Maximizing Your Money: How Gen X Should Prioritize Debt, Savings, and Investments

Despite earning more on average than any other generation, Gen Xers feel more stretched than ever, juggling debt, rising costs, and the pressure to save for retirement. 

Gen X came of age when pensions were disappearing. Then, the dotcom boom went bust, and the 2008 financial crisis flipped their finances upside down. For this generation of workers, finding the right balance between paying down debt, saving for retirement, and investing in the future has never been more crucial.

Read on for practical tips and insights on managing your financial obligations while building a solid future.

Generation X and Mortgages

Gen Xers have the highest average mortgage payment, at just over $2,300, of any generation. There are a few key reasons why Gen Xers pay the most every month for their homes. 

Many Gen Xers entered the workforce right as the dotcom bubble burst, and employers said goodbye to pensions in favor of 401(k)s. Gen Xers then bought homes in the early 2000s when housing prices were rising sharply, and lenders became loose with their lending practices on the assumption that housing prices would continue to increase. 

In 2008, that all changed, and Gen Xers were left holding the bag. Gen Xers who managed to hang onto their homes when the bottom fell out on their home values practically overnight were stuck paying on overvalued homes for nearly 10 years while the market climbed back to pre-2008 values. Unfortunately, many Gen Xers could not refinance due to upside-down mortgages.

As many Gen Xers near retirement, their mortgage debts lingering strain on retirement income creates mortgage anxiety. This anxiety, coupled with competing financial strains and inflation, has 1 in 5 Gen Xers saying they will never be able to fully retire.

Strategies To Pay Off Your Mortgage Faster

If your mortgage debt is a major stressor in your retirement plan, you can do a few things now to help.

Live Below Your Means

Despite earning the most of all generations, Gen Xers are the most likely to live paycheck to paycheck. This status quo won’t cut it for Gen Xers wanting to pay off their mortgages quicker.

Studies show that Gen Xers are buying the second-largest houses of all generations. Gen Xers looking to buy or downsize should consider opting for smaller, more modest homes to keep mortgage payments under control. Buying homes under budget helps put more money towards a principal payment to chip away at debt.

Make Biweekly Payments

Paying your mortgage biweekly instead of monthly can help pay down your loan’s principal faster. However, you must check with your lender to confirm that any extra payments you make go toward the principal. 

Round Up Payments

Even small changes like rounding up your monthly payments can save you thousands in interest payments over the life of your loan.

A $350,000 30-year loan at 6% would cost $2,098.43 per month. Rounding to $2,150.00, an increase of just $51.57 per month, would pay your mortgage off around two years earlier and save you $30,701.13 in interest.

Apply Windfalls

Spending extra cash on short-term wants is tempting, but using bonuses, tax refunds, or other financial windfalls to make extra mortgage payments is one way to reduce your mortgage principal and pay off your mortgage faster.  

Refinance

Refinancing for a better interest rate or shortening your repayment period can be solid strategies for paying off your loan faster.

Two standard loan terms are 30-year and 15-year mortgages. Refinancing from a 30-year mortgage to a 15-year mortgage, even if your interest rate does not change, can save you hundreds of thousands in interest and reduce your repayment period by half. 

However, this will increase your monthly payments, so it’s essential to ensure your budget can support increased payments before proceeding.  

Student Loan and Credit Card Debt

Gen Xers also carry the highest average student loan and credit card debt of any generation. For a generation with so many financial and caregiving obligations, the weight of their debts can add an extra layer of stress and future uncertainty. 

Student Loan Debt

Gen X has the highest average student loan debt of any generation, owing $44,240 as of 2024. That’s 17% higher than the nationwide average.

Credit Card Debt

Gen Xers have the highest credit card debt of the generations, averaging $9,255. Thirty-eight percent of Gen X report that they feel they have too much debt and almost a quarter of Gen X have been contacted by collection agencies in the past year.

Gen X’s credit card debt is not just from overconsumption. Many Gen Xers use their credit cards every month to meet their financial obligations. Additionally, 56% of Gen Xers provide financially for parents, children, or both. Twenty-four percent turn to credit cards for help to meet demands.

Paying Off Other Debt

There are a few things you can do to pay off debt quicker so you can focus extra dollars on your future.

Make More Than the Minimum Payment

Use any extra dollars to pay more than your minimum payment each month. On credit cards, the minimum payment primarily covers the interest, and any additional dollars go directly toward paying back your debts. 

Prioritize High-Interest Debt

Prioritizing paying off your highest interest rate debts like credit cards before putting extra dollars toward other debts. This method, known as the debt avalanche method, minimizes the amount of interest in your highest-interest debts to save you money and pay down the principal faster. Alternatively, you can use the debt snowball method, which prioritizes your lowest-balance card first. 

Consider Refinancing or Consolidation

For student loan debts, monitor interest rates and consider refinancing if they fall below your current rate. Lowering your interest rate even by 1% can save you hundreds of dollars a year and thousands of dollars over the life of the loan. You can take this one step further and keep paying your monthly minimum to make an even bigger impact on your principal repayment.

You can use financial tools like debt consolidation into a personal loan or a balance transfer to reduce the interest you pay on your borrowed money.

Automate Payments

Automating payments ensures you never miss a due date, saving you from late fees or additional interest charges. Additionally, you should contact your lender, as some offer a slight interest rate discount for enrolling.

Put Windfalls Toward Debt

Use windfalls like tax refunds, bonuses, or other unexpected income to pay down your debt. While debt repayment with windfalls is not as fun as a night on the town or a special purchase, the impact can significantly decrease your balance and shorten your repayment timeline. 

Strategies To Invest in Your 40s and 50s

To maximize the impact of your savings, you should implement a few key investment strategies.

Set Clear Retirement Goals

Many retirement calculators are available online to help you determine a goal for how much you need to live comfortably. These calculators can even tell you how much to save each year to reach your goals. If you’re still unsure about how much you’ll need or how to get there, you should contact a financial advisor. They can help you make a roadmap to get you from where you are now to where you want to be.

Maximize Retirement Contributions

Contribute the maximum amount allowed to your IRA and 401(k) accounts annually. The IRS imposed contribution limits for 2025 are $7,000 for IRAs and $23,500 for 401(k). At a minimum, anyone participating in a 401(k) with an employer match should contribute enough to their plan to get the match. 

Diversify Your Portfolio

Diversification is a pillar of any investment strategy. However, the closer you are to retirement, the more important diversification becomes. Diversification balances risk and growth by investing in a mix of products that respond differently to market trends. 

Automate Contributions

Automating savings is a proven strategy for increasing savings success. Automatically transferring money to your retirement accounts takes a task off your plate and removes any willpower involved in the decision. Both increase your likelihood of success. 

Mortgage vs. Investing: Which Should You Prioritize?

Your financial circumstances dictate whether you should prioritize paying off your mortgage or investing. However, some rules of thumb can help make the decision easier: 

Striking a Balance

For many Gen Xers, the best way to improve retirement comfort is to strike a balance between retirement savings and debt payoff. 

Build a robust emergency fund before making significant changes to where your money goes. A solid place to start is striving for an emergency fund with three to six months of expenses saved. 

Once you have emergency savings, you can allocate extra income toward mortgage, debt payments, and investment accounts. 

You can change your plan at any time. Financial advisors recommend reviewing your plans at least annually, but you can change your path whenever your needs or financial circumstances change. The important piece is knowing your goals and continually striving to achieve them. 

The Bottom Line

Gen X has endured their fair share of financial hurdles in early adulthood, and they still feel the effects in their highest earning years as they approach retirement. 

Many Gen Xers are financially stretched as they pay off their mortgages, address current financial needs, and save for retirement. Strategies like biweekly payments, rounding up monthly payments, and refinancing can pack a punch in mortgage debt. Maximizing 401(k) contributions, diversifying investments, and automating savings can build retirement security. 

With so many competing financial demands and quickly approaching retirement, consulting a financial advisor can help Gen Xers set clear goals and create a balanced approach to achieving them. Gen Xers had little control over how their working years started, but they’re empowered to design their best ending.