Money & Life in your 40’s, 5 Focus Areas

How to maximize a make or break decade

The 40’s are a make or break decade in terms of finances, health and living a life of True Wealth! All of life has it’s challenges and joys, the yin and the yang of existence, but the 40’s can have particular challenges and joys. The 40’s are a time when there is no more messing around in terms of “adulting”. It’s a time to take care of the things and actions of life. And I believe, if done well, this decade can launch a person into a more successful second act of their life. But the deck can be stacked against us in our 40’s. It can be a time of increased pressures and responsibilities at work and home. In fact, according to the “U” shaped curve of happiness theories, the 40’s can be our “saddest” decade. Therefore it also needs to be a time to perform some self care so our little engine keeps plugging away. Therefore, the 40’s are crucial to building wealth, but this time also requires careful strategies and consideration. In your 40’s you are truly an adult. No more extended grad school visits. You may be in full child rearing mode and putting a little human’s needs and development above your own. This is a joy and a ton of hard work! There are certain realities of the 40’s and ways to maximize finances at this time to set yourself up for awesome financial independence. Time is going by fast therefore the time to act is now!

Net worth in the 40’s

Investment and retirement experts recommend a person in their 40’s to have saved and invested three to four times their annual salary. Therefore, if someone is making $70,000 per year, in their forties they should have over $210,000 saved for retirement. This is far from reality for most. The average 401k balance at this time is $87,000. Not a small number, but a far cry from what is recommended.

Many demands on time and resources

This is a decade when you are firmly embedded in what we all think of as the “adult” world. Which means you could be at the height of career responsibility, child rearing, helping family, increased financial responsibility, etc. It can be a time when things are really starting to click along and it can also be a time of letting go of some past dreams, at least for a while. Most people during this time have mounting work and family responsibilities. These responsibilities, although exciting and life fulfilling, can also take a toll financially, mentally and physically if not managed well. The 40’s are a key time to take charge of your life and lay the groundwork for some financial success. The good news is that this can be achieved through small daily adjustments and habit forming.

Here are a few ideas to help manage your finances and ultimately your life in your 40’s:

1. Your Health Health is one of our key components to a life of “True Wealth”. As we know, It is very hard to fully enjoy the pleasures and experiences of life without a feeling of vitality and energy. Because it can be hard to keep healthy in your 40’s due to mounting stress/pressure, lack of time, etc., we have discovered many health hacks and use 7 Foods To Unclog Arteries to keep fit as best as possible. Remember that taking care of your health is not an all or nothing thing. Focus on the little things you can do to improve your health and mood, and I believe these could have a direct impact to your relationship with money. We have seen many times, someone with a lot of money may become very sick or ill. All that money doesn’t actually matter past a certain point, health is the number one source of True Wealth. Here are some other healthy lifestyle ideas:
  • Eat smaller portions. Studies are showing that reducing calories to a moderate level does help certain animals in experiments to live longer and healthier lives.
  • Focus on the nutrient quality of the food ingested. We need food for energy and nutrients. We live in an environment rich on the calorie part, but low on the nutrients. At each meal try to think about what vegetables you are having, what fruits, water, whole grains, etc.
  • Park far away so you are forced to walk. Lifestyle engineering can lead to us walking more. Many European cities involve more built in opportunities to walk compared to American cities. In the US we often get in the car (sit) on the commute, sit at a desk, sit again on the commute, then come home and sit. We need to walk!
  • Get out in nature and soak it in. Meditate for 5 minutes. Be appreciative of what you have.
  • Quit smoking or drink less. Alcohol needs to be consumed in moderation, it is just not healthy in large quantities.
  • Downsize the frappucino to a tall instead of the venti.
  • You get the idea, just like money, all these little habits can snowball into great progress. And keep in mind, being healthy can lead you to better financial management.

Added Bonus: GRATITUDE

As we get older I think it is more and more important to look around the world and be grateful for what we have. Do not take my word for it, research is finding that gratitude is the fastest way to happiness in life. Some ways to practice gratitude is to make a list of what one is grateful for, think deeply about what one is grateful for and be thankful to others. Think about all the energy, design and effort that goes into all the luxuries we enjoy each day.   2. Enjoy time with family If you are raising kids, remember that spending a bunch of money on elaborate things for them is not what they really want. They want your attention and to be around you and engaged as a family. Go on a hike, to a park, play a board game, play Frisbee, ride bikes, cook a meal together; all inexpensive things to do with your time that add richness and value to your life. Keep the toy budget under control, they don’t need everything. Create clear guidelines and be a good example of how to behave. Raising children is rewarding hard work, but remember the time goes fast and they grow up fast, enjoy each day the best you can.   3. Keep pumping up the 401k investments and other investments! Now is crunch time in terms of building wealth, get as much of your income automatically placed in your low cost index funds each and every paycheck. Think of your 40’s as the asset accumulation decade. You want to be acquiring, managing and investing in assets with as many dollars as possible. You can’t afford to lose out on this decade and the power of time and compound interest. Life expectancies may keep rising, leading to a nice time horizon to let this money grow on itself. In general you should be entering the “Extreme Asset Accumulation Zone”! Every dollar placed in savings or an asset now will be supporting you and your family in the coming decades. Think stocks, index funds, bonds, real estate, side businesses, etc.   4. Seek out your side gigs Now is a good time to assess your life. Because you have now lived a while, you actually have some wise perspective. So at this point we may have some dreams that didn’t quite work out, but that is ok because there are some life blessings we can focus on that perhaps we did not expect. Sure, we also took a few knocks along the way, those are the “slings and arrows” we all face throughout life. My 90 year old grandfather always said life is one challenge after another for us to manage! Ask yourself, are you still headed in a trajectory you like? What adjustments can you make? What can you be thankful for? Be cautious about comparing yourself to others. We all have unique yet similar journeys influenced by thousands of factors, some of which we have no control. Have you accomplished some the goals you had set out earlier in life? Pehrhaps and most likely those priorities have shifted. Explore some side gigs that can potentially lead to extra income.

The 40’s can be difficult because that youthful optimism and sense of the possible may be tested. Studies indicate that people’s happiness tends to wane in this decade. We did a review of this in our post about the Happiness Curve That Naturally Dips In Midlife. But don’t give up, it actually goes back up in the following decades. It’s a time to refocus, assess where you came from and perhaps redefine!

5. Control the debt The 40’s are a time to do some debt destruction. Knock down the school loans and car loans. Then get the mortgage down and control accumulating more debt. Avoid debt on vacations and consumer baubles/fancy clothes, etc. You do not want to enter your 50’s with high amounts of debts in order to achieve FIRE goals. Experts suggest tackling the high interest debt first. If you have thousands on some high interest credit card, focus on destroying that first while making the minimum payment on others. Make extra payments as much as possible on all the debts, but you may need to do this at different times. By 40 you start to realize life can go fast. So seize the decade one day at a time. And take care of yourself and the ones you love along the way. Focusing on these areas in your 40’s can move you closer to your FI and life goals! These concepts can also lead to a feeling of “True Wealth” in the moment, which is all we really have.  

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