Once you hit 40, retirement might not seem so far away. Building wealth in your 40s, when you’re likely to have more stable finances and can direct more towards investing, can put you in a great position to retire in your 50s.
Keep reading for 5 money moves to build wealth in your 40s and set yourself up for retirement!
Everything You Need to Know To Build Wealth in Your 40s
Even if you’re just starting out on your wealth building journey in your 40s, don’t fret. Although you’ll need to buckle down and get serious about saving and investing, you’re not too late to set yourself up for retirement.
1. Increase Your Income
When you’re in your 20s and 30s and just starting out, it’s often easy to quickly increase your income through promotions, pay raises, and changing jobs. Once you hit your 40s and 50s, you’re in your peak earning years.
Asking for a raise or hoping for more promotions are ways to increase your income, but you might also want to consider passive income sources. Passive income allows you to increase your income without doing much beyond an initial investment.
2. Reduce Debt
Getting rid of as much debt as possible will give you more breathing room come retirement and allow you to splurge a bit more to take that nice vacation or upgrade to a nicer vehicle.
Start with high interest rate consumer debt, like credit cards first. Once you have all of those paid off, start chipping away at lower interest rate debt, such as your mortgage. If you pay off your mortgage entirely by the time you retire, your monthly expenses will be significantly less.
3. Map Out Your Retirement
Think about when you want to retire and what kind of retirement you want to have. Do you want to play golf and lounge by the pool all day? Travel? Quit your day job but do something that is more in line with your passion in retirement?
If you know what you want ahead of time, you can plan better for retirement. Share your goals with your financial planner and they can help get you on the right track to meeting your goals.
4. Cut Your Spending
Just because you’re likely earning the most money you ever have in your 40s doesn’t mean you have to spend like it. It might be tempting to upgrade to a nicer car, bigger house, or take grander and more expensive vacations.
While we’re not suggesting that you don’t enjoy earning more, you don’t have to spend all of those extra earnings. Every dollar you save or invest in your 40s puts you that much closer to retirement.
5. Protect Your Family
Make sure you have adequate life insurance to support your family if something should happen to you. Pay the premiums each month, name the appropriate beneficiaries, and make a will. Having all of this in place earlier rather than later will ensure that your family will always be taken care of.
The Bottom Line
Whether you’re just starting to build wealth in your 40s or have been financially savvy all along and want to ensure that you’re set up for retirement, these suggestions will help you maintain or establish firm financial footing for the next decades of your life.
Check out our blog for more resources on insurance, financial planning, and passive income streams.