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11 Wise Money Moves You Must Make Before Turning 40

Financial freedom is accessible if you are willing to begin right now. It will be more difficult if you are over 40. It does not appear challenging to be financially secure in your 20s. Moreover, when you reach your 40s, some unexpected events take place. To deal with them all, you must make some expert financial moves before the age of 40. If you are in your 30s or will turn 40 this year, here are 5 smart financial moves you must make. 

11 Wise Money Moves You must Make Before Turning 40
Image: Pexels

Here's some inspiring news: The fact that those who are financially free earn more money isn't what differentiates them from everyone else. Instead, they simply choose to follow timeless money principles — and they don't stop until they achieve their objectives.

1. Find out your latte factor 

The Latte Factor is a statistic of how much money you spend vs how much money you earn. It is a representation of money spent on items that are not needed to be acquired. Sixty-five percent of average Americans overspend on goods they don't require. A Gallup survey is shown.

It might be anything from a monthly membership to your company lunch. You may save money on a daily basis by quitting any of those habits. After 5 to 10 years, your Latte Factor funds will have grown into a substantial sum.

Find out your latte factor

What is the Latte Factor, and how does it work?

Your Latte Factor is the amount of money you waste on things you don't really need or could replace each day, week, or month. Your Latte Factor could be a variety of things, including your work lunch habits, the lattes you buy every morning, subscription services, and so on. Even if you only cut back on one of these things, you'll save a lot of money!

Let's look at the numbers: Assume you saved $5 a day by quitting your daily coffee habit. But you don't just preserve that money; you put it to work for you. With a 10% annual return, $5 each day would increase to $12,255.99 in five years. You'd have $31,944.38 in ten years. And you'd have a whopping $888,504.56 in 40 years!!

Consider how many things you could do with that money! And it all started with a single daily expense that you're unlikely to miss. I made a Latte Factor calculator to show you how much of a difference cutting back on a seemingly insignificant expense can make.

Before you begin saving, you must first determine your Latte Factor. I recommend tracking your spending and purchases for a few weeks with an app like Personal Capital or Mint so you know exactly where your hard-earned money is going.

2. Begin Paying yourself first.

Saving money is for the purpose of investing it and watching it develop into a fortune. Where should you put your "extra" money after you've lowered your spending? Of course, to yourself — and preferably into a tax-deferred retirement account such as a 401(k), 403(b), or IRA, where your money will grow tax-free over time.

Begin Paying yourself first.

You should get the first hour of work.

Let's take that a step further: if you work eight hours a day and have no money left over at the end of the month, all of your working hours are being used by others. Have you ever viewed it in this visible region?

All of the time you spend working to get money is going into other people's pockets.

I'd like you to find out how much money you make per hour right now. Start saving at least that amount every day now that you have that figure. Making it automatic — that is, having it flow immediately from your paycheck or checking account to savings before you even have the chance to spend it — is the greatest method to ensure you'll actually save it. This money, believe me, will not be missed.

3. Increase your passive income sources

People who just have one source of income in their later years have it more challenging. If you're reliant on a single source of money, break free and develop some passive income streams. 

Increase your passive income sources

Passive income sources are usually beneficial to increasing income and developing assets. Here are a few tried-and-true passive income concepts that have shown to be successful: Make and sell a book or an online course. Create a YouTube channel and use it to educate others in your field. In the digital era, you can sell items online. Put your money into a real estate company.

According to Forbes, persons who have passive income at a young age are more likely to achieve financial independence later in life.

4. Consider refinancing your mortgage.

The best time in history to refinance your mortgage is right now. The interest rate is at an all-time low. According to mortgage analytics firm Black Knight, roughly 13 million people might save about $260 per month by refinancing their homes right now.

I strongly advise you to refinance if you can cut your rate by 0.5 percent or more and plan to stay in your house for more than three years.

Consider refinancing your mortgage.

If your loan balance is over $250,000, refinancing your 30-year mortgage might save you over $50,000! You might also refinance into a 15-year mortgage to get out of debt sooner.

When it comes to refinancing, I recommend that you shop about and make the institutions compete for your business. Quicken Loans is my #1 choice, but here are some of my other favorite mortgage refinancing options.

5. Take advantage of your pre-tax retirement choices to the fullest extent possible.

It's a no-brainer to contribute as much as you can to a pre-tax retirement plan because you don't pay taxes on sums contributed up to the legal maximum. Despite the fact that these plans are tax-advantaged wonders, according to Vanguard research, only 13% of 401(k) participants contribute the maximum amount each year. Many employers will "match" your contributions up to a set percentage of your salary – this is easy money!

Take advantage of your pre-tax retirement choices to the fullest extent possible.

If your employer matches your contributions to a 401(k) or other pre-tax accounts, you must contribute at least enough to receive the full match (typically 3-6 percent of your income). Contribute even more if you want to take it a step further – with a 401(k), your company will deduct the percentage you want to contribute from your paycheck automatically, so you won't even notice it.

According to the IRS, you can contribute up to $19,500 to a workplace 401(k) plan in 2021. If you don't have a 401(k), you can register an IRA with a reputable online broker and contribute the maximum amount for the year through automatic bank transfers. Unfortunately, in 2021, you can only contribute up to $6,000 to an IRA, and your contributions may or may not be tax-deductible, depending on your income level. After 50, you can make a "catch-up contribution," which is a little increase in your contribution.

6. Take care of your personal debt.

Personal debt is a destroyer of wealth. High-interest rates and fees eat away at funds that could be used to invest in your future. There are many different ways to pay off debt. I recommend determining which debt you can pay off the quickest so you can get it out of the way and move on to the next. I designed the DOLP debt-reduction system to assist you in doing just that.

Take care of your personal debt.

Popular debt repayment strategies include the "debt snowball" and "debt avalanche" methods. You'll use the debt snowball method to pay off your smallest debt balance first, then move on to the next smallest, until you're left with only your largest debt to deal with. The debt avalanche method requires you to prioritize paying down the debt with the highest interest rate first. Either of these strategies has the potential to be useful.

7. Set aside some money in case of an emergency.

Many unexpected incidents will occur after you reach your forties. Only emergency savings can protect you during these difficult times. If you lose your work unexpectedly, or if you have a serious medical condition or unexpected bills, emergency savings are the best option to aid.

Set aside some money in case of an emergency.

"Half the battle is being protected." Quotes from Miguel de Cervantes.

8. Get a life insurance policy in place right now.

According to Policygenius, 65 percent of parents are underinsured. If you have people who rely on your income, you must provide for them in the event of your death. Housing payments, daycare fees, college tuition, and healthcare are all significant expenses that do not appear to be decreasing in cost. Typically, group coverage provided by your job is insufficient.

Get a life insurance policy in place right now.

Today, I suggest buying insurance for $500,000 to $1 million. You'll be astonished at how inexpensive this can be if you're in good health. If you don't already have life insurance, start with low-cost term coverage.

For example, a 40-year-old woman in good health might get a $500,000 20-year term coverage for less than $40 per month with Bestow.com!

Comparing quotes from highly-rated life insurance companies is the simplest way to get started.

9. Reduce "Dead Weight" costs.

Reduce "Dead Weight" costs.

Higher-than-normal recurring expenses are a "dead weight" on your cash flow. The importance of insurance cannot be overstated. We all need insurance, but you should shop around for it every year, for example, to get a lower rate on your car insurance. You could also try:
  • Get new homeowner's insurance quotes.
  • Combine insurance policies with a single provider to save even more money.
  • Cut the cord and cancel your cable television service.
  • If you never go to the gym, don't pay for a membership.
  • Give up or reduce expensive hobbies that are impeding your progress toward your goals.
  • Change to a less expensive cell phone plan.
10. Improve Your Credit Score

How to Improve Your Credit Score

A good credit score will be your financial buddy for the rest of your life. Don't let it go!

Unexpected emergency situations happen. You never know when you'll need a loan or need to refinance your mortgage. If your credit score is in good shape, you will have an easier time getting loans. You should pay your bills on time and pay off your credit card debts to improve your credit score. A good credit score reflects responsible behavior.

11. Start to earn a passive income.

Let's dig deeper and uncover even more methods to invest and grow your money if you've exhausted your tax-advantaged investing alternatives in step four. I'm referring to sources of passive income.

Start to earn a passive income.

Here are a few of my favorite passive income suggestions to get you started:
  • LendingClub allows you to invest in peer-to-peer lending.
  • Invest in real estate passively through a platform like Fundrise.
  • Using an online brokerage account, purchase stock in your favorite companies.
  • Use the equity in your home to purchase a new home while renting out the old one.
  • Create an online product, book, or course that you can sell again and again.
To summarize

Money stress is the most significant issue that people face in their 40s. You will have many positive reasons to celebrate your 40th birthday happily if you follow the above-mentioned guidelines with minimal effort.

You're already rich.

You should start saving and investing in your 20s, but don't worry if you don't until your 30s or 40s.

Making the decision to begin is a soul decision. As you reach 40, you still have plenty of time to work toward financial independence. I'm convinced that these steps will help you in achieving your goal. Thank you for taking the initiative. Take advantage of this opportunity. You'll be proud of yourself when you look back on it.

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