Nicknames: Gen X, Slacker Generation, 13th Generation, Baby Busters
Financial Challenges: Paying off credit card debt, benefiting from previous investments.
Likely born: between the years 1962-1981
“Including Social Security benefits, Gen Xers are projected to have enough money in retirement to replace only half of their annual pre-retirement earnings. Financial planners recommend retirement savers aim to replace 70% to 100% of pre-retirement income.” – Gen X To Be Worse off Than Boomers in Retirement
Compared to other generations, Generation X sure appears to have gotten the short end of the stick. Generation X faces a steady torrent of pessimism when it comes to their financial future. On the web, low estimates for retirement saving, questionable time and ability to recoup from the recession and a general lack of confidence in future financial stability are just a few of the projections Gen-X regularly face. On top of that, immediate costs associated with kids and their education along with potential costs of caring for parents and even grandparents are serious and emotional struggles. Mortgage payment, credit cards or student loan debt on top of those factors can all combine to paint what seems like a chaotic and unstable future. You aren’t alone.
Despite the obvious challenges, there are steps that can be taken to ensure a more comfortable retirement and future. For those of you in your 30’s or 40’s or anyone who identifies with Generation X read on to discover how you can begin taking hold or continuing to improve on your unique financial circumstances.
So let’s start talkin bout your generation:
The first step in taking hold of your finances is to acknowledge your financial situation and act accordingly. The facts may appear less than optimistic but that’s no reason to avoid taking measures to protect your financial future. Whether you’ve already started to plan for your retirement, or are just beginning – sooner is better. And particularly in regards to retirement, sooner is pretty darn essential.
Keep checking in on your finances. By now, you’ve had enough experience to realize that finances are an integral part of your life, and that financial security goes beyond a number on a bank statement. Now (right now) is as good a time as any to makes sure financial literacy remains a priority. Keep updated on the condition of your credit score and your credit report. Look at your bank statements and understand what information they relay. If you’re avoiding financial discussions because the numbers look disappointing or you’re unsure how to deal with potential problems – don’t lose hope.
Articles and experts might project a dire future, but do not use that as a crutch or excuse to remain stagnant. The only way to better your future, other than blind luck, is to take action and approach upcoming years with a plan and with a purpose. Use calculators to layout the framework and predict varying outcomes (the good and the bad).
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Compile and Prioritize All the External Factors
Costs associated with kids, a car payment, credit cards and a mortgage add up – and together they can seem overwhelming. On top of normal expenses you were likely thrown a few curve balls over the years. But individual elements of finance can be managed effectively and efficiently if properly acknowledged and organized. Yes – it takes attention and careful planning, but familiarizing yourself with all your costs is an excellent way to manage your personal finances, particularly if you’re looking for areas to save.
A good starting point is to assess the meaning of a need versus a want. Basic needs should be covered before non-essentials. A new dishwasher – though convenient, is a luxury. And beyond material items, basics also include contributions into your retirement and emergency fund. Retirement funds are not optional and should be factored into your financial plans.
Baby Boomers may have been the first to be likened to a Sandwich Generation, but as a member of Gen X, you’re up next. Costs associated with extra dependents can take a huge chunk out of your savings plan. Anticipate the trend, and take measures to plan for the more than likely scenario that you’ll be spending at least some of your income on aging parents or older children. Consider how much you may need to contribute in order to care for your parents, and what kind of cuts or flexibility will be reasonable in your own savings plan.
If you have growing kids and want to offer the benefit of paying for their college education, make sure your accounts are in order first before extending financial favors or help to others. It might feel selfish to divert money away from the college fund envelope, but it goes along the same lines of putting an oxygen mask on yourself before putting it on someone else. To be in the kind of position to help someone else, you have to make sure that your own needs will be taken care of.
Start making choices with your money. Rather than funneling it equally into each red zone, be smart about the way you pay off your debt. Pay off debt with the highest interest rate first. Choose to contribute to retirement. Choose to save for emergencies and choose to stick with your financial priorities.
Manage Your Mortgage
If you have a mortgage, it will most likely take up a fair bit of your income. And though it may seem like an inevitable cost as you pursue long-term life goals, it’s still a serious debt. There are a few key things to keep in mind, whether you’re already a homeowner or you’re looking to become one in the future.
If You’re a Homeowner: Do what you can to pay off your mortgage. Even on a 15 or 30 year repayment plan, there are things you can do to cut back on the years and save money on interest by doing so. The ReadyForZero mortgage resource center can help you.
If You’re Looking to Buy a House: Think it through and have a plan. Homeownership might be linked to the all American dream, but it certainly doesn’t have to be for everyone. Ask yourself if you’re ready to assume that kind of payment plan into your life. A mortgage will last for years. It might make more sense to prioritize a comfortable retirement over your name on a deed – particularly if you’ll have to downsize later on.
Make a Plan For Your Future – Set Goals
Plenty of people make financial mistakes in their 20’s and go on to successfully correct them as they enter into their 30’s and 40’s. If you have a less than ideal history with money handling, you can absolutely still learn from them and use the knowledge to help you in your future. Setting a goal is an effective way to gain control over seemingly unstable circumstances, and to help you to find purpose in your journey. Decide what you want, where your money would be best spent and where you might cut some unnecessary costs. Map out your expected future routes – the good, the tough and the unexpected. Assume that you will have to face unexpected twists, and give yourself the financial flexibility to make detours if necessary. But above all continue to balance your future happiness with your current needs and wants. One sure fire way to get lost or make unnecessary mistakes is to go about your finances without an aim. While frugality is a place for creativity (homemade vs store bought, alternative activities) the actual numbers are much more cut and dry. Go beyond a weekly budget, and look long-term.
As you create your plan, a few questions you might ask yourself to help keep you on track:
- What are my goals – are they realistic anymore?
- Are there any alternative actions with similar benefits?
- Am I really prioritizing my finances?
- Is my plan sustainable long-term?
Continue Contributing to Your Retirement
There are plenty of reasons to be discouraged by the challenges that Gen X-ers face as they confront the reality (or seeming lack thereof) of their retirement. If you haven’t been regularly contributing to your retirement fund, then you may be telling yourself you still have time to contribute, or that there are other more worthy areas to invest your funds.
Steps to take If You’ve Already Started a Retirement Fund:
- Increase the contributions to your retirement. Just because you picked a single number that you felt comfortable with in the beginning doesn’t mean that you need to stick with it forever. If and when you can, contribute extra. By gradually upping the contributions, you’ll increase the principal in your retirement fund.
- Do not withdraw from your retirement.Taking out money from your retirement will do nothing but hurt you in the long run. Especially if the money has been appreciating for some time – dipping in early will negate all the benefits that time has given you. If possible, find another solution before you decide take anything from those savings.
- Take advantage of company benefits and/or open an IRA. Not everybody who is eligible for a 401k savings plan participates. Considering that the employing company will match up to 6 percent of your income if put into the account, it’s a surprising fact to learn. It seems that there’s quite a bit of confusion when it comes to 401k – how much you could or should contribute remains one of the most confusing points of conversation. Even with a surplus of resources, with limited knowledge you might not be accessing the best of the benefits. Talk about it, and utilize the help that may be afforded you.
Steps to Take If You Haven’t:
- Talk to professionals if you’re unsure of your options, but whatever you do – don’t put off contributing to retirement accounts.
- Research your options. There will always be options – even up to the years right before your retirement. If you’re delaying the contributions to your retirement plan because you feel as if it’s too late, now is the time to begin pursing your options with voracity. It’s not too late.
- Don’t plan to live on social security alone. A recent article on CNN cited that “including Social Security benefits, Gen Xers are projected to have enough money in retirement to replace only half of their annual pre-retirement earnings. Financial planners recommend retirement savers aim to replace 70% to 100% of pre-retirement income.” There simply isn’t enough to guarantee your secure future.
- Go beyond the 401K. Retirement savings can be doled out beyond your 401K. Roth IRA’s are another form of saving that can benefit you long term.
Pass It On
There’s an abundance of advice on the internet. While it can be useful for those already pursuing answers, it might not find it’s way to those who aren’t worried about their financial future – namely those younger generations that haven’t quite realized the benefit of youth paired with retirement planning. One of the most important things you might consider doing is communicating financial savvy to those younger than you – namely your children. They’ll gain an added perspective, and you’ll be creating an environment where it’s OK and normal to talk about finances. Keeping it private has long been the traditional route, but everyone will be faced with the question of funding retirement, taking care of family and paying off debt or loans. Not only will talking it out benefit the listener – it’ll keep you honest. To ensure your own understanding of the financial circumstances, explaining them to another might be just the key to finding mistakes or misunderstandings.
And no matter how financially sound you feel, it doesn’t hurt to keep curious about your financial environment. Things change, emergencies happen and you can’t leave yourself open and vulnerable to the unexpected bump in the road.
And of course, we have some timeless advice as we wrap up our Generation-X post.
Take The Headlines With a Grain of Salt
There’s a lot of info circulating out there. Upon first researching how you might approach your finances as a member of Generation X- you may become discouraged or frustrated. But always remember – these are projections and opinions. They don’t take into account the details of your individual financial path, they aren’t truths so much as predictions. Don’t let headlines get you down – use them as motivators for your financial journey! Ultimately you’re the one in control of how you deal with your finances. But by taking positive actions and taking control of your finances – the power is in your hands. So take this as an opportunity to expand upon your knowledge and do all that you can to ensure a secure future!
And if you ever need a mantra, you can use this one: Generation X? More like generation X-cellent.
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