Generation X, Our Financial Situation is Scary

It’s October, and time to think of all things scary. Snakes, flash floods, identity theft: they all frighten me. The thing that is most likely to make me shiver in my bed, however, are my generation’s finances.

Generation X is the Jan Brady of American adults: not as popular as Marcia Boomer with her looming retirement, nor as cute as Cindy Millennial and her tech-savvy ways and student loans. Unlike Jan, we’re not really complaining that no one is talking about Generation X financial troubles.  Latchkey kids…mall rats…slackers. If Gen X had a motto, it would probably be “You’re on your own, kid.” We learned independence early.

Independence is a great thing to learn, but it wasn’t the only thing we picked up in our journey to adulthood. We also learned consumer culture from Saturday Morning cartoons and MTV, and it still shows. Generation X now ranges from our mid 30s to our early 50s, and we still don’t have our financial lives together. Guess what? A lot of us need to get a handle on our financial troubles before we face a ghoulish retirement.

Making broad generalizations is always dangerous, and there are certainly members of Gen X who have developed good financial habits, a strong portfolio, and a commitment to saving. For the majority, that’s not the case. Over a quarter of GenX reports high degrees of financial stress, and some of the other statistics point to a frightening future.

We have more debt than savings.

We spend what we make, and then more. 38% of Generation X has more debt than savings.

Some of our spending is just about our time of life: We are more likely to have both kids and parents relying on us financially. 40% have children under the age of 18, and about a quarter support parents.  So for many of us, our expenses are just higher at this time of life. But as a generation, we’re also just bad at saving, and good at racking up debt. We have an average credit score of 650, with an average debt of $125,000. When you adjust out mortgages, the average debt for a member of Gen X is still $26,670.

38% of Gen X Has more debt than savings.

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Most of us (76%) got credit cards in our early 20s, and still aren’t managing them well. 48% of Gen X considers credit cards to be financial survival tools. 46% carry a balance on their credit cards, with an average balance of $8000. And 20% believe that going into debt to pay for day to day expenses is okay. It’s not okay. Credit cards are a great tool if you don’t carry a balance. Otherwise, your $100 grocery bill and $35 gas bill becomes much more expensive over time as the interest adds up.

We might not have had as much student debt as Millennials starting out, but we had a heck of a lot more than Boomers. And many of us are still paying them off. Even though fewer members of Generation X have student loan debt, as a group their student loan balances are surprisingly high. Almost half of all student loan debt is held by people between the ages of 30-49, which is more than the 40% held by those in their 20’s.

All of this debt means that we are putting off saving for retirement, and we’re wasting valuable time to let investments appreciate. A whopping 68% feel they will never have enough money put aside to stop working. When we look at how much we’re saving, it’s easy to see why. Only 6% of Gen X saves the recommended amount for retirement. That’s less than Millennials (8%) or Boomers (10%).  As a matter of fact, 43% of all members of Gen X are saving less than 6% of their income. 41% have saved less than 100K for retirement. 15% have taken out early withdrawals.

68% of Gen Xers feel they will never have enough money to stop working.

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We’ve forgotten to follow that old maxim “Pay yourself first.” We’re even putting our kids college savings before our retirement. While 17% say they are saving at a rate to put their retirement on track, 23% are putting money in 529 plans. That lack of savings is pretty scary, particularly when we look at what’s happening with the Future of Social Security.

The Social Security Trust Fund reserves will run dry about 2033. That’s right around the age Generation X begins to retire. So for most of us, we’ll get about 75% of the promised benefits. It could be worse. Most of Generation X thinks they will get nothing. But even full values of Social Security by themselves rarely create a comfortable retirement. And with rising medical and long-term care costs, Gen Xers need to ramp up their savings before it’s too late.

What We Have Saved Hasn’t Appreciated

We were hit harder by the Great Recession than any other age cohort, and only 12% of our generation thinks they have recovered.. We lost almost half our wealth in the stock market, and were hit hardest by the housing crisis.  Why? We bought houses when housing prices were high, because that’s when we needed more room for growing families. We took on more risk and pushed ourselves into as much house as we could afford. We invested heavily in the stock market before the crash, because we were in our prime earning years when we were supposed to take more risk. And then the bottom fell out of both.

Housing values fell, and Generation X got hit the highest with foreclosures. And now? We stopped buying houses. More of Gen X is renting than any other generation at a similar age. That’s driving up the rental market, making housing even more expensive. And for those who do own houses? We owe more on them.

We lost our jobs and stopped contributing to retirement savings or followed conservative investment strategies while stock prices were low. Some of us (27%) cashed in part or all of our retirement savings in the wake of lost jobs and other crises. All of this means, we just haven’t built up a lot of assets to counterbalance all of that debt.

What Now?

Gen X lost 45% of its Wealth in the Great Recession.

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There is some good news: there’s nothing wrong with Generation X’s income and entrepreneurial spirit. We earn more than our parents did at the same ages, with a median income of $71,100. We also make up 55% of startup founders. So making money is not the problem. We just need to be good with the money we’re making.

If you are a fellow Gen Xer, and some of these statistics ring true for you, here are some steps you can take:

  • Consider asking for help with your money. Only 35% of Generation X uses a professional financial advisor. That’s low, but it’s not entirely a Generation X issue. A lot of advisors haven’t been seeking their business, concentrating instead on higher wealth Boomers and seniors. Still, 2/3 of us admit we don’t know as much as we should about retirement savings. As we get closer to retirement it might be a good idea to get professionals, particularly fee-only planners, to help us get our retirement on track.
  • Stop the bleeding. If credit is the main way you are handling day to day expenses, you need to take a hard look at where your money is going and cut expenses. You need a crash course in Budgets 101. Start recording all of your expenses, and match them against your income. Make sure you are making enough to cover your expenses and then some. If not, look for ways to boost your income, cut your expenses, or both.
  • Make sure you plan for emergencies. Whether from illness, job loss, accidents, or other, everyone hits bumps in the road. Don’t let them roll you over. If you have a well-stocked emergency fund, you’ll be much less likely to use credit when an unexpected bill hits.
  • Go on a debt reduction plan. Credit card debt, car loans, student loans and mortgages are all weighing Gen X down. If you are carrying any of them, time to get aggressive about paying them down so they don’t stalk you into retirement. The time to pay off your debt is while you are still earning.
  • Prioritize your retirement fund. Most of us are participating in a 401K or other plan, even if we aren’t contributing as much as we could. But few of us understand the credits that help people save for retirement or the catch-up contributions that can kick in as we reach 50. Additionally, much as we love our kids, we shouldn’t be putting their college ahead of our retirement.
  • Say no to lifestyle inflation, at least until you know you are on track. It’s great that, as a whole, our generation is good at making money. As a group, however, we’ve put too much emphasis on all of the things that extra income can provide now, instead of later. You may be able to swing a bigger house or a new car by borrowing more money, but you need to ask yourself if that is the best thing for long term security. If your retirement savings is flush and you can upgrade without leveraging yourself too much, then you might be able to afford shiny & new without mortgaging your future. Otherwise, stick to the saving and investing choices that will avoid the Ghosts of Spending Past.

So that’s it, Generation X. You’ve had a rollercoaster economic ride into 2015, and are still recovering from the Great Recession. You may be on your own, kid, but you still have time to evade your financial fright house. If you begin taking positive steps like the ones listed above now, you can slay those money demons.

What do you think about Gen X’s scary financial situation? Are you frightened or challenged by the Ghost of your Retirement Future? 

Skeleton Image courtesy of Victor Habbick at


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