Financial Planning for Generation X

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We are adults in our 30s and 40s, born between 1965 and 1980 (Generation X). As children of the Baby Boomers, we benefited from our parents’ desire for us to go to college and further our education, even if they had not gone to college themselves. However, when the first Gen-Xers entered high school, America was in a recession, unemployment and inflation were high, and interest rates were in the double digits. By the time we started graduating from college, the stock market crashed and left us wondering if we had any financial future at all.

nirvana1-217x275Our parents had the benefit of company pensions and Social Security. They might have been given a chance to open one of those 401ks, allowing them to save more for their own retirement. The 401k plan was written into law in 1978 and went into effect two years later. That was great news for mom and dad, but not so great for the kids. Since the introduction of the plan, many companies have done away with their old pension plans in favor of the less burdensome 401k. This places greater responsibility on employees to provide for their own retirement. Add to that the fact that we are living longer than past generations, putting a great strain on the Social Security system and raising the very real question of whether there will be enough benefit left for us.

Each generation has its own unique challenges. Ours, in part, is to begin to focus on our retirement savings and rely on ourselves to create the financial independence we want in the future. The struggle is making that happen. While we still have time to get prepared, we need to act now.

Here are seven ways to do that.

Be Honest About Your Financial Health

We should begin by getting our cash flow organized and be honest about where we spend money, because we’re going to need to set some of that aside for the future. Do we have too many dollars going to repaying debt from our college days? Have we lost touch with the reality of how much we have to spend, because we’ve become reliant on credit cards and consumer loans? Create a plan to pay your debt off and keep it that way.

Start Saving Now

Set aside money to save just as you set aside money to spend. Save as much as you can, and then save more. Increase your savings every year by at least as much as your annual pay raise. Save what you were spending on credit card payments or car loans. Save first, spend later.

You might consider:

  • Enrolling in your company’s 401k plan and contributing up to the maximum match.
  • Setting up an automatic investment to a savings account that you can’t access easily.
  • Using coupons and renting movies rather than going to the theatre, then adding the surplus to your future fun account.
  • Eating out less and choosing lunch instead of dinner for a weekend restaurant treat.
  • Reviewing your spending habits from the past year and focus on eliminating or reducing luxury expenses. (For example, if you’re a Starbucks regular, consider cutting back your daily visits to 3 or 4 times a week).

Set A Target

Determine when you want to retire and how much of your current income you will need to maintain your lifestyle.

Educate Yourself

Learn more about investments and how to make them work for you.  Education will empower you to make better decisions.

Build A Foundation for Your Children’s Education

1988yearbookIf you have young children, learn about college savings options and start contributing something for your children.  The fact that you may not be able to save exactly the amount needed doesn’t prevent you from saving something.

If your children are nearing college age, find out all you can about financial aid options and start talking with financial aid officers at a local college or the college your child thinks they may want to go to.  And don’t be afraid to tell your child it’s not financially feasible to send them to the college they want to go to.

Evaluate Your Career Choice

Is it time for you to upgrade your career for better earning opportunities?  Change is good and our generation has been noted for embracing change.  We grew up in the infancy of the digital age and look where technology is now.

Let A Professional Do It

If this list is intimidating, don’t feel discouraged. While it’s vital that you get your financial house in order, it isn’t easy. In today’s busy world, it’s almost impossible for an individual to handle his or her own personal cash flow analysis, budgeting, tax issues, and investments. If you find that’s the case, you should consider hiring a good wealth manager to do it for you. The benefits you gain in peace of mind, extra free time, sound investment management, and tax and budgeting expertise more than make up for the fee.

Barbara Ristow
About Barbara Ristow
Barbara Ristow was one of the rare planners who started in the industry right after college. She graduated from Valdosta State University with a degree in Finance. After graduation Barbara enrolled at the College of Financial Planning, where she graduated with Masters in Financial Services. Over the next two decades, she worked in a series of insurance, investment, and planning firms — including one that she founded herself — before coming to Pinnacle to serve as the company’s Director of Financial Planning. Barbara has taken her passion for personal finance beyond the office and into the classroom, serving as an adjunct professor of financial planning at both the College of Charleston and Virginia Commonwealth University.
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