Gen Xers savvy, but overextended

Generations Xers, those born between 1965 and 1980, are short- changing themselves in financial and retirement planning.

The members of the give-it-to-me now generation, the first to be weaned on credit cards, have access to more financial advice than their parents' generation, yet might not be availing themselves of it.

Andrew Oyler, a real estate broker with Grubb & Ellis/Quantum Commercial Group, is a Gen Xer who is concerned about his generation.

"We're in a period of time when the level of debt is frightening," he said. "Society has the mentality of buy it now and figure out how to pay for it later. My generation has a lack of discipline -- we want the new TVs and cars, and the finance world makes it seem easy. Unfortunately, there is a psychological difference between buying with cash versus buying with a credit card. It's easy to end up with a ton of debt and nothing to show for it."

In hindsight, Oyler wishes that he'd had more discipline with credit cards and had started earlier making his money work for him.

On the bright side, he owns a home, has disability insurance, savings and retirement accounts, and his focus for investments is real estate.

"Money has been a taboo topic in America," Oyler said. "We act like it will just take care of itself. I like to have a team -- financial planner, attorney, CPA, real estate professional -- backing me up instead of having the Lone Ranger mentality."

As a homeowner, Oyler has plenty of company. Nationwide, during 2006, 55 percent of homebuyers were Generation Xers, according to the National Association of Realtors.

Wynne Palermo, president of Wynne Realty, said Generation Xers are smart and savvy about the real estate market -- not afraid to jump in and invest.

"Generation Xers are much more inclined to see a home as an investment to live in -- but not a nest to keep forever," she said. "They buy now and intend to buy something better later -- they still want to go skiing and buy mountain bikes."

They also tend to buy homes chock-full of technology, with smaller yards for low maintenance.

Palermo said Xers like to move quickly once they decide they are ready to buy a home. About 40 percent of her clients are Gen Xers.

So, 27- to 42-year-olds are buying homes like crazy, but what about the future? They are savvy enough not to believe Social Security is a viable retirement option, so what are they doing? Not enough, according to many advisers.

A common theme with Generation Xers is to procrastinate and start too late planning for retirement, saving and investing, not realizing how long they will live and how much they'll need to maintain their lifestyle.

"The middle class tends to get financial 'advice' from family members, cube mates and other unlicensed people -- it's scary," said Michael Pennica, a financial adviser at World Financial Group.

What's a concerned Xer to do? While advice is abundant, the single most important decision is action. Get a plan in place.

No matter what someone's age is, he or she needs to address six areas: cash flow, managing debt, short-term reserves, proper insurance (health, life and disability), investing for the future, and establishing and preserving an estate, Pennica said.

Xers are a very independent generation -- they have purpose in their lives and are eager to give back to society, but they are overextended and face bigger financial challenges than their parents or grandparents did. They operate on tight budgets and don't set aside much for savings, according to Tom Naughton, regional president for U.S. Bank.

"Many of them had the opportunity to attend college. So they entered the work force with sizable debts," he said. "They also tend to purchase homes and pay for their children to attend college."

Amid student loans, mortgage payments and children attending college, savings plans are neglected. Nevertheless, people need to take ownership of planning for retirement and the next phase in life, which might include part-time employment or a second career as a safety net, Naughton said.

While low interest rates during the past few years have allowed many to achieve the dream of home ownership, Xers might have to remain in the work force longer than prior generations to maintain their lifestyle.

Of course, the best thing, Naughton said, is to start saving at a young age -- take advantage of compounding interest rates and tax- deferred employer savings plans.

"Even if it's only a small amount, start saving as soon as possible and invest funds wisely," he said. "Just the discipline of saving will help."

Copyright 2007 Dolan Media Newswires
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