Why Gen X Isn’t Doomed
January 20, 2014Last week, Financial Finesse released our annual Generational Research Report and all I can say is, “I resemble that remark.” The good news of our findings is that my generation, Gen X, is getting better across all areas of financial wellness. The bad news is that we were the hardest hit generation by the Great Recession and we are lagging our counterparts in many areas, especially cash management.
Many of the struggles that Generation X, including me, face are somewhat beyond our control – matters of demographics and timing. Our generation is the most likely to have minor kids at home. Since the latest study by the U.S. Department of Agriculture shows the average middle-income family can expect to spend around $240,000 to raise a child to age 18, and this amount doesn’t include the cost of college, it goes without saying that we have a few bills to pay. My wife and I have an 8 year old and a 4 year old so we are paying to raise them and set aside money for their college at the same time. I imagine that many of you can relate to the sacrifices that entails. We save for retirement, but not as aggressively as we did before the kids. We also don’t travel or entertain like we did before parenthood.
Another factor that we couldn’t control is the market. I started my working career in 1997 so like almost all of us, my first 401k investments missed the entire bull market of the 80s. I had a great ride in the late 90’s but there wasn’t much there because we were just getting started and then had to endure a 3 year bear market and a full-fledged crash in less than 10 years. Suffice it to say that our nest eggs got scrambled.
To top it off, like many of you, we decided that the time was right to buy a bigger house for our family… about 2 years before the real estate market collapsed! Sometimes it felt like if it wasn’t for bad luck, we wouldn’t have any luck at all. But fortunately, for our family and for you, things aren’t as bad as they appear.
Kids are a blessing, albeit an expensive one, but they do eventually grow up and move out. (Hint to those Gen Xers or Millennials who haven’t bought a home yet – if the kids don’t have room to be comfortable, they won’t want to come back when they graduate!) That money that has been dedicated to them for years is about to start going back to your priorities of paying off debts, saving for retirement and having that rainy day fund our parents and grandparents always told us about.
The stock market has had a great run since it hit bottom in March 2009 and we still have 20–30 years until we hit full retirement age. We also have been the generation of skeptics, never trusting that Social Security would be there, so we have had a more realistic picture of what it would take to retire all along. Lastly, housing prices have rebounded some and interest rates are still historically low so it may be possible to refinance to a shorter mortgage and be debt free at or before retirement.
We still have time to make the small changes in our daily spending habits and apply that money towards our long term goals of debt reduction and retirement savings. Without a flux capacitor, we can’t go back to the past but we can use tools like these to get back on track. As Bluto would tell us, this isn’t over.