5 of Gen X’s Biggest Financial Regrets and How To Fix Them
Gen X, often considered the “forgotten generation” in how the media treats them, has had to learn a lot of financial lessons without much guidance. Born before the internet, to working parents — hence why they’re often called “latchkey” kids — Gen Xers figured out their financial struggles by living them.
As a result, some Gen Xers have financial regrets because they learned financial lessons the hard way.
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GOBankingRates spoke with several Gen Xers about their biggest financial regrets, and then asked Chris Urban, CFP, RICP, founder of Discovery Wealth Planning, to weigh in with advice to fix, solve or avoid these same financial regrets.
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Taking Out an Adjustable-Rate Mortgage
Dayna Bennett, 52, an academic counselor and single mom of two college-aged kids from California, regretted taking out an adjustable-rate mortgage (ARM) loan when she and her ex-husband purchased a home together. This type of loan starts out at one, typically much lower, interest rate, and then that rate increases over some time period.
“When we got in, our payment was completely manageable, like $1,400 a month,” she said.
When the ARM rate changed, however, their payment ballooned to over $3,000 per month. “We were drowning and couldn’t do it. I regret not knowing and understanding what we were getting into,” she said
“I would caution anyone against doing anything when it seems like you’ll have time to come up with more money. When those payments go up, you might think you’ll have the money to absorb that increase, but you might not,” she explained.
The problem was “solved” when she and her husband got divorced and short-sold the house.
“I’m a huge fan of fixed-rate mortgages, whether it’s 30 year or 15 year, even if you can make larger payments,” Urban said. “So I would start there, because what may happen is that you can make the payments work under one interest rate regime, but down the road, if your plans change or your income changes, etc., you may not be able to afford what may lie ahead.”
If you’ve already got yourself in an ARM, you may have trouble refinancing to get a better rate, though it’s at least worth looking into, he explained. “The fixed-rate mortgages offer a lot more certainty and less chance of variability in the payment.”
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Not Learning a Trade
Heather Seggel, age 54, an unemployed former freelancer in California, regrets majoring in English in college, which never translated into a thriving career for her, and wishes she’d picked a trade instead.
“I did take on debt to go, and it resulted in my having to move back in with my parents afterwards because I had no earning power, and that left me stuck in the very situation I was trying to escape — rural and isolated, with no real path forward,” she explained.
While she would never suggest people not to go to college, she urged some thoughtfulness. “I’d say whatever you choose to do, do it with a plan in mind and some clear markers to ensure you stay on track. If it’s college, what are you specifically hoping to come away with? Make a list and gauge your time in school by whether it aligns or strays from those goals. I had no plan and just floundered my way through, and it truly was a giant waste of time and money,” she said.
Urban acknowledged that the cost of higher education has gone up significantly over the years. “I’m just not sure the cost benefit is there anymore. So I think trade schools and things are great for people that have a passion for something specific, maybe it’s an industry or a certain business. The cost benefit can certainly be significant,” he said.
Taking On Credit Card Debt and Student Loans
Jennifer Frederick, age 48, a writer based in Maryland, said she regrets getting into credit card debt and taking on student loans. While she was able to recover from credit card debt financially through a loan from her parents (though it took a toll on her mentally and emotionally), student loans persist.
She described her student loan debt as “massive” because she didn’t pay them consistently when she first graduated, and even paying them consistently now does little to reduce the total.
“At this point, I keep hoping for legislative change or else I may very well die in student loan debt, which is the only way they are discharged,” she said.
While her own financial education feels like it came too late to make a big difference, it has helped her teach her children how to pay for college. “There are some professions-lawyer, doctor, etc. — where [loans] may be unavoidable, but look at state schools, research scholarships. Do the math to find out what repayment will look like,” she said.
Urban added that it’s a good idea to look at all of the most affordable school options first, such as in-state colleges and community colleges. From there, he suggested work-study programs that pay you to work at some sort of college-based job.
Not Saving in a High-Yield Savings Account Sooner
Jenna Rhodes, 48, an artist from New York, wished she’d learned about high-interest savings accounts many years ago. She started saving at the age of 17 in traditional savings, where she earned around $100 or less in interest per year.
Finally, about three years ago, she heard the words “high-yield savings account” and began reading about internet-based banking. “I ran calculators and saw that I could make a lot more money by putting my savings in a different bank. At Bank of America, my APY was 0.03%. At several other banks, the APY was 5%. Not 0.05%, but 5%! I couldn’t believe there could really be that significant a difference in savings accounts, but there was,” she said.
She moved her money, and last year, she made over $4,000 on roughly the same amount of savings that she’d received $36 on the previous year.
“Now I try to spread the word — it was so easy to open a new account online, makes almost no difference in my life which bank it’s in, and I just got about $3,964 more in free money last year for making that little switch,” Rhodes said.
While high-yield savings accounts are fantastic when the interest rates are high, Urban suggested you should treat the higher interest rates as a “feature and not a rationale for it being part of your investment strategy.”
What he means is that everyone should be thinking long term in their investments. “So learn what the purpose is for the money in that type of account. Whether it’s an emergency fund, or you’re in retirement and it’s just kind of like a cash bucket, find the purpose for the money and have that amount of money in there regardless of what the interest rates are because they’re going to change,” he said.
There might be a better opportunity cost by investing your money into something like stocks, bonds or something else, he said.
You also don’t want to keep too much money in any savings account because it isn’t keeping up with inflation. He said that if you’re working and have a safe job, three to six months’ worth of income is plenty in a savings account. If you’re not working, or in retirement, you may want more like one to three years’ worth of cash available to buffer you from any market volatility.
Not Learning How To Budget
Shannon, age 47, a customer service representative in Washington state, wishes she had learned to budget much sooner. She said she didn’t know how to navigate banking beyond writing a check and balancing her checkbook.
She felt that “lingering beliefs about women and money” also negatively influenced some of the information she’d gained about budgeting.
“I wish, culturally speaking, I could have learned without some of the pressures to achieve or gain. I believe firmly in dreaming big but also being mindful about managing what I have right now and how to make it work for me,” she said.
Ultimately, she taught herself to budget. For people who struggle with this, she recommended simply trying to use a simple, old-school check ledger to budget.
However, Urban said that more digitally minded folks might benefit from budgeting apps and software. If you get budgeting advice from a finance expert, it’s important to be mindful that they are someone with financial credentials and not just a self-proclaimed finance influencer, according to Urban.
Whether you’re Gen X yourself or not, financial regrets don’t have to be part of your own story. And if they are, there’s always a solution if you put a little effort into finding one.
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This article originally appeared on GOBankingRates.com: 5 of Gen X’s Biggest Financial Regrets and How To Fix Them