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Advice to a 40 Year Old on Wealth Building
<Thread>
I did a thread recently on advice for 20 year olds on building wealth...now here's my advice to 40 year olds.
This is for people who have not yet made it.
I know many married, 2 kids, not much savings
There's still time!
<Thread>
I did a thread recently on advice for 20 year olds on building wealth...now here's my advice to 40 year olds.
This is for people who have not yet made it.
I know many married, 2 kids, not much savings
There's still time!
1. If you're like most 40 year olds, then you have probably
have a 9-5. Your energy isn't the same and you don't want to work until you're 70, and you want your kids provided for.
Don't despair! You can still make it
have a 9-5. Your energy isn't the same and you don't want to work until you're 70, and you want your kids provided for.
Don't despair! You can still make it
2. The first step is to take stock of where you are and where you want to be.
You need to have a realistic assessment:
- income
- outgoings
- savings / debt
- investments
- skills
You need to have a realistic assessment:
- income
- outgoings
- savings / debt
- investments
- skills
3. The critical step in building wealth is getting cash flow positive. That means, every month, more cash coming in than going out.
This is fundamental for everything else
- paying debt
- having cash to invest
- safety net
This is fundamental for everything else
- paying debt
- having cash to invest
- safety net
4. If you have debt, especially toxic debt like credit cards, etc. you need to get rid of it immediately.
It is robbing you of your dreams.
Also, if your mortgage is high, >30% of income, then you need to fix that too
How do you pay down debt?
It is robbing you of your dreams.
Also, if your mortgage is high, >30% of income, then you need to fix that too
How do you pay down debt?
5. You need to go Dave Ramsey style and wage war on your debt.
If you have credit cards/HELOC, etc then address these first.
- Reduce the interest rate. Call up the lender, It usually works
- Term it out. Ie move it into the future, to remove the bite. 0% Balance transfers
If you have credit cards/HELOC, etc then address these first.
- Reduce the interest rate. Call up the lender, It usually works
- Term it out. Ie move it into the future, to remove the bite. 0% Balance transfers
6. - Get a debt consolidation loan, if it's cheaper
- Sell things. You don't need that much stuff.
Get radical and aggressive.
- Sell your car if it's pricey, esp if you have a big lease (esp. second car)
- Have a yard sale
- List it on Ebay. I sold $1000s of old books
- Sell things. You don't need that much stuff.
Get radical and aggressive.
- Sell your car if it's pricey, esp if you have a big lease (esp. second car)
- Have a yard sale
- List it on Ebay. I sold $1000s of old books
7. If you have a big or overly expensive house, sell it. Downsize.
Then you can either rent your next house, or have a much lower mortgage (if at all).
You can also refinance your mortgage
The goal is housing that's <20% of your income
Then you can either rent your next house, or have a much lower mortgage (if at all).
You can also refinance your mortgage
The goal is housing that's <20% of your income
8. Do a line-item veto on expenses. Go through statements and cut out everything you don't need.
the COVID 19 times have revealed how little we need to spend
- Lessons and tutors? Use YouTube/Zoom
- Sports Club? Just have a backyard and neighbors
- Expensive Vacations? Why?
the COVID 19 times have revealed how little we need to spend
- Lessons and tutors? Use YouTube/Zoom
- Sports Club? Just have a backyard and neighbors
- Expensive Vacations? Why?
9.
Shop around to save on energy, Internet, phone bills, etc.
With a critical enough eye, you should be able to cut your expenses by 30% or more.
You should sell enough useless stuff that you cut your debt down to manageable size.
And housing should be under control
Shop around to save on energy, Internet, phone bills, etc.
With a critical enough eye, you should be able to cut your expenses by 30% or more.
You should sell enough useless stuff that you cut your debt down to manageable size.
And housing should be under control
10. Your Defense is strong now. With lower costs, you should be at breakeven from the 9-5, and maybe paying off debt and/or starting to invest.
Now, we will play OFFENSE
This means getting your income up and investing aggressively.
Now, we will play OFFENSE
This means getting your income up and investing aggressively.
11. People forget, the EASIEST way to increase your income is through a RAISE at your 9-5.
- Lots of good stuff on getting raises, but it boils down to 3 factors
- be vocal
- tie your comp to results
- know the market
If you can boost income 10-20% quickly, DO IT. It adds up
- Lots of good stuff on getting raises, but it boils down to 3 factors
- be vocal
- tie your comp to results
- know the market
If you can boost income 10-20% quickly, DO IT. It adds up
12. That means you should be accumulating cash, at least a bit, every month
DON'T spend the increase; park it for investments
NEXT, build other income streams
The EASIEST way is freelancing related to your 9-5
This can be the same thing or related
DON'T spend the increase; park it for investments
NEXT, build other income streams
The EASIEST way is freelancing related to your 9-5
This can be the same thing or related
13. You can trade time for money. A few hours /week can generate $1000/month
That makes a HUGE difference to your results, long-term.
It also can set the stage for your own gig.
Try to make >$1000/month freelancing, and save/invest the excess, and you will see results
That makes a HUGE difference to your results, long-term.
It also can set the stage for your own gig.
Try to make >$1000/month freelancing, and save/invest the excess, and you will see results
14. If your situation requires extra income somehow, then try some other freelancing, like Uber/DoorDash. I have met many people who make $40/hour on these side hustles, which is equivalent to $75k+ per year.
This can be a significant earner as well.
This can be a significant earner as well.
15. Key is to work a bit extra so that you are ALWAYS cash flow positive.
If you are on track and have paid down all toxic debt and reduced expenses, and building savings, then you can start to build a side business.
This goes beyond trading time for money. It's scale
If you are on track and have paid down all toxic debt and reduced expenses, and building savings, then you can start to build a side business.
This goes beyond trading time for money. It's scale
16. Here, find a business that can generate PROFITS over time, but with no capital required.
You want to have permanent extra income and risk time, not capital.
The income from this will be 100% invested
You want to have permanent extra income and risk time, not capital.
The income from this will be 100% invested
17. MoneyTwitter has plenty on this but a few suggestions
- Affiliate marketing
- Info products
- E-Commerce (flipping too)
- Consulting, farm out work
- Done-for-You Services
Start building in your spare time, and pay the price for a year [ie 9-5, family, and spare job only]
- Affiliate marketing
- Info products
- E-Commerce (flipping too)
- Consulting, farm out work
- Done-for-You Services
Start building in your spare time, and pay the price for a year [ie 9-5, family, and spare job only]
18. Your goal in 12 months should be to generate an income stream.
Anything above $2k/month is GREAT.
You should see a path to it matching/overtaking your 9-5, if you want to exit 9-5
Or you can just milk the income stream for cash to invest
Anything above $2k/month is GREAT.
You should see a path to it matching/overtaking your 9-5, if you want to exit 9-5
Or you can just milk the income stream for cash to invest
19. Now that you are throwing off good cash flow, you want to invest
My goal is always the same-- invest into a field that can be an INCOME
I.e. you want to it be cash flow generating and enough cash (which you invest)
With cash flow, the risk is lower, its's easier to sell
My goal is always the same-- invest into a field that can be an INCOME
I.e. you want to it be cash flow generating and enough cash (which you invest)
With cash flow, the risk is lower, its's easier to sell
20. Examples of cash flow producing assets
- Real estate
- Operating businesses
- Income-generating assets, e.g. leasing
If you have $50k saved up, you can buy a rental property that yields you $500-1000 in extra cash every month
It's an extra income stream which you invest
- Real estate
- Operating businesses
- Income-generating assets, e.g. leasing
If you have $50k saved up, you can buy a rental property that yields you $500-1000 in extra cash every month
It's an extra income stream which you invest
21. Once your
finances are fixed
you've invested into enough cash flow
you feel comfortable that you could leave the 9-5 (or have)
-> then you do portfolio investments
- index funds
- individual stocks
These hedge wealth against inflation, they won't make you rich
finances are fixed you've invested into enough cash flowyou feel comfortable that you could leave the 9-5 (or have)-> then you do portfolio investments
- index funds
- individual stocks
These hedge wealth against inflation, they won't make you rich
22. One note:
If your 9-5 is high-paying i.e lawyer, banker, plastic surgeon, then you should be stacking cash every year. Skip straight into the investing part.
If you can't stack cash, cut your expenses.
Go buy cash flow and then do portfolio investments.
If your 9-5 is high-paying i.e lawyer, banker, plastic surgeon, then you should be stacking cash every year. Skip straight into the investing part.
If you can't stack cash, cut your expenses.
Go buy cash flow and then do portfolio investments.
23. Now...taxes!
This is the time to SAVE on taxes by putting reasonable expenses in the company
Talk to your accountant because there are ways to have spouses/children own things that reduce overall tax bill
In a company, you can sock away retirement money tax efficiently
This is the time to SAVE on taxes by putting reasonable expenses in the company
Talk to your accountant because there are ways to have spouses/children own things that reduce overall tax bill
In a company, you can sock away retirement money tax efficiently
24. That's it. Hopefully you can be on your way to financial freedom in 12 months or less.
For the ~40 year old crowd-- anything to add? Anything I forgot?
For the ~40 year old crowd-- anything to add? Anything I forgot?
