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You've probably received a ton of financial advice at different stages of your life. Things like, "you should start saving as soon as you get your first paycheck!" But what if you haven't built up much—or any—wealth by the time you reach your 30s or 40s?
You've probably received a ton of financial advice at different stages of your life. Things like, "you should start saving as soon as you get your first paycheck!" But what if you haven't built up much—or any—wealth by the time you reach your 30s or 40s?
The good news is that it's never too late to start investing in your future. No matter what you've achieved so far, our handy guide offers you tips and tricks on how to build wealth in your 30s and 40s.
How to Build Wealth in Your 30s
Your 30s are a great time to kickstart your ideas about money. Take a look at your life and see if you're on track for a secure future or if you need to make a few changes. Here's what to do to help you achieve your goals.
Create a Vision for Your Future
The first step in any plan to build wealth in your 30s is to review your experience and assess your outlook. Can you picture a life where you have personal wealth and are financially secure? Compared to your family background, would you like to earn more or about the same as your parents?
Ask yourself questions based on your life goals. For example:
- Do you need to save up for a major purchase, like a mortgage down payment on a new home?
- Will you need to furnish that new home?
- Do you need to set aside money for college or raising children?
- Will you want to take a big family vacation, possibly to a foreign country?
- Do you have enough savings to cover emergencies?
Make a Budget and Save First
Maybe you're thinking, “I don't have any spare money to save!” One guaranteed way to build wealth is to save a portion of your paycheck first—then see what you have left over to spend.
Create a budget that follows any of the popular guidelines like 50 percent for needs, 30 percent for wants, and 20 percent for savings and/or debt payments. Consider automating your savings with scheduled transfers from your checking to another account.
Start tracking your spending using a method that works for you, like an expense tracker app or highlighting the different spending categories on your account statement. Make notes of any surprises and ask yourself if you really need the item or service.
Consider Ways to Reduce Your Debt
You might feel you can't save because you're too busy paying down debt. So, your 30s are a great time to work out a way to bring your payments under control.
Make Plans for Your Retirement and Estate
Your retirement is an essential part of any discussion about how to build wealth in your 30s. Thanks to the magic of compounding interest, the sooner you start investing in your future, the more wealth you'll accumulate.
Seek an employer that offers a 401(k) so a percentage of your salary goes directly into a retirement account that can be transferred if you change jobs. Ideally, your employer will make matching contributions.
In addition, you can open an Individual Retirement Account (IRA) and choose between a Traditional or Roth IRA. An IRA is also the best option if your employer doesn't offer a 401(k) so you can start your retirement savings.
For your estate, make a Last Will and Testament so your family or descendants are clear on what to do with your assets should the worst happen. You may also consider taking out life insurance.
Be Aware of Lifestyle Inflation
As your income rises, you may be tempted to buy a better car, a bigger home, or a more fashionable wardrobe. This natural tendency is called "lifestyle inflation," and it's one reason many people don't build wealth in their 30s.
Many people who have built up wealth are not your stereotypical rich people. They might not live in a mansion and drive a Ferrari. Instead, they got wealthy because they lived modestly, saved money, and invested their spare earnings. You don't need to keep up with the Joneses!
How to Build Wealth in Your 40s
Your 40s are a time to consolidate and build on the wealth you've gathered so far. But if you're just getting started, don't worry! You can take all our advice on how to build wealth in your 30s and add it to our handy list of how to build wealth in your 40s.
Create Multiple Income Streams
Chances are your career is well underway. But are you putting your time and assets to their best use? Your 40s are a great age to see if there are ways to boost your income. You could:
- Sell your hobby wares for a profit.
- Offer consultancy services in your areas of expertise.
- Seek seed money for your brilliant idea and make an action plan.
- Rent a spare room on Airbnb.
Max Out Your Annual Retirement Contributions
Let's say you opened an IRA in your 30s and you contributed a few hundred dollars every other month, on top of your 401(k). Well, if you want to know how to build wealth in your 40s, you need to take things up a notch.
- Read the fine print on your retirement account and make the maximum contribution each year based on your earnings. For example, some IRAs let you contribute about $6,000.
- Learn about the tax advantages you can enjoy later in life and make the most of these opportunities.
- You could open a Health Savings Account (HSA), which lets you use the funds for medical expenses during retirement.
- If you haven't looked at your will in a while, you should check that any additional assets and wealth are accounted for.
Invest Your Money in Stocks or Index Funds
You can learn about the stock market and invest your money according to your hunches, interests, and values. Or you can hire a professional to do it for you!
Note that the stock market lets you invest in publicly traded (or publicly listed) companies of your choosing, while an index fund lets you invest in a curated group of companies. Investing in the stock market involves risk including the possible loss of principal.
Reassess Your Needs and Consider Downsizing
Your living expenses and accommodation needs may go up and down depending on whether you have children and when they leave the nest. Or you can just simply find your lifestyle changing as you grow older.
Your 40s are a good time to check in and see if you want to continue living the same way or make some money-saving changes, like:
- Sell a large home and invest the proceeds when purchasing a smaller one.
- Cut down on groceries and food waste.
- Have fewer family vehicles.
- Cut back on help like gardeners and cleaners.
Create a Debt-Free Plan
Your 40s mean you're at a midpoint in life and retirement is still years away. Even so, you want to start thinking about how you can be debt-free by the time you're about 65.
- Look at your mortgage schedule and see if you're on track to pay it off. If not, can you increase your payments? There's usually no penalty for paying extra.
- What are you using your credit cards for? Can you pay off your balance each month and use your cards only to earn cash back and enjoy other benefits?
Enlist a Financial Advisor to Get on Track
Whether you're in your 30s or 40s, there's no need to handle your finances and make important decisions on your own. Listerhill Credit Union offers a range of services to help you navigate life and set yourself up for a great future.
Whatever you need, our friendly financial advisors want to get to know you and guide you in the right direction.
Learn about our financial planning services Listerhill Investment Services.
Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. Listerhill Credit Union and Listerhill Financial Services are not registered as a broker-dealer or investment advisor. Registered representatives of LPL offer products and services using Listerhill Investment Services, and may also be employees of Listerhill Credit Union or Listerhill Investment Services. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, Listerhill Credit Union or Listerhill Investment Services. Securities and insurance offered through LPL or its affiliates are:
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Related: How to Save Money Fast On a Low Income
