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Top Ways to Build Wealth in Your 40s

Jan 05

Friends in their 40s Discussing Building Wealth

Last month, I wrote about the Top Ways to Build Wealth in Your 50s. This month, let’s talk about wealth building in your 40s. Dare I say that in your 40s, you’re hitting your mid-life stride?  40-somethings are kind of walking a tightrope with their wealth – maximizing earnings, minimizing debts, and prioritizing needs and desires.

There’s a lot to think about in your 40s: if you don’t have kids in college, chances are you’re at least thinking about saving for college. Usually, your late 40s into your 50s are your top earning years, so with your higher income, you might be thinking about buying a larger house, traveling, golf club memberships, or luxury cars. It’s easy to get distracted!

So, what’s a 40-something to focus on if you’re serious about building wealth? Here are my top tips:

Save 50% of every raise

In your 40s, you’ll likely have promotions and job opportunities that can lead to significant increase your income. Lifestyle creep is prevalent at this stage of life, and it’s tempting to adjust your lifestyle upward with each bump in income. Proceed with caution!

Instead, a smarter wealth building strategy is to save at least 50% of every raise. That may even seem generous to some, who might save an even larger chunk of their raises. Obviously, if you can save even more, that is even better. But if you’re wanting to travel, or do some fun things you couldn’t afford to do before, committing to only spending 50% of each raise will help you build a larger savings/401k and narrow the gap to retirement.

Create passive income streams

With the extra income you’re generating in your 40s, another wealth building strategy is to create a passive income stream. Passive income streams usually require an initial outlay of cash or investment money and time, but after some work, will bring you consistent income without a lot of effort on your part.

One good example of a passive income stream is a rental property. There are some dividend stocks you can invest in as well that can bring regular payouts. You can also turn a hobby into a business, or become a silent partner in a business. Every person’s path is different, but it’s something to consider in your 40s!

Curb the cost of kids

Did you know the cost of raising a child from birth to age 17 is $491,000 for families earning over $100,000 year? A significant portion of that cost (30%) is estimated to be clothing and “miscellaneous”.  If you’re saying “yes” to all of your kids’ requests, it might be time to start saying “no”. If not for the sake of your wealth building, for the sake of the kids.

For more in-depth info on that, I recommend “The Financially Intelligent Parent” by Eileen and Jon Gallo, who propose an 8 step strategy to raising successful, generous, and responsible children.

Get fit

Surprised by this one? Many people are! Yet, research shows that people who exercise at least three times a week earn 6% to 9% more than those who do not, according to research by Cleveland State University professor Vasilios Kosteas. Initially the correlation may not make sense to you, but diving in, Professor Kosteas cites growing evidence that fit employees are more productive and manage work-related stress better, which can lead to faster career advancement.

Get Life Insurance

This is another one that you might not think about as a wealth building strategy. And honestly, it’s more for your family than you. Buying a life insurance policy helps ensure that all the money you’ve worked hard to save for retirement is used for its intended purpose, should you pass away in the meantime.

For example, if you died without life insurance, your spouse or family members might have to dip into those accounts to pay off debt or assist in burial expenses. Life insurance helps ensure that your family is taken care of, and that they won’t have to spend your retirement money prematurely.

I recommend speaking with an insurance advisor on the type and amount of coverage to invest in. The point is, if you don’t have it, the time is now!

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Bart A Zandbergen, CFP® is a Registered Investment Advisor with Optivest, Inc and a Registered Representative with Gramercy Securities, Inc. Investment advisory services are offered by Optivest, Inc. under SEC Registration and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC, 3949 Old Post Road, Charlestown, RI, 02813, 800-333-7450.


Investment advisory services are offered by Optivest, Inc. and securities are offered through Gramercy Securities, Inc., member FINRA & SIPC. Securities are not FDIC-Insured, are not bank-guaranteed and may lose value. This website is provided solely for Optivest, Inc. clients and does not intend to provide investment, tax or legal advice. Be sure to consult with your own tax and legal advisors before taking any action that would have tax consequences. All references to Optivest on this website refer to Optivest, Inc. (a California Incorporated company) and all references to Optivest Properties refer to Optivest Properties, LLC. Optivest, Inc. does not represent that the securities, products, or services discussed in this website are suitable or appropriate for all investors. Information herein is taken from sources deemed reliable and neither Optivest, Inc. nor Gramercy Securities, Inc. is responsible for any errors that might occur. Optivest, Inc. may only transact business in those states and international jurisdictions where we are registered/filed notice or otherwise excluded or exempted from registration requirements. The information on this website is not intended for distribution to, or use by, any entity or person in any jurisdiction or country where such distribution or use would be contrary to law or regulation, or which would subject Optivest, Inc. or Gramercy Securities to any registration requirement within such jurisdiction or country. The opinions expressed by vendors or third parties are those of the author(s) and are not necessarily those of Optivest, Gramercy or their affiliates. All links to other Internet websites (“hyperlinks”) are included as a convenience for our visitors and Optivest, Inc. assumes no liability for the content or the presentation of such linked sites. No part of this website may be reproduced in any form, or referred to in any other print or electronic publication without the express consent of Optivest, Inc. The material has been prepared and is distributed solely for information purposes and is not a solicitation or an offer to buy or sell any security or instrument or to participate in any trading strategy. No representation or warranty is provided for any software that may be downloaded from this website. Copyright © 2016 Optivest, Inc.

Securities offered through Gramercy Securities, Inc., 3949 Old Post Road, Charlestown, RI 02813, 1-800-333-7450

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