Eight Baby Boomer Money Mistakes You Should Avoid

Baby boomers have been receiving a lot of criticism in recent months for their collective contributions to our country’s economic problems.  First, we are blamed for an extreme amount of debt driven consumption that inflated highly leveraged real estate and credit bubbles.  Second, we are now being blamed for an excess of saving when many so-called economic experts are calling for increased consumer spending.  In general, boomers are probably guilty on both counts.   I have a suggestion.

Instead of wasting energy hurtling insults at financially irresponsible baby boomers, why don’t we make a list of all of the money mistakes that were made by the boomer generation.  The younger folks can read the list then pledge “never again.”   I hereby volunteer to start the list of boomer mistakes.  Here we go:

Assuming that what goes up, will continue to go up

This seems like one of those “duh” lessons that should not need to be taught.  Apparently not, because boomers bought homes – upsized McMansions even – during the go-go years, often using highly leveraged, unconventional loan products.  The premise was that this was a low risk activity because equity would be built from continued real estate appreciation.  Not.

The times of continuously increasing real asset values, stock markets, and even bond yields are likely over, perhaps for years or decades.  Boomers didn’t figure this out in time.  Your investment and retirement planning should be adjusted accordingly.

Using home equity as a primary retirement nest egg

For many boomers who used home equity as a retirement plan – Californians in particular – that nest “egg” is now an egg shell, empty and cracked.  Homes are not investments except to the extent they are paid for and providing you tax-free shelter services.

Failing to diversify

This is related to mistake No. 2 but further includes being inattentive to proper allocation of investments into non-correlated asset classes.  This takes study and thought, two financial planning characteristics in short supply among my fellow baby boomers.  We have been oblivious to risk or were busy chasing yields from the hottest funds, or both.

Ignoring life expectancy

Yes, it’s hard to believe that a generation of mostly overweight and out of shape Americans can be guilty of forgetting how long they will live, but it’s true.  Perhaps the best evidence is how abruptly and massively boomers pulled money out of the markets in response to negative conditions.  “Sell low” we cried, forgetting that our investment horizon still spanned 20-30 years.  A lot of us think those stable value funds and CD’s will sustain us until the end.  Maybe so, if we plan on living in a van down by the river.

Sacrificing retirement for our children

So often I have read about boomer parents maxing out a HELOC or borrowing from retirement accounts to pay college tuition or to send adult children extra living money.  (“Gee Mom and Dad, I just have to live in Manhattan.  Don’t make me move just because I have negative cash flow.”)   You didn’t sign up for that obligation.  If you can afford to help the spoiled little darlings, go ahead.  Just don’t get guilted into it.  If you do, make sure you are prepared to turn the tables on your kids when you are old and broke.

Addiction to stuff

Take a poll of baby boomers you know.  I will bet that most will tell you that one of their immediate goals is to simplify their lives, including shedding themselves of a lot of the “stuff” they accumulated over the years.  Wouldn’t it be nice if we could figure out that “stuff” is more trouble than it’s worth before we acquire it all?  Now that you know how you will feel about it later (because I told you), you can implement stuff-avoidance strategies now.

Working for money

Don’t start making faces at me.  I know we need money and work is what generally provides it.  But there is that old work-life balance thing that baby boomers still haven’t figured out.  The trick is to maintain control of the outgo ledger so that you have choices on the income ledger.  Once you become accustomed to car payments and such, you are at risk of being stuck in a work life of quiet desperation, waiting for weekends and vacations that come and go but never satisfy.

Marriage recycling

I will be the first to acknowledge that Mr. ToughMoneyLove is not a relationship expert.  In fact, just the opposite is probably true.  I have to credit Mrs. ToughMoneyLove for keeping me around for 31 years.  But money experts will tell you that one of the worst financial disasters a person can experience is a divorce.  The older you are, the worse it is.  So do what so many boomers have not.  First, choose wisely.  (As I used to tell our sons, when evaluating a woman as a life partner, be sure you are thinking with the correct body part.)  Then work hard to maintain that marriage.  Your spouse and your net worth will love you for it.

I think these eight baby boomer money mistakes are a good start.  What can you add to the list?

Photo credit:  Rob Pym

Feed Mr. ToughMoneyLove

FREE UPDATES: If you enjoyed this, please subscribe to receive the newest hard truth from Mr. ToughMoneyLove automatically by RSS feed (what is RSS?) or by spam-free Email.

  • Banner


8 Responses to “Eight Baby Boomer Money Mistakes You Should Avoid”
  1. Danny says:

    Hi I’m new to this site, but I’m already intrigued.

    Regarding #5, I’m on the other end of the equation and would add that making sure you can take care of your own retirement probably ranks 2nd in greatest financial gifts you can give your kids (next to starting them off debt free). Otherwise, in another 10 or 15 years, that kid in Manhattan will still have to move so they can support children of their own along with their aging parents.

  2. Danny: Thanks for visiting. And I agree that making sure that you do not become a financial burden on your own children ranks near the top of the list of financial planning goals.

  3. Great list. Here are my additions:

    9. Ignore government debt and fund today’s needs with your grandkids’ taxes.

    10. Make debt a social norm and desensitize yourself to the impact it can have. Accept debt as an unavoidable part of life and pass those values along to your children.

  4. MasterPo says:

    I disagree about #5.

    My kids are my future. They will be here long after me and my wife are gone.

    If it comes to a choice bewteen retirement and my kids schooling the latter wins all the time.

    Imagine your kid gets into Harvard or MIT. Would you face your child and tell them “Great that you got in but we have no money to send you. Communitty college is just as good.”?

  5. tom says:

    These are excellent points and very much true.
    I would say the biggest change will come from working for money. Look around, so many young entrepreneurs.

  6. Tom says:

    #7 is so true – we young folks should learn this lesson before it’s too late.
    #5 – my mom sacrificed a lot to raise 6 kids. She even neglected her own health and financial situation sometimes to help a few of us as adults (except me, of course). Now, she’s retired and no one comes to see her … parents don’t owe their kids anything!

  7. John says:


    Here is a couple to consider. (which I have done)

    1. Thinking of Credit Card Available Credit as how I have to spend.

    2. Living paycheck to paycheck, i.e no Cash Reverse – Issue is not doing whatever it takes to make it happen.

  8. dwhite2762 says:

    I’m an old boomer and I would add this to the list. Be what we were in the 60’s. We lived in a school bus and had a great life without a TV, an Ipod, a fancy phone and the internet. We actually met with people and discussed philosophy and what war meant to us. We made our own music and we listened to poetry. We always had enough to share with people that didn’t have what we had. We cared about the earth even then and we used our weekends to clean up our enviornment. We used public transportation. We shopped for used clothes and made our own hippie style. My husband of 40 years and I are now (slowly) in the process of returning to the 60’s to the great enjoyment of our children and grandchildren.

Speak Your Mind

Please leave a comment and tell us your version of the hard truth...

You must be logged in to post a comment.