Strategies to Build Wealth in Your Forties
Financial Steps that Can Set You Up for Future Financial SuccessKathy Longo, CFP®, CAP®, CDFA Wednesday, 10 August 2022
If you’re in need of strategies to build wealth in your forties and find yourself worried about accumulating enough to fund your future, you’re not alone. In fact, research shows that the average 401(k) balance for Americans between the ages of 40 and 49 is $120,800, meaning there are a significant amount of people who have less than that stored away in their savings. Even if you feel behind, rest assured you can make significant strides toward building wealth in your forties. Read on for strategies to help you make the most of this decade and maximize your wealth for the future.
Max Out Your Retirement Plans
Taking full advantage of your employer-sponsored retirement savings accounts can be one of the best strategies to build wealth in your forties. If your employer offers a plan like a 401(k), 403(b), or 457(b), make sure that you’re contributing as much as possible up to the annual maximum of $20,500. Some employers even offer to match your contributions, and if this is the case for you, you’ll want to do what you can to ensure you’re contributing enough so that you can reap that benefit. An employer match is essentially free money that can make a significant difference over time. Workers over age 50 can contribute an additional $6,500 per calendar year, which is called a “catch-up contribution”.
Invest, Invest, Invest
Alongside putting money away in retirement accounts, developing a sound investment strategy and deciding which type of investments you want to include in your portfolio can be a crucial step to building wealth. The way you choose to invest and the amount of risk you decide to take on is completely up to you, but be sure that you’re being thoughtful with your choices and doing your research before deciding where to put your money. At this stage in your life, developing an investment portfolio that’s strategic and well thought-out can have an important impact in helping you achieve your retirement goals. Navigating the world of investing can be a bit complex, so if you’re unsure about where to begin or what options might be best for you, it may help to speak with a financial advisor you trust who can help you make the best choices for your goals and choose the best strategies to build wealth in your forties.
Tackle Your Debt
It can be difficult to build wealth when you’re weighed down by debt at the same time. Use this decade to really commit to making a debt payment plan and relieving yourself of that burden. There are a few common tactics you can try. The first is the avalanche method, which is when you pay the minimum on all of your debts while paying as much as possible on the debt with the highest interest rate. Another tactic, the snowball method, involves making the minimum payment on all of your accounts but then focusing any extra cash on the debt with the smallest balance first.
Whatever approach works best for you, what’s important is that you put a plan in place and stay committed to it so that you can enter retirement without bringing the stress of debt with you. No matter what other strategies to build wealth in your forties you may be using, debt can act as a significant roadblock to achieving your goals.
Get Strict with Your Spending
If you’re having difficulty maxing out your retirement contributions, or if you’re still struggling to build up a nest egg, it might be a good idea to revisit your budget to see where you have opportunities to cut down on spending. Even if you think you’re a cautious spender, there are undoubtedly little purchases here and there that you might not even be thinking about, but which add up over time.
It can be difficult to get a handle on your expenses. A helpful way to be sure you’re seeing the full picture of your finances is to look at your monthly bank and credit card statements so you can better understand your spending habits. You’ll have an easier time cutting out expenses once you have a full understanding of where your money is going.
Focus on Estate Planning
As you’re working through your strategies to build wealth in your forties, estate planning should be at the forefront of your mind. Though it’s mostly about what you want to happen after you’re gone, estate planning is ultimately about taking care of the people you love. Not to mention, when done strategically, estate planning can be a great way to start building long-term generational wealth.
If you’re feeling overwhelmed by the estate planning process, you might want to look into hiring a skilled professional who can help you set up the right insurance policies, arrange your financial affairs, and ensure that you’re covering all of your bases to meet your own needs, as well as the future needs of any dependents or heirs.
Generate New Income Streams
A smart way to boost your income and savings is by adding additional income streams. This doesn’t necessarily have to mean dedicating all your free time to work – there are many ways you can make money without working around the clock. Here are a few ideas:
- · Freelance a few hours each week
- · Work part-time at a local coffee shop or bookstore you love
- · Open your own Etsy shop
- · Sell your art, produce, or homemade goods at a local fair or market
If you’re unsure about where to start, think about what you like to spend your time doing or any hobbies you may have. There are plenty of opportunities out there for you to get creative while also boosting your income.
Downsize Your Home
Many of us end up purchasing a home with more square footage than we need, so selling your house for a smaller place could end up saving you hundreds each month. If you’re halfway through your mortgage term, this could be an especially beneficial time for you to consider selling – especially if you’ve outgrown your need for a larger home.
Concluding Thoughts on Strategies to Build Wealth in Your Forties
If you’re in your forties and feel like you still haven’t saved as much money as you’d like, now is the time to recommit to strengthening your finances and getting yourself on track. It’s not too late to create the future you envision - you just have to get intentional about the next steps you take. Taking small steps, making sustainable plans, and reconsidering your spending habits can help ensure that you’re on the right path towards achieving your savings goals.
If you’d like to partner with a professional as you focus on strategies to build wealth in your forties and beyond, contact us today. At Flourish Wealth Management, we provide personalized service and extensive expertise to help our clients meet all of their financial and life goals. We look forward to hearing from you!
About the Author
Kathy Longo brings over 25 years of expertise and experience to Flourish Wealth Management. Kathy is wholly dedicated to improving the life of each client and finds joy in making complex matters simple and easy to understand. She excels at asking the right questions, uncovering new possibilities and implementing the most advantageous strategies for success. Playing such a pivotal role in her clients’ lives remains an honor and a privilege. After earning a degree in Financial Planning and Counseling from Purdue University, she began her career at a small firm in Palatine, Illinois where she worked directly with clients while learning to build a viable, client-centric business. Over the years, she gained extensive knowledge and wisdom working as a wealth manager, financial planner, firm manager and business owner at notable, various sized companies in both Chicago and Minneapolis.