How to Build Wealth in Your 40s - Mom Meets Midlife (2024)

Last Updated on April 24, 2023 by Erin

Welcome to midlife! You may find yourself wondering how to build wealth in your 40s, which is an absolutely fantastic thing to wonder about.

If you’re anything like me, you’re thinking more about retirement and how to secure your financial future. This is a critical time to focus on strategies that can help you grow your wealth and achieve your long-term financial goals. Honestly, retirement is not too far away and if you have accumulated enough wealth, you may have the option to retire early!

In this blog post, we’ll explore some key financial strategies to consider in midlife.

This is a huge post chock-full of information, so I’ve added a handy table of contents for you. Make sure you pin this post so you can refer back to it later!

**This post contains affiliate links. This means if you click and buy, I may receive a small commission (at zero cost to you). Please see my fulldisclosure policyfor details.**

Common challenges faced when trying to increase wealth

Time Constraints

In midlife, many of us are busy with work, family responsibilities, and other commitments. It feels like there isn’t any time to left in the day to focus on building wealth. You may wonder how it’s possible to balance work and personal life while also devoting time to managing finances and investments.

I get that, I really do! I’m a midlife mom of three younger children and currently working full-time (although I’m making a big leap this summer and changing career paths). I have a lot of uncertainty ahead but thanks to the financial habits I’ve been putting into practice, I’m not worried about money.

High Expenses

In midlife, you may have higher expenses, such as mortgage payments, childcare costs, and other financial obligations. These expenses can make it challenging to allocate funds towards saving and investing. It’s important to take a good hard look at your spending to see if there’s anywhere you can cut back.

“Paying yourself first” might be a great strategy for increasing your savings. With this strategy, you automatically put an allotted amount into savings and investments before you spend money on anything else.

There are also apps out there that can help you pay less on your bills and cut back on unnecessary subscriptions. BillTrim is one such app and they have served thousands of consumers. You can be assured they are legit. BillTrim is currently rated 4.9 on TrustPilot.

Debt

Many individuals in their 40s may have accumulated debt, such as credit card debt or student loans, which can hinder their ability to build wealth. High-interest rates on debt can also make it challenging to save and invest. If you have a high amount of debt, it can also negatively impact your credit score, which can make it difficult to obtain loans or credit in the future. This will limit your ability to invest in assets that generate wealth, such as real estate or a business.

If you are struggling with debt, there are several things you can do to overcome it and start increasing wealth.

Make a plan to pay off your debts systematically, starting with the debts with the highest interest rates first. This can help you pay off your debt faster and reduce the amount of interest you pay over time.

Creating a budget can help you identify where you are spending money and where you can cut back. This can help you free up money to pay down your debt. Consider a low buy year to help change your spending habits and save more money. Click on the picture below to access free printable companions to help you successfuly complete a low buy year and meet your financial goals.

Lifestyle Inflation

As people progress in their careers and earn more money, they may be tempted to upgrade their lifestyle. That might include buying a bigger house, driving a more expensive car, or going on more luxurious vacations. While it’s natural to want to enjoy the fruits of your labor, lifestyle inflation can become problematic when it outpaces income growth and hinders wealth-building efforts.

To avoid lifestyle inflation, it’s important to have a financial plan in place that takes into account long-term financial goals, such as saving for retirement or investing in assets that generate wealth. It’s also essential to track spending and be aware of how income increases are being allocated.

Market Volatility

Investing in the stock market comes with risks, including market volatility. Those of us entering midlife may be hesitant to invest aggressively in stocks due to the potential for significant losses.

Investing always involves a certain level of risk, but it’s not necessarily true that higher risk is necessary to build wealth. It’s true that investments with higher risk generally have the potential for higher returns. However, this doesn’t mean that investors need to take on excessive risk to build wealth.

Working with a financial advisor or investment professional can provide access to expertise and advice that can help investors manage risk and build wealth. I use Empower (formerly known as Personal Capital) to keep track of my investments for free. I also have access to a financial advisor with no hidden fees.

Empower Personal Wealth, LLC (“EPW”) compensates FlexOffers.com, LLC for new leads. FlexOffers.com, LLC is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.

Is It too Late to Start Building Wealth at 40?

While it’s true that starting earlier provides more time for compound interest to work its magic, it’s never too late to begin building your financial future.

Use the tips in the rest of this post to make a plan and start now.

Assess Your Current Financial Situation

Review your income, expenses, and debt

Take a look at your income sources, such as your salary, investment income, and any other sources of income. Are you making a decent amount of money? Can you negotiate a raise or take on extra work to boost your income? Think about it.

Next up, let’s review your monthly expenses. It’s time to get real and identify areas where you can cut back. Maybe it’s time to start cooking at home more often, or finding ways to save on your utility bills. And if you’re not using those monthly subscriptions, it’s time to say goodbye.

Consider using budgeting tools or apps to help you track your expenses and identify areas for improvement. Again, Empower is an amazing free tool for tracking your spending and making sure you’re staying within a budget. Give it a look!

Now, let’s tackle the topic of outstanding debts. Take a moment to gather all of your debts, whether it’s credit card balances, loans, or any other debts. Note down their interest rates, payment schedules, and minimum payment requirements.

Here’s a tip: Focus on paying off the high-interest debts first. You can do this by consolidating your debt or making extra payments towards those high-interest debts. Trust me, it’s worth it. Not only will it save you money in the long run, but it’ll also relieve some of that debt-related stress.

Determine your net worth

Net worth is crucial when building wealth. Think of it as a snapshot of your overall financial health. Your net worth is calculated by subtracting your liabilities from your assets. This means it shows you the difference between what you own and what you owe.

Why is this important? Because by determining your net worth, you can gain insight into your current financial situation. This can help you make better financial decisions in the future. Take some time to calculate your net worth and get a clear picture of your finances. It’ll be worth it in the long run!

If you’re not sure how to get it all calculated, I again used Empower.

When I decided to make a midlife career change, I knew I had to get a better idea of my finances. I had no idea what my net worth was, and it was really exciting to see it once I plugged everything in. It gave me the confidence I needed to turn in my letter of resignation.

Develop a budget and savings plan

Developing a budget and savings plan is a key step in building wealth. It helps you control your spending, save money, and achieve your financial goals. By developing good financial habits and sticking to your budget and savings plan, you can build a solid foundation for long-term financial success.

You can use online budget trackers but if you’d prefer old-fashioned paper and pencil (I actually prefer both), I’ve put together FREE printable companions for budgeting and saving.

Consider a Side Hustle

When thinking about how to build wealth in your 40s, a side hustle is one of the first things that comes to mind. A side hustle provides an opportunity to earn extra income in addition to your regular job. This can help you pay off debt, save more money, or invest for the future.

Having multiple streams of income, including a side hustle, can help diversify your income and provide a buffer in case of job loss or other financial setbacks.

Here are some examples of side hustles that midlife women can pursue alongside a full-time job:

1. Freelancing: Many women in their 40s have valuable skills and experience that they can leverage to provide freelance services, such as writing, editing, graphic design, or consulting.
2. Online Selling: You can sell products online through platforms like Etsy, eBay, or Amazon. This could involve selling handmade crafts, vintage items, or other unique products.
3. Reselling: You can shop your own home for things you no longer wear or use, or find items in a thrift store or garage sale for cheap. Resell on platforms like Mercari, Poshmark, or Kidizen. You can read my detailed review of Kidizen here. I have found quite a bit of success in my spare time, even as a casual reseller!
4. Tutoring: If you have expertise in a particular subject, you can offer tutoring services to students of all ages, either online or in-person.
5. Coaching: Midlife women can become coaches in a variety of areas, such as health and wellness, business, or personal development.
6. Pet Sitting or Dog Walking: Animal lovers can offer pet sitting or dog walking services to busy pet owners in their community. Sign up with Rover and get started today! Rover is the nation’s largest network of 5-star walkers and pet sitters.
7. Home Staging: Midlife women with an eye for design and home décor can offer home staging services to help homeowners prepare their homes for sale.
8. Virtual Assistance: Many businesses and entrepreneurs need help with administrative tasks, such as email management, scheduling, or social media. You can provide virtual assistance services from home. FlexJobs is the leading resource for those looking for legitimate, remote and flexible jobs such as virtual assistance.
9. Start a Blog: There are many bloggers out there who have been able to transition from blogging as a side hustle, to blogging full-time. You can make a blogging income by becoming an affiliate, selling printables or courses, and having ads on your blog.

I have a whole blog post dedicated to ways you can make money from home in midlife.

Invest in Yourself

I currently work in the field of speech-language pathology, and I have to earn 30 hours of continuing education in order to keep my certification and licensure. Sometimes that can feel cumbersome, but I’m actually very grateful it’s a requirement. Nobody wants to work with an SLP who isn’t up to date on the latest evidence-based practices. The other benefit is that by increasing my education, I can potentially negotiate a higher salary and advance my career. When you increase your salary, this leads to increased income over the long term. This is a key component when building personal wealth.

Education and skills development can also provide you with the knowledge and skills necessary to start and run a successful business. If any of the side hustles I mentioned earlier in this post are intriguing to you, it might be worth exploring online courses or purchasing eBooks to increase your knowledge and confidence.

If you are interested in increasing your investments, you need to ensure you are making informed investment decisions. By understanding financial markets and investment vehicles, you can make smarter investment decisions that can help grow your personal wealth over time.

Investing in YOUR education and skills development is essential for building personal wealth, for all the reasons mentioned above. It’s never too late to invest in your financial education, even well into yours 40s and 50s.

What Investments Should I Make in My 40s?

Diversification is key to reducing risk and maximizing returns. Consider investing in a mix of stocks, bonds, and other assets that are diversified across different sectors, industries, and geographic regions. This can help protect your portfolio from market volatility and provide steady returns over the long term.

Real estate can be a valuable addition to your investment portfolio, providing both income and appreciation potential. You can look into rental properties or real estate investment trusts (REITs) to diversify your portfolio and generate passive income.

Real estate is something we have been investing in the last 5 years, even with two teacher salaries (which are notoriously not very impressive). I highly, highly recommend looking into real estate. It has been an amazing (mostly) passive source of income and a great investment for our future.

Investing in your 40s can be complex, with many factors to consider. Seeking professional advice from a financial advisor can help you make informed decisions. It will also ensure that your investments align with your goals and risk tolerance.

Take Advantage of Retirement Savings Opportunities

Saving for retirement is crucial, and starting in your 40s, you still have several years to take advantage of retirement savings opportunities. Here are some steps you can take:

1. Maximize your 401(k) contributions: If you have a 401(k) plan through your employer, aim to contribute the maximum amount allowed by the IRS. When you’re 50 or older, you can contribute an additional “catch-up” contribution.
2. Consider an IRA: If you’re not eligible for a 401(k) or want to save more, consider opening an individual retirement account (IRA). You can contribute up to $6,000 in 2022, or $7,000 if you’re 50 or older. Depending on your income and other factors, you may be eligible for a tax deduction for your contributions.
3. Take advantage of employer matching: If your employer offers matching contributions to your 401(k), make sure you’re contributing enough to take full advantage. This is essentially free money that can significantly boost your retirement savings.
4. Review your investment strategy: As you get closer to retirement, it’s important to review your investment strategy and make sure it aligns with your goals and risk tolerance. Consider working with a financial advisor. This will ensure that you’re investing in a diversified portfolio that will help you reach your retirement goals.
5. Plan for healthcare costs: Healthcare costs may be a significant expense in retirement, so it’s important to plan for them. Consider opening a health savings account (HSA) if you’re eligible and contribute as much as possible. You can use the funds in your HSA tax-free to pay for qualified medical expenses in retirement.

How Can I Retire Early at 45?

Retiring early in your 40s is an ambitious goal that requires careful planning and dedication. If you’ve already been working on building your wealth for a while, this could be attainable!

To retire early, you need to save aggressively. Aim to save at least 50% of your income and consider cutting expenses to free up more money for savings. You also need to live frugally. This means cutting back on unnecessary expenses, buying used instead of new, and focusing on experiences over material possessions. Try out a very minimalist lifestyle.

Look for ways to generate multiple passive income streams, such as investing in rental properties or starting an online business. It might sound silly, but I take advantage of online surveys and loyalty programs to earn cash back.

I earn hundreds of dollars each month that I use to buy the things we want and need. It’s so easy to do in your spare time and definitely helps if you have an aggressive savings plan. You can read all about it here.

Consider retiring in stages, such as reducing your work hours or transitioning to a part-time job, before fully retiring. This can help you ease into retirement and provide additional income as you adjust to a lower annual income.

You will definitely want to do your research and educate yourself before you decide you want to retire early. It’s possible for those who are committed to the process!

Final Thoughts

Congratulations, you’ve made it to the end of this post! Hopefully, you feel more confident knowing how to build wealth in your 40s. Don’t forget to share this post or pin it so you can refer back to it later.

Your 40s are a critical time in your career when you’re likely earning your highest income. By focusing on building wealth during this time, you can take advantage of your earning potential and put yourself in a strong financial position for the future.

Building wealth in your 40s also allows you to secure your financial future and achieve financial independence. This means you can retire comfortably (maybe even early), pursue your passions, and enjoy your golden years without worrying about financial constraints. You want to ensure you have a safety net in case of unexpected events such as illness, job loss, or economic downturns. By having a robust savings and investment portfolio, you can weather these challenges without compromising your financial stability.

Finally, building wealth in your 40s provides opportunities for legacy building, such as leaving a financial legacy for your children or contributing to charitable causes that are important to you.

Don’t forget to leave a comment and let me know your thoughts! And best of luck as you build your wealth in midlife 🙂

Sincerely,
Erin