6 Gen X money tips

Life Lessons

6 Gen X money tips

If you were born between the mid-1960s and 1980, you’re a part of Generation X, between Baby Boomers and Millennials. And you’ve probably got a lot on your financial plate, including retirement, education costs and student loans or other debts.

Gen Xers are often called the “sandwich generation” because they may be raising children and taking care of aging parents at the same time. In other words, they face many personal and financial challenges, such as higher expenses, more debt and more time away from work.

Here are 6 money tips a Gen Xer can use for a happier financial life:

1. Be clear about your financial priorities.

If you don’t know what you want to achieve with your money, it’s difficult to spend it wisely.

Financial goals don’t have to be complicated, but each one requires an action plan that breaks it into bite-size pieces. For example, if you want to save $30,000 for a house down payment over the next five years, you’ll need to put aside $6,000 a year or $500 a month.

Knowing what you’re working and saving for helps motivate you when you’re tempted to spend money on something else.

2. Put your retirement first.

While it’s admirable to support your children’s goals, making too many sacrifices to put them through college could end up hurting your family in the long run. If you underfund your retirement, your kids may have to support you in your old age.

Put your retirement first by figuring out how much you need to save each month or year. For 2019, a workplace retirement plan such as a 401(k) or a 403(b) allows contributions up to $19,000, or up to $25,000 if you’re over age 50.

Retirement accounts come with money-saving tax benefits that allow you to grow a healthy nest egg faster. And some employers offer matching contributions. Be sure to contribute enough to max out a company match so you get as much free money as possible.

If you don’t have a retirement plan at work, just about everyone can have an Individual Retirement Account or IRA. Similar to a workplace plan, an IRA offers great tax advantages and a menu of investment options. However, the annual contribution limit is lower for 2019: $6,000, or $7,000 if you’re over 50.

3. Safeguard your ability to earn an income.

While insurance might seem like an expense, it’s an important safety net that can save you money. Being underinsured or uninsured means something unexpected could jeopardize your financial future.

Disability insurance is an often-overlooked coverage that replaces a significant portion of your income (such as 60%) if you can’t work due to a covered accident or illness, such as cancer, heart disease or becoming pregnant.

Ashley Shope, assistant vice president, Product and Market Development for Unum, offers a good reminder about the tax implications of workplace benefits. “If an employer pays for your disability coverage, you may have to pay federal and state income tax on benefits you receive,” Shope says. “Don’t let a potential tax liability take you by surprise.”

4. Set your loved-ones up for success.

When those you love are counting on you financially, it’s important to make sure they’d be safe without you. Life insurance is a key coverage to have if a spouse, partner or family member would be hurt financially if you died.

Life insurance beneficiaries receive cash payments that can be used for any reason, such as college, mortgage payments, or everyday bills. Having a life policy is a smart way to make sure your family could enjoy a similar lifestyle after your death.

“You’ll never be younger than you are today,” Shope says. “Remember life insurance premiums are based on your age. By locking down your rate, you won’t have to worry about the cost going up as you age.” She adds some types of permanent life policies even allow you to stop paying premiums after age 70.

5. Don’t allow debt to derail your financial plans.

After you’ve created financial goals, put your retirement first and filled any insurance gaps, it’s time to tackle debt. Make a list of all your debts, including the names of the institutions you owe, your outstanding balances and their interest rates.

In general, it’s best to target your highest interest rate debts first because they cost the most. For instance, make a plan to pay off a credit card that charges a 24% annual percentage rate before one that charges 12%. If you have low-interest debt, such as a mortgage that charges 5%, paying it off ahead of schedule should be a lower priority.

6. Don’t skimp on getting professional advice.

If you’re having trouble making financial decisions, don’t underestimate the benefits of using a professional, such as a financial planner, tax accountant or estate attorney. Getting good advice always comes at a cost, but can help you save money in the long run.

The Financial Planning Association and the National Association of Personal Financial Advisors have resources to help you find a qualified advisor.

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