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So, you were born between 1965 and 1978. Are
you tired of the Generation X label and being
portrayed by the media as a cynical, Xtreme
sports-loving, body-piercing slacker? If you're
one of the 76 million Americans that are
considered to be "Xers," you may see yourself more
as an independent, career-minded, technologically
savvy, young adult. As someone between the age of
22 and 35, "Xers" most likely tune out the
thousands of marketers with retirement messages
geared towards "boomers." Insurance providers,
investment companies and financial planners are
virtually ignoring the millions of Americans
considered to be "Xers." Meanwhile this
misunderstood group continues to buy homes and
select mortgage companies and retirement plans
with little attention and relevant advice.
So, are boomers the only generation that should
be concerned about their future? Absolutely not.
Planning for your future can be tough for anyone,
no matter what his or her age. But individuals
between the ages of 22 and 35 need to recognize
the important opportunity they have of starting
early and understanding the basics, according to
Randy Schuldt, vice president with
IHateFinancialPlanning.com, a new Web site geared
to the more than 75 percent of Americans who hate
financial planning.
Schuldt offers some additional financial
planning tips for Generation Xers:
Think Retirement
According to the 1990 U.S. census, the average
American worker has only saved $1000 towards
retirement. Pretty sad, isn't it? To make matters
worse, the average monthly Social Security benefit
for a retired worker in 2000 was $804 (Source:
U.S. Social Security Administration). You've heard
it before, the sooner you start saving for your
future, the better. So where do you start? First
of all, just start. Consider putting away a little
at a time -- $25 or $50 a month - in a mutual fund
or 401(K) account. If you're 25 years old and put
$25 away each month into an account earning 8.0
percent, you will have saved $58,099 by retirement
at age 60. Compare this amount to the $14,940 you
would save by starting when you're 40.
Develop a Financial Plan
Whether you're graduating from college, getting
married or having a baby, you need to set specific
goals (home ownership, vacation property, college
education, retirement, etc.) and develop a
financial plan for the future. To get started,
consider meeting with a financial professional. A
financial professional can help you get off on the
right foot, by helping you develop a long-term
financial plan that will make your hard earned
money work harder for you.
Explore Life Insurance
If you're still living the "Friends" lifestyle
and spend most of your time at coffee shops like
Monica, Joey, Phoebe, Chandler, Ross and Rachel,
you may not need to think about life insurance
just yet. However, "Xers" do settle down, get
married and start families. If you have dependents
(a spouse, children or aging parents) you need
life insurance. The good news is that many
employers offer life insurance as an employee
benefit. But this may not be enough. First, talk
to your benefits or human resources manager to
learn more about their offerings and how to
enroll. Then, see an insurance agent who offers
insurance from major providers to determine if you
may need more.
Deal with Debt
"Debt is one of the biggest financial problems
facing young adults," says Chris Newell, principal
of Newell Financial Corp. in Little Rock, Ark.
When it comes to paying off debt, Newell says to
start high. Rather than concentrating on paying
down a little of each credit card balance, find
out the interest rate for each card -- it should
say on the monthly statement -- and pay down the
cards with the highest debt and interest rates.
"First, make a pledge, 'no more additional
credit card debt,'" Newell says. "Then, start
paying off the highest debt cards. As soon as one
card is eliminated, continue the same payments on
the other cards. Never reduce this monthly debt
payment amount until they are all paid off. You
will have to be disciplined and pay substantially
more each month than the minimum balance."
Contribute the Maximum
401K plans and IRAs offer the best
opportunities to take advantage of tax-deferred
savings and contributions from your employer. If
you're working, ideally you should contribute the
full amount to your 401K plan that you can. But at
the very least, contribute up to the match offered
by your employer.
An IRA provides tax efficiency to set aside
money for retirement. For example, by contributing
to a Roth IRA (just one type of IRA), you don't
pay income tax when you withdraw the money
(including gains, dividends and interest) assuming
you are age 59- and the account has been open for
five years. If your annual income is less than
$95,000 for a single taxpayer or $150,000 for
married couples filing jointly, you can contribute
to a Roth IRA.
Develop a Support Network
This is the age of information. Most likely,
you may have a cell phone, voice mail, pager and a
handheld computer. You prefer to learn through
conversation and communities rather than reading
text books and reports. The same goes for
financial planning. "Xers" are much more willing
to talk about their financial situation than their
grandparents or even, parents. Embrace this new
freedom. Schuldt recommends creating a community,
either online or an old-fashioned investment club,
and learn from each other. Whether you pool your
money and start investing in the stock market or
share investment tips and advice, communities
offer a fun, easy way to get interested in your
financial future. Or go to
IHateFinancialPlanning.com to plug into a growing
community of people who share a similar hatred for
financial planning.
Keep Dreaming
What is that you really want? Home ownership?
Early retirement? Financial independence? It's
important to understand your financial goals and
to realize that your actions today either bring
you one step closer to -- or pull you one step
back from -- your goals. If you plan to buy a home
in five to ten years, are your actions today
helping or damaging your credit rating? Not only
do you need a down payment to buy a house, you
need an established credit history and a record of
on-time payments.
The bottom line for "Xers" is that you should
ignore the marketing messages geared towards
cynical, unmotivated slackers. It's not too early
to start planning for your future and saving for
retirement, says Schuldt. Consider the big
picture. The decisions you make today about your
career, education, debt and retirement will stick
with you and shape your future. So, invest in
yourself. Start small. And ignore the stereotypes.
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