6 Expert Tips for Gen X on How To Tackle Six-Figure Debt

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Generation X is sometimes referred to — perhaps unfairly — as the “Slacker Generation.” These days, however, the “Debtor Generation” or “Generation Debt” may also apply.

Compared to other generations, Gen X — the group born between 1965 and 1980 — saw a relatively modest increase in total average debt per person last year (up 1.9% over 2022, according to Experian). Still, Gen X’s total average debt of $158,000 was significantly higher than millennials ($125,000), and nearly as high as the combined debt of baby boomers ($95,000), the Silent Generation ($39,000) and Gen Z ($30,000).

“Generation X is up to their eyeballs in debt, no matter how you look at it,” said Daniel Roccato, a clinical professor of finance at the University of San Diego’s Knauss School of Business.

Roccato cites multiple reasons for this, including income failing to keep up with living costs in recent years, combined with sharp increases in costs of raising kids (who Gen Xers often had later in life than other generations), and in many cases needing to care for aging parents at the same time.

“There has also been a certain amount of keeping up the Joneses,” he added, noting that many Gen Xers have struggled with frugality compared to earlier generations. “They see the person next door with a brand-new Range Rover in the driveway, and they want one.”

Average debts of six figures have many Gen Xers wondering what it would take to significantly move the needle out of the red, or at least in the right direction. It’s especially true with the oldest members of the group hitting retirement age. Here, financial experts have plenty of tips to offer.

Assess Your Situation Honestly, Then Make a Budget

As the founder of G.R.A.C.E. Financial Coaching, Suzanne Scullion has helped many clients tackle credit card and other forms of debt. Honesty about the amounts you owe, your interest rates and your minimum payments is key, Scullion said.

“You need to sit down, assess the situation and be honest with your spouse and with yourself,” she said. “Don’t hide anything from anyone.”

Scullion recommends crafting a budget as a next step, then giving yourself 60 days with a least some flexibility to adjust. Do some of what she calls “forensic accounting,” digging deep to find expenses that you don’t need. Cut the nonessentials and put that money toward your debts. If you can swing doubling up on payments, go for it.

Pick a Snowball or an Avalanche

Targeting credit card or other debts with the highest interest rates first is known as the debt avalanche method in financial-speak. Many believe it is always the best choice — but think again.

Scullion favors the debt snowball approach, in which debtors knock off smaller debts at the outset. It may take you longer to pay everything off, but you are more likely to follow through according to her.

“The snowball works faster because of the psychology of it,” she explained. “The biggest thing that happens to people when they can’t pay off debt is that they get burnt out.”

Roccato acknowledges that the snowball approach serves many people well. Others will fare better tackling those higher-rate debts at the beginning, he said.

“If you need the re-enforcement of a snowball, that’s great,” Roccato said. “But if you don’t, the math makes the avalanche method far more supreme.”

Consider a Side Gig

“There has never been a better time in the U.S. to make extra money on the side,” Scullion said, citing the “gig economy” and a plethora of rideshare, food delivery and similar jobs available to Gen X.

It may also be time to make some money via a garage sale, or by selling something bigger. “Maybe that RV that has been sitting in your driveway that you haven’t used since that first trip,” Roccato suggested.

Try Negotiating With Your Creditors

You might envision haggling with your creditors as something akin to talking with a brick wall. It’s usually at least worth a phone call though, Scullion said. Some of them may jump at the chance to get most of what you owe in one shot, rather than over many months.

“Be prepared with a lump sum payment in your hand,” Scullion said. “If you have a debt of $10,000, see if they would settle for $7,000 paid in full.”

Beware of Bankruptcy and Pulling From Retirement Accounts

“This is not your parents’ bankruptcy,” Scullion warned, citing long-term effects on your credit score and other aspects of your financial life. “One of the worst things that people go to when they shouldn’t is bankruptcy.”

Roccato said that the bankruptcy process has become more consumer friendly in recent years, allowing consumers to sit down with their creditors and restructure debt, under the guidance of a bankruptcy court. Nevertheless, he also considers it a “nuclear option.”

Both also strongly caution against pulling money from retirement accounts, particularly for members of Gen X. With retirement age looming, members of this group will likely find it difficult — if not impossible — to pay themselves back. In addition, there are opportunity costs associated with taking money away from your investments.

Consider More Drastic Steps To Live Within Your Means

Roccato said changes that might seem dramatic are sometimes what is needed if you’re dealing with six-figure debt and there is no end in sight.

“Sometimes you have to ‘right-size’ your life,” Roccato said. “It may mean changing ZIP codes. It may mean changing careers.”

Or, perhaps a combination of some big moves and some “slow and steady” moves is in order. “It’s not going to happen overnight,” Scullion cautioned.

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