Hopefully, we will come into our 40s with an excellent financial game plan. If done correctly, we should already be debt-free and have cash flow going into investments. But let’s rewind and talk about how the 40s fit into our overall lifetimes.
I am roughly four months into my 40s, and I feel great. I am still physically fit, I have the perfect wife, and we have enough cash flow to live the life we want. Not everyone is so lucky. As with the 30s, divorces are happening almost daily.
The people who are doing well also live the American lifestyle—which means spending lots of money. As we reach our 40s, we will start to notice that “keeping up with the Joneses” is a real thing.
People will start to get augmentation surgeries, take expensive vacations, send kids to private schools, and buy luxury vehicles. This kind of lifestyle means that they want to work until they are 70 or 80 years old.
It may seem hard, but you have to go your own way. You may feel we like to call FOMO or fear of missing out, but I challenge you to exercise JOMO or the joy of missing out. You see, JOMO allows you to walk your own path, usually one that leads to a much happier life.
Many divorces can trace back to overspending and other money issues. When you control your finances, you will become the CEO of yourself. My wife and I avoid all the money-madness and focus purely on our relationship and becoming rich. You’ll be surprised how easy it is to become rich when you aren’t buying liabilities. We are the CEO of our lives, and we don’t have to worry about money again. Know, we want to ensure our kids don’t have to concern themselves with money as well.
Before we venture into our 40s rundown, we need to do our prerequisite reading allocation. First, let’s unlock our minds through improved memorization, speed reading, and critical thinking. Luckily we can find all these upgrades in one fantastic book titled “Limitless.” Our brain is our most valuable asset, so getting it in tip-top shape is the first thing we need to do in our 40s.
We will need to focus on more complex topics, such as taxes, debt, and assets for this timeframe. Robert Kiyosaki, my favorite author, consistently talks about these topics in his books. My favorite book of his is “Unfair Advantage,” and it is the perfect book to fit our complex age. The other book is called “Before You Quit Your Job” and guides you to build a business before you quit your day job. Yes, we will need to start a business in our 40s, even if it is small.
As I said earlier, we should be debt-free going into our 40s. I barely made it to become debt-free before I turned 40. My wife is 37, so she is good to go. It feels good to be debt-free, and we can focus 100% on the future. If you are not debt-free, you may need to ask yourself, “Should I Consolidate Debt?” The short answer is “only if you have controlled your spending”. But, you will need to come up with a plan to pay off debt quickly.
Our 40s will be the busiest time of our lives. Our kids will still be in the house, our jobs will need us to be in peak performance mode most of the time, and our relationships will also need proper tuning. If we run out of time, we can learn to maximize our effectiveness by becoming insanely productive during the magic hours. The magic hours are any time when the rest of your family is sleeping or otherwise preoccupied. This time is where you can get as much done as possible, with little impact on your home life.
Our retirement should be starting to take form early in our 40s. We cannot rely solely on a defined pension plan, 401k, or social security. We need cash flow. Cash flow is the heart of everything we do, and the more we have, the less we worry. This leads me to one of my favorite series, The Cash Flow 101 series. Inside we talk about building our retirement 4-50 cash flow retirement consisting of retirement income, investment income, rental income, and business income. You do not need to copy my plan, but you will need to understand words like cash flow and passive income.
We talked about debt; now we need to discuss your biggest expense, taxes. If we can understand the three types of income, earned, portfolio, and passive, we can direct our investment strategy to minimize taxes. The Taxes 101 series discusses the benefits of different revenues, such as real estate and starting a business. If we can keep our taxes under control, we can become rich that much faster.
The most important investing lesson we can learn is the difference between an insider and an outsider. Too often, people think that they are going to become rich from the outside. If you are buying stocks at an IPO, you are on the outside. You may profit, but the people who offered up the stocks are getting rich as insiders—the same with buying REITs and owning your own real estate. When you own a business, no matter the size, you are an insider. You control the prices, profits, and expenses. We may not become an insider in our 40s, but we need to set the stage to do it during our 50s.
One of our primary tasks in our 40s is to ensure our dividend portfolio is 100% funded. Yes, that means we should graduate our 40s with at least $1 million in our dividend portfolio. It may sound complicated, but that’s what you should require of yourself. $1 million should give us $40,000/annually in dividend income, leaving our principal intact.
We can fund our dividend portfolio by buying real estate and starting a home business. As far as real estate goes, we may only need to buy our primary residence in our 40s. This purchase will help us control inflation and build equity. We will later be able to leverage that equity to fund our dividends.
As far as a home business, we will want to start something very low risk, high reward. Getting started with a writing career is a good idea. Writing is 100% free. In our 50s, we will flesh out our business pursuits, but anything that can make us money while costing us little investment capital is perfect for now.
Remember, our 40s and 50s are our highest-earning years, so staying on our jobs maybe what we need to do. I know I am waiting in the military for the time being. If we can ride out our high-paying jobs throughout our 40s, we should not have to work a job in our 50s.
Finally, we need to dip into the cryptocurrency space. If you are looking at a way to make money in your spare time at home, NFTs or Non-Fungible Tokens may be something to look into for extra cash. As much as CryptoCurrencies may intimidate us, it is time to learn as much as we can and start investing. Investing in cryptocurrencies may be the investment vehicle that sets up our children for long-term success. We never know. Don’t go overboard, but allocate 1-3% of your portfolio into trustworthy cryptos.
Whew, as I said, the 40s are the crunch years of our lifetimes. Our kids are home and growing, our relationships have to come center stage at the same time as our jobs, and we need to set up our dividends, rents, and royalties to have out-sized growth in our 50s.
Don’t frustrate yourself too much. All we have to do is have a plan. Whether you reach your goal or not, you will be moving in the right direction. In June 2019, we planned to have $100,000 in investments by June 2029 (the year of my 30-year military retirement). We achieved $150,000 by April 2021, so less than two years. Now our goal is to have $1 million by June 2026, so five years from now.
I have no idea if I can reach this goal because there are a ton of variables. But what if we have a total of $800,000 in June of 2026? Will I really be disappointed by this? Of course not. Set your goals and push forward. See you in the 50s!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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