Prime Rate Credit

Hey - I posted this article I wrote about something that is very near and dear to me, since I am a Generation X’er, as they call them, so I wanted to post it here too for you to read. It’s really about how my generation, who is now in their late twenties and early thirties, needs to really educate themselves better on saving for the future and not living beyond their means, which I’ve seen so much of in myself and amongst my peers. Enjoy!

Generation X is that age group that is just now starting to reach its late twenties and early thirties. Gen X’ers, as they’re called sometimes, are increasingly demonstrating a lack of financial knowledge and budgeting know-how unfortunately, and it’s really going to hit them hard in their golden years when they’re ready to retire. I’m actually in the Generation X age group, and I have seen too many examples of this generation being financially irresponsible, and financially uneducated.

So, why are Gen X’ers so carefree with their money, and what price will these young jetsetters pay down the line?

It’s been said that the baby boomer generation also was not prepared for retirement. This is the age group that was born in the 1950’s during or right after WW II and became a part of the 60’s hippie generation. The same was said about them, that they were not preparing themselves adequately for down the road, and they “lived in the moment” too much without worrying about saving for their future and ensuring a peaceful, worry free retirement.

Many of those baby boomers now are scrambling to make up for lost time, investing their money aggressively so that in the next ten years or so when they reach retirement age, they’ll be more equipped to individually deal with retirement, rather than rely solely on Social Security, which many believe simply won’t be reliable in the future. Not to mention, Social Security provides only a pittance of “security”, financially speaking.

The lucky baby boomers will have an inheritance of some sort to look forward to from their parents, since their parent’s generation consisted of people more equipped for retirement, who’d been investing or saving for a long time for their golden years. Us Generation X’ers may not be so lucky though, and many among us are spending record amounts of money on credit cards and “bad debts” that will take years upon years to pay off, and which also easily racks up thousands of dollars in interest. All of this adds up to our inability to save money, and puts a huge dent in our future net worth.

Heck, most Gen X’ers, even the oldest ones who are now in their 40’s, owe more money than they’re worth (in other words, their financial obligations outweigh their financial assets). Our parents, who are most likely baby boomers, as said before, are not as well prepared and do not have as high a net worth usually than the generation before them, so we should be seeing a decline in inheritances when Generation X gets to be retirement age.

That means that it’s up to us to seize control over our financial future. Do you know how many of my peers have the opportunity to participate in a 401k retirement program with matching employer contributions, who don’t? Let’s just say it’s a lot more than it should be. These Gen X’ers are making a huge mistake, in that they are not getting the tax benefits of having a pre-tax 401k, nor are they getting “free money” from their employer. Essentially, they are throwing money away, as well as not saving for their future!

Not only is it akin to “throwing money away”, it is also going to dramatically reduce the net worth of any Gen X’er when they retire. You see, due to the principle of compound interest, the earlier you begin saving can have an enormous, mind boggling impact on the bottom line when you reach retirement age. Saving just one year earlier than you would have many times can result in THOUSANDS UPON THOUSANDS of dollars in missed retirement money.

Compound interest is the principle of interest (money), being paid on the original (principle) amount of an investment, as well as on the interest that accumulates on that principle amount. So essentially what you end up with under the concept of compound interest is money on top of money being earned on an original investment amount over the years. The longer you invest, the more this money continues to “build on itself”, hence the principle of “compound interest”. In other words, invest earlier and you will be amazed by the difference it will make in your overall investment strategy and the end result of your investment endeavors.

So, does Generation X still have a chance at pulling itself out of lagging retirement planning? Sure. But the time is passing every day, and those days add up to thousands of dollars in the end. So please, if you’re a Gen X’er and you’re reading this, don’t wait! Start investing now. You’ll be amazed at what you can do if you just put your mind to saving for your future, and you’ll also experience greater peace of mind for the future of you and your family.