Everyone picks on Millennials these days but a new study by Lending Tree shows that out of all the generations, Gen X is the one dealing with the deepest financial problems.
First, some definitions.
Gen Z or Centennials: Born 1996 – current day
Millennials: Born 1977 – 1995.
Gen X: Born 1965 – 1976.
Baby Boomers: Born 1946 – 1964.
The Silent Generation: Born 1945 or before
Lending Tree, an online lending marketplace, did a study on the 3-year changes in each generation’s debt.
As each generation moves into different stages of their personal and economic lives, the amounts and types of debt they carry shifts, too. We compared the debts of members of the four adult generations — millennials, Gen Xers, baby boomers and silents — between March 2016 and March 2019 to see what’s changed.
Specifically, we calculated the changes in the average balance of each major debt category — personal loans, credit cards, auto loans, student loans and mortgages — and the change in the percentage of each generation that carries each type of debt. (source)
Here were the key findings:
Millennials saw the greatest spike in overall debt. Their total balances rose by an average of $16,714 — almost 29% — between 2016 and 2019.
Gen Xers now have the highest average debt burden of any generation. They increased their average debt burdens by about 10%, or $11,898, between 2016 and 2019, thanks to steady dollar increases across all debt categories.
Older generations — boomers and silents — are winding down their debt, thanks to decreases in average mortgage balances. However, they’ve increased their average debt across all other categories.
Boomers decreased their debt burdens by 7%, or $10,424. Members of the silent generation dropped their overall debt by $9,486, or 8%. (source)
But what about Gen X? Why are they in so much trouble?
Gen X has financial problems in many ways.
Marketwatch did an analysis on that the ways that Gen X is financially wrecked and it’s not pretty. This is my generation so I was especially interested in their analysis.
They’ve got the most credit card debt of anyone - yet still spend more than anyone on non-essentials...
Despite their sky high credit card debt, Gen X spends big on non-essentials, according to data released in 2018 from finance site Bankrate.com. Indeed, “Gen Xers (ages 38-53) spend $3,473 annually on restaurant food, prepared beverages and lottery tickets, the most of any generation,” the report reveals.
They’re woefully under-saved for retirement... Median retirement savings for Gen X is only $35,000, the same median amount as millennials, despite Gen Xers being much closer to retirement,” according to a study of 3,000 Americans by Allianz Life. Having just $35,000 in retirement savings — especially when you’re a Gen Xer ages 37- 51 — is not even close to enough. Fidelity recommends that by age 40 you have three times your salary saved for retirement. Gen Xers may be so under-saved thanks to the competing financial demands of children… and caring for aging parents.
Their average debt now tops $150,000. Not only is their credit card debt high, the total amount of debt they have is. Those in the 35-44 age group have “the highest debt levels of any age bracket,” SmartAsset notes, citing Federal Reserve data.
They’re more likely than other generations to say they can’t meet their financial goals. All of this debt and the lack of savings may explain why fewer than 1 in 3 members of Gen X says they think they can reach their long-term financial goals, according to a survey released in 2017 by FICO. (source)
That’s not a pretty picture for people between the ages of 37 and 51.
Some of the reasons for this financial mess
Reading over the data, the thing that jumps out at me is that people of my generation are at the point where they’re taking care of everyone. Some still have kids at home, while others have adult kids who have returned home. We are often lending a helping hand to our adult children who are in college or trying to get their feet on the ground. Some of this generation are taking care of aging parents.
It’s pretty tough to save for retirement when you have all these people depending on you.
Regarding the credit card debt, that one is kind of a mystery to me. While I have used credit cards to fund medical care I couldn’t fully pay for with my emergency fund, I rarely use them otherwise. It seems to me that it is essential to get this high-interest debt under control immediately. (If this is a problem for you, check out this article about paying down debt fast.
Spending on non-essentials seems to be a problem too. A lot of folks think that being on a budget means you can never have any fun, you can’t travel, you can’t go out to eat. So instead of creating a budget, they throw caution to the wind, spend while they have money, and complain when they don’t. I’d never say that you cannot travel, dine out, or do fun things. I do all of these and on a fairly tight budget. But I work it into my budget, I fund it with cash, and this comes after savings and all my other bills.
The biggest concern I see is that the money we Gen X-ers are paying into social security right now is going to fund the retirements of the Baby Boomers. The social security system is at a near-breaking point right now and most folks believe it may not even be there by the time we get to retirement age, much less for millennials. All that money that has been taking from our paychecks our entire working life…and none left when we need it. And if you think times are tight now, just wait until you’re too old to work and there’s no social security.