When you are in your 20s and 30s, it is easier to manage your finances and build your seed money. However, as you proceed towards the fourth decade of your life and your financial obligations pile up, your budget planning might need some serious course corrections. As you enter your peak earning years, you need to begin revising your strategies for building your wealth more aggressively for after retirement, while still taking good care of your kid’s college education, mortgages, and other financial commitments. We have rounded up a list of five smart ways in which you can grow your wealth in your 40s more efficiently.
Get yourself a life insurance
One of the most commonly overlooked mistakes most people make is pooling in all their savings in taxable investment accounts or retirement plans and forgetting all about how important a life insurance policy really is. While the very thought of a premature death might be very unsettling, it is worth considering the financial crunch your spouse and children might have to bear in clearing off your debts and covering for your burial expenses. That said, it is absolutely imperative to get yourself a term life
insurance policy that would not only help build your cash value but also ensure that your retirement wealth is used exactly for its intended purpose.
Consolidate your 401 (k) accounts
By the time you are forty, you have probably tried your hands at multiple career gigs for exploring your prospects in the industry. And you might also have signed up for a couple of retirement programs sponsored by your employers. Now is the time to consolidate your multiple individual 401 (k) plans into a single retirement program and reap the gains that come along. Rolling over your multiple accounts under one roof will help you eliminate multiple fees and commissions, and also broaden your scope of further diversifying your investment portfolio with an IRA account.
Consider a passive investment scheme
Another smart move is to boost your primary income with a steady investment scheme that will help you save an extra portion for your retirement each month. While such schemes will certainly require a significant initial investment, they will continue to provide continuous returns in the long run. A good example of a passive investment stream is buying a piece of real estate and getting monthly returns by means of rent payments. In addition to this, you can also invest some funds in dividend stocks that will help you build your wealth with regular payouts.
Put a tab on your expenses
While a fat paycheck might be reason enough to splurge on luxury vacations and bigger cars, it is important to keep your expenses in check now more than ever. Consider every single dollar that you refrain from spending on unnecessary purchases as a means of strengthening your financial cushion for after retirement.
Take control of your debts
It is high time you started taking your debts seriously and working diligently towards clearing off every single dollar you owe. More often than not, people end up borrowing more to pay off their previous debts. And before they know it, they are trapped in a vicious cycle of liabilities that become bigger by the day. That said, it is important to focus on developing the habit of managing your repayments solely with your income and not piling on more debt unless it is absolutely necessary to do so.