5 Worst Mistakes Gen X Can Make With Money — and How To Avoid Them
Written by
Gabriel Vito
Edited by
Zuri Anderson
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Gen X is juggling mortgages, student loans and kids’ college costs while trying to save for retirement. Unlike boomers with pensions or millennials with time to build wealth, they’re caught in the middle.
To uncover their biggest money mistakes and how to avoid them, we asked financial experts for their insights. Here’s what they had to say.
1. Ignoring Retirement Savings — Thinking Social Security Will Be Enough
Many Gen Xers are behind on retirement savings, assuming Social Security will be enough to fill the gap. That’s a dangerous assumption according to Fei Chen, founder and CEO of Intellectia AI.
“Most Gen Xers are falling behind in retirement savings, counting on Social Security to make up the difference — which won’t be sufficient. With increased life expectancy, they stand to outlive their money,” he said.
Fei Chen explains that Gen X can take advantage of retirement accounts like 401(k)s and RRSPs while they’re still in their prime earning years. Investing in diversified assets like index funds can help build long-term wealth. For those who are behind, catch-up contributions and delaying retirement by a few years can make a significant difference.
2. Carrying Too Much High-Interest Debt
“Generation X is also known for carrying higher levels of mortgage and credit card debt than their parent’s generation,” said Erika Kullberg, founder of Plug and Law.
Between mortgages, student loans and credit cards, Gen X often struggles to balance debt and savings.
“The two biggest financial mistakes Gen X should try to avoid are ignoring their debt and underestimating the amount of retirement savings they need,” Kullberg continued. “Debt can quickly become overwhelming when you’re trying to pay a mortgage, save for retirement and pay for your children’s education.”
Gen X can free up cash flow for savings by tackling high-interest debt first. Refinancing loans and resisting lifestyle inflation can also improve financial stability.
3. Prioritizing Kids’ Expenses Over Retirement
Many Gen Xers put their children’s education ahead of their own financial future, a mistake that can leave them unprepared for retirement.
Andrew Latham, certified financial planner (CFP) at SuperMoney, warned that this often comes at a steep cost.
“Many Gen Xers drained their savings or delayed retirement contributions to help pay for their kids’ college — only to realize too late that there are loans for school but not for retirement,” he said.
Gen X can avoid this trap by prioritizing their retirement savings first. Students have access to loans, scholarships and affordable education options, but there’s no way to borrow for retirement. Ensuring financial security now can prevent becoming a burden on their children later.
4. Not Having an Estate Plan
Many Gen Xers assume estate planning is only for the wealthy, but skipping this step can leave families vulnerable, said Caleb Yarian, founder of Better Off Estate Planning.
“One of the biggest mistakes Gen Xers continue to make is not getting an estate plan in place early. You never know when the unexpected might happen, and leaving your family without an estate plan means neither you nor them will be deciding what happens after,” he noted.
Gen X can protect their loved ones by drafting a will, setting up power of attorney and updating beneficiary designations. A clear estate plan ensures their wishes are carried out and prevents unnecessary legal and financial stress.
5. Over Investing in a Home Instead of a Diversified Portfolio
Many Gen Xers see homeownership as the ultimate investment, but Robert Johnson, PhD, CFA, CAIA, chairman and CEO at Economic Index Associates, warned that tying too much wealth into real estate can limit financial flexibility.
“Homeownership is not a very effective way to accumulate long-term wealth for retirement, despite conventional wisdom suggesting the contrary,” Johnson said. “Many people continue to believe the myth that residential real estate is the best long-term investment, and the evidence simply suggests otherwise.”
Johnson also cautions that being too conservative with investments can be as risky as being too aggressive. Referring to the old Wall Street adage: “You can eat well, or you can sleep well,” he added. “Investing in the stock market will cause investors to have some sleepless nights, but in the long run, they will accumulate wealth if they stay the course.”
Gen X can build wealth more effectively by balancing real estate with a diversified portfolio of stocks, bonds and other assets. Instead of relying on their home as their primary investment, they can focus on strategies with stronger long-term returns.
More From GOBankingRates
