How Can Women in Their 40s Build Lasting Wealth?
Turning 40 is a milestone—and it can be a powerful time to start building long-term financial security. By your 40s, you’ve likely gathered some solid experience, financial responsibilities, and a clearer picture of your priorities. Now’s the time to maximize what you’ve built and make strategic moves that set you up for financial security. This guide breaks down 10 essential money moves to help you grow wealth and plan for a comfortable future.
1. Understand Your Financial Picture
Start by calculating your net worth, which is simply the total of your assets—like retirement savings, investment accounts, property, and cash—minus any debts, including credit cards, loans, or your mortgage balance.
Calculate Your Net Worth
At 40, take a close look at your financial status by calculating your net worth. Add up assets like:
Retirement savings
Investment accounts
Property or home equity
Cash in savings accounts
Subtract any outstanding debts (liabilities) like:
Credit card debt
Loans
Mortgage balance
A positive net worth trending upward means you’re growing wealth. This exercise isn’t just a one-time check—recalculate at least annually to keep tabs on your progress. Regularly tracking your net worth gives you a clear view of how well you’re moving toward your financial goals.
2. Clarify Your Goals
Your 40s are a good time to set specific financial goals. You might already know where you’d like to go, but clarifying the details gives you a more actionable path.
Consider These Key Goals:
Retirement Vision: Decide at what age you want to retire and think about where and how you’d like to live. Even if this vision changes, defining a general idea helps you know what to work toward.
Lifestyle Goals: Think about your ideal lifestyle now and in retirement. For example, do you want to travel more, start a business, or work part-time?
Near-Term Goals: If you have short-term goals, like funding a child’s college education or buying a second home, outline these too. This helps you prioritize and allocate funds accordingly.
3. Build Consistent Money Habits
Developing steady financial habits keeps you on track for long-term goals.
Automate Your Savings
Set up automatic contributions to retirement accounts and savings goals. This “pay yourself first” approach builds a habit of consistently saving, even if you’re busy or face unexpected expenses. Automating savings protects you from lifestyle creep (the tendency to spend more as you earn more) and keeps you focused on your long-term goals.
Monthly Check-Ins
Review your finances at least monthly. Checking bank and investment statements helps you stay aware of your spending patterns, track progress, and notice any unusual charges. Keeping your finger on the pulse of your finances makes it easier to adapt to changing priorities.
4. Boost Retirement Savings
Your 40s are a critical period for retirement savings because compound growth over time amplifies your contributions.
Max Out Workplace Retirement Accounts
If you have access to a 401(k) or other employer-sponsored plan, aim to contribute the maximum allowable amount each year. These contributions are often pre-tax, which can lower your taxable income and boost retirement savings.
Consider a Roth IRA
If eligible, a Roth IRA is a great supplement to your 401(k). Roth contributions are made after-tax, but the withdrawals in retirement are tax-free, giving you flexibility when it’s time to draw income.
Health Savings Account (HSA)
If you have a high-deductible health plan, you can open an HSA to save for future medical expenses tax-free. Contributions roll over each year, so they can also act as an additional retirement savings vehicle.
5. Prioritize Debt Reduction
Debt can be a significant obstacle to building wealth. Reducing high-interest debt frees up income for saving and investing.
Tackle High-Interest Debts First
Focus on paying down high-interest debts like credit cards or personal loans. Start with the highest-interest debt, then move to the next. The faster you eliminate these, the less you’ll pay in interest and the more you can save or invest.
Mortgage and Student Loans
While not always as urgent, reducing your mortgage or student loan balance can help, especially if you plan to retire mortgage-free. If you have a low-interest mortgage, you may prefer to invest rather than pay it down aggressively, depending on your financial goals.
6. Build a Financial Community
Discussing money with family and trusted friends isn’t always easy, but it can provide a support network that keeps you accountable and motivated.
Share Goals with a Partner or Friend
If you have a partner, spouse, or close friend who shares similar goals, check in with each other regularly. Sometimes, just talking about your goals with someone you trust can make a huge difference in sticking with your plan.
Consider a Financial Planner
A professional can offer insights and strategies tailored to your situation, helping you avoid common pitfalls. They can help identify smart tax strategies, investment options, and retirement planning moves, making it easier to achieve your goals with confidence.
7. Invest in Career Growth
Your earning potential often peaks in your 40s, making it an ideal time to leverage career growth for higher earnings.
Ask for Raises
If you’ve added value to your company, it’s reasonable to ask for a raise. Come prepared with specific examples of your contributions and industry salary benchmarks. Higher earnings now mean more potential for saving and investing.
Consider New Opportunities
Don’t shy away from career moves that align with your goals. A new role or position might offer a better salary, benefits, or work-life balance. Now’s the time to look for positions or employers that value your unique skill set.
Explore Side Income
If your schedule allows, consider generating additional income through a side hustle or consulting. This extra income can fast-track your financial goals or serve as a safety net if you face career transitions.
8. Protect Your Health and Wealth
Maintaining health is essential as you plan for future goals, and financial protections help cover unexpected costs.
Health Insurance Check
Even if you’re healthy, review your health insurance options annually. Ensure your plan meets your needs, including coverage for any specific conditions, preventative care, or health concerns that might arise.
Disability and Life Insurance
Consider disability and life insurance if you don’t already have it. Disability insurance replaces income if you can’t work due to illness or injury, and life insurance ensures your family is financially supported. The right coverage can give you peace of mind that unexpected events won’t derail your financial plans.
9. Prepare a Basic Estate Plan
Estate planning isn’t just for the ultra-wealthy. A basic estate plan helps your family if anything happens to you.
Create a Revocable Trust or Will-Based Estate plan
Your revocable trust and will determine how your assets are distributed and who will care for your dependents if necessary. If you have children, appointing a guardian is essential. Work with your legal professional to determine which type of estate plan is best for your situation.
Assign Beneficiaries
Make sure retirement accounts, insurance policies, and other assets have up-to-date beneficiaries. This ensures your assets are transferred smoothly to your loved ones.
Consider Power of Attorney
A power of attorney gives someone you trust the authority to make financial or medical decisions if you’re unable to. Having this in place ensures your affairs are handled according to your wishes.
10. Think Ahead for Future Needs
College Funds for Children
If you’re saving for your child’s education, consider opening a 529 plan. This tax-advantaged account grows over time, helping fund tuition, room, board, and other educational expenses.
Long-Term Care
In your 40s, long-term care may not be top of mind, but planning ahead can save significant costs down the road. Research long-term care insurance options now, even if you don’t plan to buy it immediately, to understand your options and potential costs.
Bottom Line
Your 40s are a decade of growth and preparation. By building a clear financial picture, prioritizing retirement savings, and strengthening habits, you’re setting yourself up for security and flexibility. Remember, the goal isn’t just to accumulate wealth but to make choices that give you the freedom and peace of mind to enjoy the years ahead.
Reference
Yahoo Finance. (2023). Build wealth in your 40s. Retrieved from https://finance.yahoo.com/news/build-wealth-40s-150013484.html
National Geographic. (2023). Health challenges for women in their 40s: Cancer, heart disease, and more. Retrieved from https://www.nationalgeographic.com/science/article/health-challenges-women-40s-cancer-heart-disease
CNBC. (2024). How to manage your money in your 40s, according to CFPs. Retrieved from https://www.cnbc.com/2024/04/16/how-to-manage-your-money-in-your-40s-according-to-cfps.html
Pew Research Center. (2023). The data on women leaders. Retrieved from https://www.pewresearch.org/social-trends/fact-sheet/the-data-on-women-leaders/
J.P. Morgan Asset Management. (2023). Women and investing report. Retrieved from https://am.jpmorgan.com/content/dam/jpm-am-aem/emea/regional/en/insights/investment-themes/women-investing-report.pdf