Stock & Bond Investing in Your 40s

There are a few paths you can take in your 40s. You can get into more debt, get divorced, have a mid-life crisis, or become rich.

Luckily I choose to become wealthy by making more income than I spend. Remember, wealth is having excess income versus expenses.

But I didn’t choose to have a job and become wealthy. Nope, I have more passive income than my expenses—we call this financial freedom. But it didn’t come easy.

Earned Income vs. Passive Income

Welcome back to the Stock & Bond Investing At Any Age series (20s, 30s), where we stay on the path to building wealth.

1. Retirement Planning in Your 40s (Amazon)
2. Real Estate Investing in Your 40s (pdf)
3. Staying Debt-Free in Your 40s (pdf)
4. Dividend Investing in Your 40s (Amazon)
5. Bond Investing in Your 40s (pdf)

Your 40s are tough. I barely survived my 30s; I was 38 when I learned the words passive income. I am now 42, and my life has come full circle.

People revert to their high school shenanigans in their 40s. They use social media to show off their vacations, houses, and private school kids.

Once upon a time, it was just high school reunions where people exaggerated their lifestyles—now it’s every day.

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You pay the price with your time if you get caught in this expensive cycle. Even worse, your children will pay the price. You won’t be around for their adult life because you’ll be working.

Building a massive stream of income. The only goal of your 40s is to create an enormous stream of passive income. 

The word “massive” will depend on where you live and your spending habits. For a small town like Pensacola, Florida, $1,000 per month is massive.

If you live in San Diego, California, or New York, New York, you should aim for $3,000 monthly. 

Building a portfolio that pays you this much monthly won’t be easy, but there is a way to get there quicker than usual—income investing.

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The power of income. At the end of December 2022, I calculated my dividends. The final amount for the month was $1,800.

I received some special dividends that month from some closed-end funds. Seeing that amount of cash flow in one month changed my life instantly.

You see, I was looking at doing another six years in the Marine Corps (to reach 30 years). Adding those extra six years would net me roughly $2,000 per month more in retirement pay.

I was looking at $1,800 per month from dividends. I went to work the first week of January and dropped my papers for retirement—that’s the power of income.

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I will retire in six months. I can promise that I will have more income in six years with my dividends than working for those years—that’s the magic of compounding.

Income investing for the soul. Becoming an income investor takes work because it requires financial education.

You have to read the stock news, follow interest rates, and understand shifts in mortgage prices. This line of investing is not for the faint of heart.

I choose income investing over dividend growth investing because I need my income now. If I had started investing in 1999, when I enlisted, I could have bought shares in McDonald’s. Those shares would have set me free already.

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Unfortunately, I was too busy buying used cars with 18% interest in 1999. I had to catch up in my 40s and used income investing as the vehicle.

The magic of seeing your income. There is nothing quite like seeing considerable amounts of money arriving in your account without working for it.

In fact, today, I woke up to $90 in my Dividend Debit Card from Ares Capital (ARCC) and Simon Property Group (SPG).

Income investing is perhaps the most addicting habit I have had in my life. It is truly life-changing to grow your paycheck continuously.

Getting started with income investing. There is little risk in income investing if you bring the right mindset.

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Most people invest to watch their money go up; I invest to get my money back. When I get my money back, my investment is in an infinite return.

Let’s say you bought a riding lawn mower that you pay $200 monthly to own. You have three neighbors who borrow it for a total of $150 a month.

Within two years, you pay off the lawn mower; however, your neighbors still pay $150 monthly to use it. Your lawnmower is in an infinite return.

This is how I view my income-investing portfolio. I buy these funds to get my money back quickly and then keep them in an infinite return.

Blue Chip Stocks: Tasty Growth and Yummy Dividends

The six types of income investing. I divide income investing into six categories with various risk appetites. Please read my “From Dirt to Dividends” series to get started on all six types.

1. From Dirt to Dividends 1: Gardening & Preferred Shares
2. From Dirt to Dividends 2: Livestock & Closed-End Funds
3. From Dirt to Dividends 3: Insects & Business Development Companies
4. From Dirt to Dividends 4: Community Farming & Mortgage REITs
5. From Dirt to Dividends 5: Composting & Dividend ETFs
6. From Dirt to Dividends 6: Vermiculture & High-Yield Blue-Chip Companies

You can have it your way. There is no right or wrong way to invest for income. You may want to stay with high-yield blue chip stocks like Altria (MO), AT&T (T), and British American Tobacco (BTI).

Or you could open an M1 Finance (affiliate) account and add 5-10 closed-end funds. The goal is to get started today. You need to get as much money into these accounts—fast.

The bigger the pile of cash, the faster you can retire. Your income will start doing all the work for you at some point.

Annuities vs. Dividends

Conclusion. I am at the point where I can invest $1,500 per month into my portfolio WITH the income from my portfolio. Anything else I add is a cherry on top.

You want to avoid working into your 50s and 60s. The only way to free yourself from the workforce is with income. 

Passive Income: How to Stay Motivated

Most people try to enjoy their 40s by spending money and traveling; however, it is all for not. They will still dread going to work on Mondays.

If you push yourself, you can hit your target monthly amount (between $1,000 and $3,000) in 2-5 years. This won’t be enough money to retire, but it’s enough to relieve a ton of stress.

Trust me; it’s nice getting an extra $1,500 per month without working for it. I am living the American Dream because I started income investing in my late 30s and early 40s. If I can do it, you can too. Good Luck!

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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. All Right Reserved Military Family Investing