The challenge for Generations X and Y
Generally, the Baby Boomer Generation is in control of its financial matters, but Generations X and Y are products of vastly different experiences. As a result of those experiences, the younger generations have a different range of attitudes, motivators and financial decision-making processes to those of the Baby Boomer Generation.
Younger generations live for today
Generation X generally has a short-term focus and concentrates more on lifestyle, living for now rather than planning for the future, with around 70% of their disposable income being spent on non-essential items. In addition, many of them have high debt levels – Generation Xers have an average of $4000 credit card debt.
For many Generation Xers, there are a lot of triggers for change. Many of them are now married, have mortgages and families, and some of them are starting to feel their age a little. This gives them more perspective on life, and for the need to get things sorted. And the fact is that they can – they just need to use 70% of their disposable income to build their future.
For many Generation Xers, there are a lot of triggers for change. Many of them are now married, have mortgages and families, and some of them are starting to feel their age a little. This gives them more perspective on life, and for the need to get things sorted. And the fact is that they can – they just need to use 70% of their disposable income to build their future.
Generation X is pretty smart, due to a relatively higher participation rate in tertiary education. But in an area as complex as financial services, they usually need some guidance from a skilled financial coach to get them into a strong enough position to make sound financial decisions to support their lifestyle choices.
Generation Y is even more of a challenge, and many are set for some future financial pain, with an average credit card debt of $6000 and a view that long-term planning is that which covers the next year or 2. With a more controlled approach to their finances, they can set themselves up far better for future success.
Financial strategies for Generations X and Y
The first thing that the emerging generations need to do is get their finances under control. This involves:
- Consolidating their debts
- Reducing their debt opportunities (that is, cutting up some credit cards and resolving only to use credit cards when they can pay off in full when they get their statements)
- Creating a budget – and sticking to it.
In many cases, it will be the first time that they have put their financial situation onto one piece of paper and realise that they almost always spend more than they earn! Once things are under control, they can look to creating some wealth – perhaps even using “good debt” in the form of gearing to do so. Importantly though, spending time and money on guidance from a suitably qualified professional could be the most important investment that these generations make!
Invest in your future – see a financial planner
One of the best things that Generations X and Y can do is to meet with a financial planner, who will be able to address any financial problems they may have, and help them plan for a far healthier financial future.
Source: AXA Australia