- Talent (65%)
- Networking (55%)
- Luck (51%)
I’d like to challenge something from this study. It found that Americans feel that over 50% of our success if related to Luck?! This is so high! I do feel that luck and circumstance may have a very small influence to our overall success. I think it’s crazy that people believe it is this high. We can increase our “luck” by the actions we do everyday. Sure, being in the right place and the right time can help, but by working hard, gaining knowledge, honing your talents, and growing your sphere of influence you increase your “luck”
While these factors do remain somewhat consistent across generations, younger individuals often feel the need to overcompensate financially to account for perceived deficiencies in other factors such as networking or other opportunities.
The Influence of Media and Technology
Social media does seem to amplify visibility into others’ wealth. It can create this skewed perception of “normal” income levels. Additionally, viral success stories often highlight extreme outliers, reinforcing unrealistic financial aspirations. I mean how many times do we hear these people on social media say, “I’ve made $20,000” a month by making faceless videos, or high-ticket affiliate products, or even selling pics of your feet! Let’s not even get started with the ones that say they also have an OF account!
A Healthier Approach to Financial Success
Focus on Tangible Milestones
Rather than chasing an abstract salary figure, it may be better to focus on meaningful, achievable goals. For example:
Building an Emergency Fund: Start with a goal of saving three to six months’ worth of living expenses.
Planning for Retirement: Contributing regularly to a 401(k) or IRA, even in small amounts, can grow significantly over time thanks to compound interest.
Investing Wisely: Rather than fixating on quick wealth, adopt a diversified, long-term investment strategy.
Redefine Success
We can take a page from some of the older generations who emphasize stability and happiness over how much our paycheck is:
Happiness and Free Time: 59% of Americans value happiness over wealth as a measure of success. Prioritize spending on experiences and time with loved ones.
Job Satisfaction: Finding a job that aligns with your values can lead to greater fulfillment than a high salary.
Combat Unrealistic Expectations
Limit Social Media Exposure: I know it’s hard if not impossible to limit our time on social media, but if we recognize that the wealth we see on social media are often curated and unrealistic.
Set Realistic Goals: Start small and focus on incremental progress rather than overwhelming, lofty ambitions.
Seek Financial Education: Over 20% of Americans cite a lack of financial knowledge as a barrier to success. Resources like blogs, financial advisors, or apps can help you take control of your finances.
What We Can Learn From Generational Differences
Generational perspectives on financial success reveal key insights:
Adaptation Is Key: Each generation faces its own unique challenges and adapts its financial strategies accordingly. Gen Z can be flexible and learn from older generations’ emphasis on planning and saving.
Balance Ambition with Realism: While it’s good to aim high, setting unattainable goals can do more harm than good. Practical steps often lead to sustainable success.
Define Your Own Success
Financial success isn’t about earning some arbitrary salary. It’s about creating a life where you feel secure, happy, and able to pursue your passions. Start by asking yourself:
What truly matters to me? Is it wealth, or is it the freedom and happiness that money can bring?
What small steps can I take today? Begin by setting achievable goals like saving $50 a month or investing in a low-cost index fund.
How can I grow financially? Seek education and advice tailored to your situation.
Don’t chase someone else’s dream. Create your own definition of success—and rock it. Horns up, my friends.