Judging by the statistics, Generation X isn’t doing too well financially. In fact, those born from 1965 to 1980 seem to be worse off in many regards than the two larger generations they’re wedged between — baby boomers and millennials.
Gen X has the highest average debt of any generation, according to credit reporting agency Experian.
Nearly half of Gen X workers report living paycheck to paycheck, according to Met Life.
Gen X is less likely than other generations to rate its financial wellness as good or excellent, according to a Bank of America report.
Gen Xers are more likely than other generations to say they won’t have enough saved by age 65 to meet their retirement needs, according to a TransAmerica Center for Retirement Studies report.
There are good reasons the generational middle child is struggling so much financially — and, no, it’s not because Gen X has spent too much time making mixtapes and watching John Hughes’ films. Many members of this generation are caught between supporting millennial and Gen Z kids and caring for aging boomer and silent generation parents. Plus, Gen X has largely been overlooked by employers and the financial services industry.
That doesn’t mean, though, that if you’re a member of Gen X that you should simply accept your current financial situation. You can take control of your finances by taking these steps.
Last updated: April 19, 2021
Figure Out What About Your Finances Needs To Change
Before you can improve your finances, you first need to figure out whether the way you’re currently handling your finances is working for you, said career coach Elizabeth Koraca. For example, ask yourself how you feel when you log onto your bank account or pay bills. Do you feel excited, organized and on top of things?
“If you don’t, if you have a sinking feeling in your gut, you want to tap into that,” Koraca said. Think about what you dread when it comes to your finances and what you need to change so you don’t dread it anymore. Recognize, though, that change can take time. “It is challenging to change habits,” Koraca said. “Take baby steps. You don’t need to become a financial expert overnight.”
Identify Your Financial Priorities
You’ll be more motivated to ditch bad habits and improve your finances if you know your “why,” Koraca said. Why do you need to improve your finances? What outcome do you want? Make a list of your financial priorities and rank them. Then you can set goals based on your priorities.
Create a Vision for Your Financial Life
Map out where you want to be financially within a certain time frame and set monthly goals to get there. “You need to see what it’s going to look like,” Koraca said.
Be specific with your goals. For example, don’t just write, “Pay off credit card.” Koraca recommends creating a mini action plan for each month that details how much you’ll pay toward your credit card debt, where the money is coming from to make that payment or what spending you need to eliminate to generate extra money. Then set calendar reminders for what you need to do each month to reach your goals.
Get a Professional Involved
If you’re struggling to figure out what you’re doing wrong with your finances and how to make changes, hire a professional to help you. A financial advisor can identify your strengths and weaknesses, create a financial plan for you and help you stick to that plan. In a way, it’s like hiring a trainer to help you get in shape. “You want someone to watch your form because your odds of being injured by doing something slightly off financially are higher when you’re older,” said Bobbi Rebell, a certified financial planner professional and personal finance expert at Tally, an automated credit card payoff app.
Check with your employer to see if it offers access to a financial advising service as part of its workplace benefits. Otherwise, you can find an advisor through the National Association of Personal Financial Advisors, the Financial Planning Association or the Garrett Planning Network.
Do a Multi-Generational Audit
Rebell recommends assessing what is going on with both your parents and your children that could affect you financially and then making a plan to limit the financial impact — or, at the least, to be prepared for it.
With your parents, this starts with having conversations with them sooner rather than later to find out where they stand financially and what role they expect you to play as they age. With your kids, it’s important to start preparing them from a young age to be financially responsible adults. If they’re already young adults and relying on you for financial support, create a plan to taper off that support. “You have to start setting up the guardrails to protect your financial future,” Rebell said. If you jeopardize your finances by letting your kids’ continue to depend on you for support, you’ll likely find yourself having to depend on them as you age.
Prepare For Emergencies
If you haven’t already, build an emergency fund with enough cash in a savings account to cover three to six months of expenses. Make sure you have enough life insurance to replace your income and cover major debts so that those who count on you for financial support will have a safety net. Cover your estate-planning bases by drafting a will, a power of attorney and advance directive. And look into long-term care insurance or life insurance with a long-term care benefit to help cover the cost of any long-term care you might need as you age.
Check Out: 7 Major Emergencies That Could Bankrupt You
Tackle Your Debt
The first step to digging yourself out of debt is to stop racking up debt. The average credit card debt among Gen Xers is $8,467 compared with a national average of $6,445, according to Experian. So put away the credit cards and give yourself a cash allowance just as you would with your kids.
Then set a timeline for paying off your debt and calculate how much you’d need to pay each month to reach that deadline. Coming up with the cash to make debt payments might require making some deep cuts in spending. However, don’t stop contributing to your retirement account to boost debt payments, said Daniel Lash, a partner at VLP Financial Advisors. If you need help with a debt payoff plan, you can find a free or low-cost credit counselor through the National Foundation for Credit Counseling.
Prioritize Retirement Savings
The median amount of retirement savings Generation X households have is $69,000, according to the TransAmerica Center for Retirement Studies. That amount won’t go very far in retirement. To figure out how much you should have in retirement savings, Lash recommends multiplying the amount of money you need annually to cover expenses and live comfortably by 25. For example, you’ll need $1 million saved if you expect to live on $40,000 annually in retirement.
“It seems so big and daunting,” Lash said. “You have to make difficult decisions. What are you willing to go without today to save that money?” If you’re a parent, you’ll likely need to prioritize saving for your retirement over saving or paying for your kids’ college education. Just remember that if you don’t save for your future, you might have to rely on your kids for support (and you don’t want to do that to them).
Keep Down College Costs for Your Kids
To help prevent both you and your kids from taking on student loan debt, start talking with them well before they start applying for college about what you can afford. Discuss ways they can get a college education at a reasonable cost, such as enrolling into a community college the first two years of school then transferring to a state university, Lash said. Your children also can take dual credit courses while in high school to reduce the number of courses they’ll have to take in college and apply for scholarships — even if they’re not the valedictorian or top athlete.
Find Out: How Do I Cut College Costs?
Downsize Sooner Rather Than Later
Don’t wait until you’re retired to move to a smaller home. If the kids are in college or have graduated, now could be a good time to downsize. With a smaller mortgage, lower property taxes and lower utilities, you’ll have more room in your budget to increase debt payments or retirement account contributions.
And don’t worry about not having enough room for all of your kids. “You don’t need to provide permanent housing for your entire family,” Rebell said. Plus, if the kids will only have a couch to sleep on, they’ll be less tempted to move back home after college.
Keep Reading: Retirement Steps You Aren’t Taking Now, But Should
You Can Take Control of Your Finances
Taking these steps to improve your finances can be difficult. “It’s kind of like losing weight,” Lash said. “We all know how to do it. It’s the implementation of it that’s the most difficult part.” You don’t have to implement all of these steps at once, though.
Also, Rebell cautions not to go to extremes. “You don’t need to be overly frugal,” she said. “Give yourself permission to enjoy the money and financial resources you have earned. It’s really important to live your life.” Just find a balance so that you have the resources to continue to enjoy your life in the future.
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This article originally appeared on GOBankingRates.com: 10 Things Gen Xers Can Do To Improve Their Finances