Financial strategies for Generation X

You’ve probably read the headlines — the baby boomers aren’t saving enough money, Generation Y and the Millennials (born in the 1980s) are steeped in debt with no hope of living the dream set out by their predecessors. But what about Generation X?

According to Statistics Canada, Generation X (a term coined by author Douglas Coupland), “includes people born from the end of the baby boom (1960 to 1965) to the late 1970s” but the years are flexible with some demographers extending the years to the early 1980s.

While the original “slacker” generation isn’t front and centre in the news, many are quietly wondering about their financial present and future.

Gen X is the generation that worked at a stable job, saved their money and bought a home. Now they’re suffering from a loss of household net worth in the United States and stable jobs have become a thing of the past. Canadian Gen Xers also carry a heavier debt-to-income ratio: 39 per cent compared to 25 per cent for boomers when they were the same age.

Dana Bentley, 39, has been wondering if she and her husband are ticking all the right financial boxes. They have a mix of investments, including stocks and mutual funds, as well as registered retirement savings plans (RRSPs) and an emergency saving account. They’re working towards retirement, but as Bentley says, “We’re currently planning for retirement at age 70. We are working on keeping our debt down, so that hopefully we can retire earlier, but the way the markets have been lately and the baby boomers working through any government support that’s left, I’m not insanely optimistic.”

Despite doing everything right, Bentley often wonders if it will amount to anything. She says, “Some days, yes. Then I get a notice of what my RRSPs are doing, and then not so much.”

“Gen X is terrified and can’t do anything about it,” says Toronto-based financial adviser Shannon Lee Simmons. But there are ways this “ignored” generation can change their financial circumstances.

1. Grieve for your loss
   “There’s a sense that ‘I did everything by the book,'” says Simmons. “Gen X went to university, got the degree and got the job and saved the money. They should have the three-bedroom house and the nice car. But this didn’t happen for Gen X the way it happened to the boomers. Gen X was blindsided — much more than Gen Y. Gen Y graduated from university knowing that the economic rug was being pulled out from underneath them. Gen X didn’t. Gen X graduated thinking that if they just followed the right steps, everything was going to be fine.”

Simmons says that Generation X needs time to grieve and to be a bit angry that what you thought you were going to get, may not come to you no matter how good you were financially. “There needs to be a change in what it means for Gen X to feel successful,” she says.

1. Put yourself first
   Simmons says that some of her Gen X clients have “meltdowns over kids.” She explains, “Parents feel inadequate if they can’t put their children in every sport possible. It’s a huge challenge… This generation is paying for very expensive child care and rising costs of living amid stagnant wages, terrible market conditions and aging parents. The fears that one can’t afford their family are real.”

Simmons suggests not putting kids first. “You can be a good mum and not put your child first financially.” If a family is struggling to pay bills and save anything at all, she recommends stopping the RESP [registered educational savings plan] contributions and putting it in retirement savings.

“If you have nothing [saved] for yourself in retirement, what are you going to do later? You won’t have enough for retirement and could potentially be, and I hate saying this, a [financial] burden.”

1. Talk to your parents
   Gen X’s parents are getting older and getting sick. Simmons says, “Gen X is afraid of not being ready for this.” Simmons suggests having “the talk” with your parents, which should include a frank conversation about their finances, their health, their preparations and their expectations of help.

This is also the opportunity for Gen Xers to find out about future inherited wealth and decide on their responsibilities to their parents as they get older.

1. Look at fixed costs
   “Gen Xers are racking a crap load of line of credit debt and it’s not because they’re buying Louis Vuitton. They have $2,000 a month [payments] for childcare. That’s a huge problem,” says Simmons. “There isn’t that need for the ‘shiny, shiny”-like clothes. Gen X spends their money on housing and transportation.”

That’s why it’s critical to get your fixed costs under control. That may mean giving up one of the cars for alternate means of transportation, and looking at smaller homes or even renting. When it comes to daycare, it might be time to look at how much daycare costs versus salaries and deciding whether it makes fiscal sense to have one parent stay at home, public day care or sharing a nanny.

1. Don’t rely on inherited wealth from your parents
   Generally speaking, baby boomers are the wealthiest generation but Simmons cautions against expecting a huge inheritance. “Boomers are going to enjoy their retirement and they will live longer, so there might not be anything to inherit.”

Finally, Simmons has one more piece of advice. “Gen X cares a lot about what society thinks — more than any other generation. They need to stop that.”