The Top 5 New Year Financial Resolutions for Gen X in 2021
Members of the Generation X age cohort are reaching the age where they begin to think about retirement. Though few Generation Xers have enough money to retire, a growing percentage of this age cohort is making meaningful strides toward truly rewarding golden years.
Whether you are a pre-retiree or still working your tail off to lay the financial foundation necessary for retirement, you can benefit from the expert advice of a fee-only CERTIFIED FINANCIAL PLANNER™ Professional.
Meet with a Greeneville, TN CERTIFIED FINANCIAL PLANNER™ Professional for comprehensive financial planning, and the stage will be set for a graceful transition to your golden years.
Let’s take a look at the top financial tips for Generation X as we segue into the new year.
1. Recognize the Benefits of Aging
As a member of Generation X, you are in your 40s or 50s. At this point, you’ve likely cut your grunge era long hair, trimmed your scraggly beard, and put your flannel clothing back into the closet, possibly for good. This is a time to embrace the corporate realm, work your tail off, and save as much money as possible for retirement. Thankfully, the IRS wants to help in your mission to retire as planned.
As soon as you hit 50 years old, you are eligible to save additional money in tax-advantaged retirement accounts. This means you can save an extra $1,000 in your IRA in addition to the $6,000 contribution cap along with $6,500 more above and beyond the standard $19,500 limit of your employer-sponsored retirement plan.
2. Generation X Faces Challenges in the Form of Unexpected Expenses
When 401(k) participants are polled, the majority of those in the Generation X age cohort insist unexpected expenses are one of the primary roadblocks to saving money for retirement. Members of Gen X tend to be homeowners, so they are understandably saddled by unanticipated home repairs. In fact, nearly 40% of Gen Xers reports unanticipated expenses are their primary financial barrier.
Don’t let an unexpected expense ruin your budget or stop you from making progress toward your retirement goal. Establish an emergency fund today and add money to it from each paycheck until you hit at least a couple thousand dollars. This way, when those unexpected expenses arise, you will have money available to put out the metaphorical fire and continue making progress toward your retirement goal.
3. Don’t Shy Away From Investment Risk
As is often said, scared money does not make money. Embrace the opportunity to grow your nest egg by investing in stocks, mutual funds, and ETFs with moderate risk. You can gradually reduce your risk exposure as you transition to your late 50s and 60s. However, you should not be risk-averse until that time.
Diversify your portfolio across several risk levels while you have a couple more decades in the workforce, give your nest egg a chance to expand, and hold on tight as the market undulates. Resist the temptation to sell or shift your money to low-risk investments and you will emerge as a winner years or decades down the road.
If you are uncertain as to which investments pose a considerable risk or how to diversify risk, listen closely to the input provided by an experienced fee-only financial advisor in Greeneville, TN. Fee-only CERTIFIED FINANCIAL PLANNER™ Professionals operate without commissions, meaning there is absolutely no potential for a conflict of interest.
4. Consider Sending Your Children to Public School
More than 20% of Gen Xers pay for their child’s education. However, many of those who have passed through both private and public education systems insist there is not a meaningful difference between the two. Furthermore, it does not make sense to pay taxes that fund the public school system only to pay even more money to educate your child at a private educational institution. Though you certainly deserve credit for helping your kids pay for post-secondary education, doing so should not bust your budget.
Crunch the numbers before sending your youngster off to a private academic institution to get a sense of how it will impact your retirement goals. Maintain a laser-like focus on those goals when setting a budget. If sending your child to an expensive private school interferes with your retirement plan, give serious consideration to sending him or her to a comparably affordable public school.
An added bonus is the fact that you won’t feel nearly as depressed when paying your property taxes as the money will help educate your youngster as opposed to financing the educations of those your son or daughter will inevitably compete against for employment.
5. Aggressively Pay Down Debt
Most people are surprised to learn Gen Xers have an average debt load of $125,000. There is a common misconception that millennials are the sole age cohort overloaded with debt as the cost of a college education spiraled out of control as this group entered its late teens and early 20s.
However, if you add up all the debt from home mortgages, auto loans, credit cards, personal loans, and student loans, the average Gen Xer is more than six figures in debt.
In fact, Gen Xers carry an average of nearly $40,000 more debt than the typical adult living in the United States. It is a grave mistake to continue carrying the bulk of this debt into the years and decades ahead.
Reduce your spending, downsize in every possible regard, and pay down your debt sooner rather than later. Reducing debt in a timely manner saves you thousands or even tens of thousands of dollars in the long run. Prioritize debt that carries a high-interest rate ahead of other debt. Pay down high-interest debt as soon as possible and you can put the savings toward your retirement rather than paying it to your lenders.
If you have multiple loans or other types of debt, some at high-interest rates and others with considerable balances, don’t let the numbers fluster you.
Reach out to Sapiat Asset Management. We specialize in working with Gen X’ers. We use a unique, personalized process to identify your specific needs.
Our knowledge of your financial situation is a big part of the foundation that drives our relationship with you. Contact us today for a complimentary consultation.