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Benefit from Lessons Learned by Baby Boomers

By Jane Young, CFP, EA

Despite the financial challenges that younger generations are facing, they could benefit from the knowledge and experience of baby boomers. It is clear that high inflation, including the high cost of a college education and real estate, is making it more difficult for generation X, millennials, and generation Z to save and invest for the future.  However, all generations must navigate financial and societal challenges.  They learn and grow from these experiences, gaining knowledge that can benefit future generations.  Below are some successful financial habits of baby boomers that may be helpful to other generations.

Many successful financial habits are driven by a strong focus on the future. This includes creating and working toward long-term financial goals. A focus on the future also requires saving and investing for the future at the expense of immediate satisfaction.

Baby boomers were raised by parents and grandparents who lived through the Great Depression. The economic uncertainty and geopolitical unrest during this time resulted in placing a high value on saving and frugality. The importance of living below your means, being prepared for emergencies, and saving for the future was passed down to their children and grandchildren.

Successful boomers carefully manage their budgets to ensure expenses never exceed income and they believe living below your means is the cornerstone to financial stability. They have been more willing to cut back on non-essential spending than other generations due to recent pressures from inflation.

Additionally, as baby boomers started their careers, many companies discontinued offering lifetime pension plans. As a result, they had to develop good saving and investing habits to prepare for retirement. They were on the forefront of investing in 401k and IRA plans. They started investing in diversified portfolios containing substantial allocations in stock mutual funds. They learned the importance of automatically investing from every paycheck, the value of paying yourself first, and compound interest.

Some additional successful habits include the avoidance of high interest debt, one-third of boomers carry no debt, and the avoidance of lifestyle creep. They avoid the tendency to continually increase their lifestyle in lockstep with every raise, bonus, or inheritance. Rather than spending an increase in income on non-essential items, they save or invest most of it for the future. They strive to save at least 10% to 15% of their income and treat raises as an opportunity to boost the percentage they contribute to retirement.

A final successful habit is the desire to educate themselves on financial and investment issues - 83% of baby boomers are at least somewhat confident about their finances.  This confidence comes from reading about finances and conversations with others. They are also more likely to seek professional advice. More than 52% of baby boomers consult a financial advisor. Professional advice helps them make more informed decisions, stick to a budget, and achieve financial goals. An advisor provides them with education to better understand financial issues.