How To Build Wealth In Your 40s

The problem with being in your 40s and 50s is that life can just feel bland.

Same car, same house, same job, same career, same…same…same.

The first thing to do is not go crazy to change out the sameness. You want the cool car but do you need it at the cost of building wealth in your future? Maybe it is, probably isn’t.

I am not saying don’t have fun, don’t spend money. I am just saying that your 40s may be the first time to really get your finances under control and build the wealth you will need to one day retire.

The Basics Of Building Wealth

You need to understand the difference between good debt and bad debt. It is sort of the difference between an asset and a liability.

“It’s not now much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.”
— Robert Kiyosaki, Rich Dad Poor Dad

An asset per Robert Kiyosaki is anything that puts money in your pocket and a liability is anything that takes money out of your pocket.

What Are Good And Bad Debt?

Good debt would be a mortgage on a rental property that is not only paying for itself but giving you a little bit extra each month.

Bad debt are things like credit cards, student loans, and anything with an interest payment that is costing you money.

Some would argue that student loans might be good debt, but frankly, it is like gambling. I had over $40,000 in loans and so did my wife. I never worked in the field I studied in and she does. So for her, one could argue it was good debt because without it she couldn’t hold her job.

I wouldn’t go back for a bachelor’s degree in my 40s unless it would guarantee me a huge promotion or open up a lucrative career path for me.

In order to build wealth you will need to cut as much bad debt as possible.

Build Up Your Credit Score

As you pay off your bills you will inevitably build up your credit score.

You will want a high credit score if you want to have the option to invest in rental properties, which is a good way to build wealth overall if you have the money and knowledge. To learn more about real estate investing to see if it is for you please see my recommended book section here.

To keep your credit score good put standard bills on credit cards that give cash back or points towards vacations. Then pay them off in full every month.

There are other things you should do and we will cover those below.

Chess pieces King and Queen standing on coins on a dark background - From Active to Passive Income Different Types of Income

How The Rich Make Their Money

Have you ever wondered how the rich make their money?

Well they start by working a traditional job (well 80%+ do) and then they build assets over time until they are wealthy.

There are different types of assets that literally anyone can get into. Some are very active. Some are 100% passive. Most are what I call passive-ish. Lots of work at the beginning and then almost none later.

Click here to read From passive to active income.

Investing In Your 40s

Once your bad debts are taken care of start moving that money into a 401k or similar retirement account. As of 2022, you can invest up to $20,500 a year. If your company gives you any sort of match then you will get free money invested above and beyond that.

Some companies only give you a match on your salary and some will give you matching on your salary and annual bonuses. Take all the free money you can. If you overpay into the fund the brokerage (Fidelity / Voya / Vanguard / Etc.) will cash you out at the end of the year or carry it over to the next year.

If you are still able to invest in an IRA, you can use that overpayment to fund part of an IRA. If you already max out an IRA or aren’t eligible for an IRA then they will write you a check (minus any applicable taxes) at the end of the year, typically in February to March.

If you want to know if you should invest in a Roth vs Traditional IRA click here. This is functionally the same for understanding a Roth vs Traditional 401k. If you want to know how these will impact your income taxes each year click here.

Saving For Retirement In Your 40s

I like the retirement calculator below. If you are 40 years old and haven’t saved time for retirement and maximize your 401k contribution limits – without adding more for catch-up payments which you can do in your 50s – and your employer gives you a 5% match you will be very close to being able to retire at 67.

Retirement chart that shows if you start saving the legal maximum amount of $20,500 a year or 13.7% of your paycheck if you make $150k you will have 3.27 million USD by the time you retire in 27 years. This assumes you will get a 5% employer match and have an 8% rate of return. You will get about $6,036 a month and would need $6,650 a month assuming a 70% reduction in expenses from your annual salary of $150k.

If you did the catch-up payments you would be ahead of the game instead of about $600 a month short. If social security is still in place then social security would make up for this cost.

This is good news if you haven’t saved anything and you make enough to carve out $20,500 today. That number will just grow with time as well. If you want to play around with your specific retirement numbers (and I highly recommend you do), you can do so for free here.

Making The Most Of Your 40s

To make the most of your 40s don’t go crazy with spending on fast cars or fast women.

Try not to have a mid-life crisis where you lose your job / family and financial well-being. Your 65-year-old self will appreciate you.

Older man sitting in a boat that is sitting on the beach as he looks over the ocean with three palm trees in the background

If you want to accelerate this path to making money I would suggest looking into obtaining a side business that can increase your wealth. I highly recommend affiliate marketing as that is perhaps the easiest way into this. You can learn more about affiliate marketing with this video and 15-day training here or with my affiliate marketing beginners guide article here.

Text on a green cover "5 Things to do to live comfortably and stop living paycheck to paycheck" free PDF

Are you living your best life or are you stressed about paying the bills?

In this quick 2-page PDF, I cover 5 ways you can get your financial life back on track.

I used to live paycheck to paycheck and after years of paying off debt and maximizing my investments I am now able to save and invest more than 45% of my wife and I’s gross pay.

This allows me to live comfortably (not a crazy rich person) and sleep better at night. If you want this let me know where I can send it to you below.

This Is How You Can Build Wealth In Your 40s

If you want to build wealth in your 40s, it’s important to start by saving as much money as possible. You should also invest in assets that will appreciate over time, such as stocks, real estate investment trusts, or creating a business.

Another key to building wealth is to live below your means and avoid excessive debt. By following these tips, you can set yourself up for a bright financial future.

Otherwise, focus on making more money either through real estate holdings.

Wow, you read a lot to get here. Can you do me a favor, please? Can you leave a comment if this was helpful to you or if I missed something? Alternatively, it would help me out a lot if you shared this content with those that might need to see it. Thanks, you are the best!

Or look into affiliate marketing with this video this article on your beginners guide to Affiliate Marketing.

Picture of Dwight Scull sitting in his gaming chair in his office surrounded by board games and Role Playing Books. — “Marriage is hard. Divorce is hard.
**Choose your hard.**
Obesity is hard. Being fit is hard.
**Choose your hard.**
Being in debt is hard.
Being financially disciplined is hard.
**Choose your hard.**
Communication is hard. Not communicating is hard.
**Choose your hard.**
Life will never be easy. It will always be hard.
But we can **choose our hard.** Pick wisely.”

About Dwight Scull

I have been married to my wonderful wife, Rebecca, who puts up with me since 1999. I am a proud father to my Gen Z, son, and daughter-in-law. Grandfather to my favorite granddaughter who was born in 2021.

I lost my mom, father-in-law, and 12 others in 2013 and was DEEPLY in debt. I started reading and watching all the financial info I could find.

I chipped away at my debt and went from a negative $105k net worth having one home paid off, no credit card debt, and saving/investing 45%+ of my gross salary.

I used these daily habits to lose 100 pounds and keep it off.

I believe that you can overcome any challenge you face if you just take small daily actions and be consistent with them. It is how you will be financially successful.

Join my free Facebook group to get a ton of free resources to help you get out of debt, learn how to invest your money and work toward having the option of retiring early.

How To Build Wealth In Your 40s