Should I be worried if I'm below my generation's benchmark?

Should I Be Worried If I'm Below My Generation's Benchmark?

In the world of personal finance, generational benchmarks often serve as aspirations rather than achievable goals for most individuals. While it’s tempting to measure your financial success against these benchmarks, it’s crucial to remember that they don't account for personal circumstances or the unique paths people take in life. Instead of focusing on arbitrary numbers, you should concentrate on personal financial growth and stability. Here's a detailed look at why being below your generation's benchmark shouldn't be a cause for alarm.

Understanding Generational Benchmarks

Generational benchmarks provide a snapshot of ideal financial success within different age groups. According to Empower's 2024 survey, benchmarks for annual income💡 Definition:Income is the money you earn, essential for budgeting and financial planning. and net worth💡 Definition:Total assets minus total liabilities—the true measure of your financial health vary significantly across generations:

• Gen Z: $587,800 income, $9.47 million net worth
• Millennials: $180,865 income, $5.6 million net worth
• Gen X: $212,321 income, $5.3 million net worth
• Boomers: $99,874 income, $1.05 million net worth

It's important to note that these figures are aspirational and not reflective of the median wealth💡 Definition:Wealth is the accumulation of valuable resources, crucial for financial security and growth. in these groups. For example, the Federal Reserve💡 Definition:The Federal Reserve controls U.S. monetary policy to stabilize the economy and influence inflation and employment. reports that the median net worth for millennials is between $100,000 and $200,000, which is far below the benchmark.

Why Benchmarks Don't Tell the Whole Story

1. Aspirational, Not Realistic: Generational benchmarks are often set high, representing ideals rather than what most people achieve. They can be useful for setting goals but aren't realistic for everyone.

2. Varying Life Circumstances: Factors such as career stage, location, family size, and personal health can significantly influence financial standing. These nuances are ignored by broad benchmarks.

3. Progress Over Perfection: Personal financial growth is more important than meeting a benchmark. Tracking improvements in savings💡 Definition:Frugality is the practice of mindful spending to save money and achieve financial goals., debt💡 Definition:A liability is a financial obligation that requires payment, impacting your net worth and cash flow. reduction, and overall net worth year-over-year provides a more accurate picture of financial health.

Real-World Scenarios

• Millennial Example: Consider a 28-year-old millennial earning $75,000 annually with $50,000 in student debt and $20,000 in savings. Although below the generational benchmark, they are on a positive path by focusing on debt repayment and consistent savings.

• Gen X Example: A 40-year-old Gen Xer with a $100,000 income and a $300,000 net worth might seem below the generational benchmark. However, if they have a stable job, a solid retirement💡 Definition:Retirement is the planned cessation of work, allowing you to enjoy life without financial stress. plan, and manageable debt, they are likely in a secure financial position.

These scenarios highlight that financial success is not solely about hitting benchmarks but about making informed decisions that improve financial standing over time.

Common Mistakes and Considerations

• Avoid Comparison Traps: Constantly comparing yourself to generational benchmarks can lead to unnecessary stress and potentially poor financial decisions. Instead, focus on what’s within your control, such as your savings rate💡 Definition:The savings rate is the percentage of income saved, crucial for building wealth and achieving financial goals. and debt management.

• Recognize Personal Growth: Celebrate personal financial milestones rather than getting discouraged by not meeting broad benchmarks. This could mean paying off a significant portion of debt or reaching a personal savings goal.

• Tailor Your Financial Plan💡 Definition:A spending plan that tracks income and expenses to ensure you're living within your means and working toward financial goals.: Customize your financial plan to fit your life circumstances. Whether it’s prioritizing an 💡 Definition:Savings buffer of 3-6 months of expenses for unexpected costs and financial security.emergency fund💡 Definition:Savings buffer of 3-6 months of expenses for unexpected costs, including pet emergencies and medical crises. or focusing on retirement savings, ensure your financial goals align with your life stage and needs.

Bottom Line

Being below your generation’s benchmark is common and not a cause for concern. These benchmarks are aspirational and do not consider individual life circumstances. Focus instead on steady progress, financial wellness, and achieving your personal financial goals. Remember, financial success is a marathon, not a sprint, and it’s the progress you make year-over-year that truly counts.