Every generation has coined financial-related phrases that many of us use regularly, such as:

• “Waste not, want not.” (Silent Generation; born 1928-1945)
• “Keeping up with the Joneses” (Baby Boomers; born 1946-1964)
• “You only live once” (YOLO) (Generation X; bon 1965-1980)

These phrases aren’t just words; they reflect how generational experiences impact our approach to money, influencing everything from savings to spending and risk tolerance to pursuing financial goals.

As Generation X enters their early 40s through late 50s, the “YOLO” mindset has influenced many of their financial habits. For many Gen Xers, their focus on living for today, coupled with the financial pressures of mortgages, college costs for children, and possibly caring for aging parents, has resulted in less attention to long-term financial planning. 

As a Greeneville CFP ®, we specialize in working with Gen X individuals and families to create sustainable financial and retirement plans lasting 30 years or longer.  In our blog today, we’ll look at three case studies that describe the effects of YOLO and the wealth management tactics you can deploy now to reverse course.  

The Financial Realities Facing Gen X

Let’s face it…using the YOLO approach can create risks later in life. Since Social Security’s intermediate future is in question, focusing on your retirement planning is more crucial than ever. Depending upon the strength of your YOLO mentality, it’s possible that your Social Security benefits may not fully cover your retirement needs. This could cause you to work longer or adopt more aggressive savings and debt-reduction strategies for a more stable retirement later in life.

Juggling expenses while prioritizing retirement income and savings has been an ongoing struggle for Gen Xers. Studies show that this generation carries higher-than-average debt, particularly in mortgages and credit cards, compared to other generations. This debt often creates an all-too-common cycle: high monthly payments reduce the amount left for retirement savings and living expenses. 

Here’s a closer look at the unique financial circumstances impacting Gen X:

• Many Gen Xers are still working to pay down mortgages, student loans, and other debts. Unfortunately, debt often crowds out other savings opportunities, such as retirement.
• Social Security’s future remains uncertain, and even if available, the benefits may be insufficient to support a comfortable retirement. Gen X cannot solely rely on these benefits to secure their later years.
• Many Gen Xers have yet to build substantial retirement savings. Unlike previous generations, who may have had pensions to lean on, most Gen Xers will need to rely heavily on their savings. Here are three case studies illustrating how a YOLO mentality can lead to potential pitfalls and how strategic financial planning helped them set a better path toward improved spending and saving habits. 

Case Study 1: “Living for Today” – The Impact of High Spending Habits

Sarah, 50, Greeneville, TN

As a successful business owner, Sarah has always believed in living life to the fullest. In her mid-30s, she purchased her dream home, and she has traveled the world over the past 15 years. Her financial choices reflect her “live for today” mentality. 

Sarah just turned 50 and realized that her lingering business debt and persistent inflation have impacted her ability to profit from her business.  She’s also realized that if she wants to retire in comfort by 65, her retirement savings will need a lot of help. 

The Plan: Sarah worked with her financial advisor in Greeneville, Sapiat Asset Management, to identify immediate steps she can take to prioritize her financial goals and needs. This included reducing her monthly expenses and channeling those savings into retirement accounts.  Her Greeneville financial planner also recommended restructuring her business debt to lower interest payments, giving her more opportunity to save for retirement.

The Results: Sarah reduced her lifestyle spending by 20%, and these savings were redirected into a Roth IRA, which provided tax-free growth potential. 

By addressing debt and cutting back on discretionary spending, Sarah began to feel more in control of her financial future. The results also helped her establish an attainable retirement timeline, ensuring she could enjoy life today while building a secure future.

Case Study 2: “Caught in the Sandwich Generation” – Balancing College Tuition and Retirement

Mike and Jennifer, 47 and 49, Knoxville, TN

Mike and Jennifer have been managing their two children’s college expenses while supporting Mike’s aging parents. This “sandwich generation” responsibility left them overwhelmed and struggling to balance family needs and retirement planning. They would try to save income from their salaries every month, but that effort was inconsistent.  

The Plan: Their Greeneville financial advisor suggested establishing separate accounts for college and retirement, helping them prioritize their future while supporting family obligations:

• A 529 plan provides tax advantages for college expenses
• A high-interest savings account was set up for retirement to start building their retirement cushion

The Results: By automating monthly contributions into these separate accounts, Mike and Jennifer could support their children’s education while saving for retirement. Their advisor also introduced them to tax-efficient strategies, such as maxing out their 401(k) contributions, which reduced their taxable income. This dual approach allowed them to balance their finances, ensuring they weren’t sacrificing their retirement for short-term family expenses.

Case Study 3: “Late Start, High Hopes” – Fast-Tracking Retirement Savings

Paul, 52, Chattanooga, TN

Paul, a 52-year-old professional in Chattanooga, always intended to prioritize retirement savings but kept putting it off. His career provided a steady income, but expenses and a busy lifestyle meant he’d amassed very little in retirement savings. With Social Security unlikely enough, Paul realized he’d need to make major changes to retire comfortably on a timeline that fit his goals.

The Plan: Paul’s Greeneville financial advisor helped him plan a catch-up strategy that compensated for lost time. The experts recommended aggressive savings goals by maximizing Paul’s contributions to his 401(k) and using catch-up contributions allowed by the IRS for individuals over 50. Additionally, his advisor recommended a mix of investments in stocks and bonds to optimize growth while minimizing risk.

The Results: By restructuring his budget and cutting back on unnecessary expenses, Paul could direct more income toward his retirement accounts. In addition, he scheduled a monthly review with his advisor to review results and make any necessary adjustments, keeping Paul on track toward achieving his goals of a comfortable retirement. Relying on his advisor’s expertise, Paul’s financial picture improved dramatically, helping him feel more confident about achieving his retirement goals.

The Key Takeaways for Gen X

Here are a few key strategies that can help you avoid common retirement pitfalls:

1. High-interest debt can eat away at retirement savings. Work with a financial advisor to develop a plan to pay down debt while contributing to retirement accounts.
2. Automating retirement contributions can help create consistent growth in savings accounts. By treating retirement as a necessary monthly expense, more savings will accumulate over time.
3. Utilizing 401(k)s, traditional IRAs, and Roth IRAs allows you to increase tax-deferred or tax-free growth, making a big difference in retirement savings.
4. A Greeneville financial advisor who understands Gen X’s unique challenges can help create a customized retirement strategy that balances current expenses with future goals.
5. Adjust Lifestyle Expectations: While a comfortable retirement is attainable, it may require Gen Xers to shift their lifestyle choices today. Cutting back on discretionary spending can pave the way for greater financial security in the future.

Ready to kickstart your retirement savings efforts?  Connect with the Sapiat Asset Management team today.