Personal Finance

Want Financial Wellness? Achieve These 7 Financial Goals by 40

December 21, 2021
Discover the essential financial goals to achieve by the age of 40, including paying off credit card debt, building an emergency fund, planning for retirement, diversifying investments, saving for college, estate planning, and building generational wealth.
Britt and Laurie-Anne two women laughing and looking at their computers on a couch in a well-styled living room
Britt & Laurie Anne
Two female investors in their 30s with a collective net wealth of over $6 million+
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As 2021 draws to a close, we're getting to the time of year when people stop to reflect on where they are in life and where they want to be…and maybe most importantly, what it will take to get there.

To make sure you're on a good path financially, you should aim to achieve these financial goals by 40.

1) Pay off your credit card debt

Before you can start building wealth, you have to pay off your high-interest rate debt, meaning debt with an interest rate over 7%, like credit card debt. Otherwise that debt is going to cost you more than you can make through saving or investing, so pay it off so that you can start doing other things with your money.

(If you want help paying off your debt, sign up for a free mini-course, Five Days to Debt-Free!)

2) Have a fully funded emergency fund

If you want to manage your money well, building an emergency fund is one of the first things you should do. An emergency fund is money that you set aside for life's unexpected expenses, and it's foundational for financial security.

If your car breaks down or your kid needs stitches, you want to have the money on hand to deal with it, and you don't want to have to pull money from your investments. If you have questions about putting together an emergency fund, you should check out this article answering all of your questions about emergency funds.

3) Get on track to retire

As a general rule, one of your financial goals by 40 should be to have three times your salary in retirement savings. For instance, if you earn $60,000 a year, this means you should have a total of $180,000 across your 401(k), IRAs, and any other retirement accounts.

This is a good time to be seriously thinking about retirement because you probably still have about two decades before you retire. So, if you feel like you're behind on saving for retirement, don't panic. You still have time to save for retirement and invest it so that it can grow by the time you reach retirement age.

4) Develop a diversified investment portfolio

With this goal, I'm assuming that you're already invested. (If not, here's how you can get started.)

Investing is the key to building wealth. But what may be more important than just investing is having a variety of investments: stocks in different companies, bonds, real estate… A diversified portfolio minimizes your risk in case one of your investments doesn't go well.

5) Save for your kids' college

It feels like an understatement to say college is expensive. The average cost of college for an American student is $35,720 per year. And that's just tuition; throw in housing, books, food, and other expenses, and college costs about the same as a small war.

Especially if your kid wants to go to private college or out of state, you want to start saving for college as soon as possible. If you're on track for retirement, then open a 529 College Savings Plan for your kids. This is an investment account with tax advantages. You can use a 529 plan to pay for college, K-12 tuition, apprenticeship programs, and student loan repayments. Plus, it has minimal impact on financial aid eligibility.

6) Start estate planning

I know no one wants to think about passing on, but it's a reality of life, and we have to think about and prepare for it. I'm not gonna get too deep into estate planning here, but here are some things to, to think about.

  1. Take inventory of your assets. What are your different accounts? Where are they? Make sure someone else knows where all of your money is.
  2. Account for your family's needs. Make sure you have enough life insurance. If you have kids, make sure you've designated legal guardian.
  3. Review your beneficiaries. See who gets you're retirement account if you die. Note your state's estate tax laws and inheritance taxes. Educate yourself on what taxes you or your heirs will have to pay.
  4. Plan to reassess your estate plan regularly.

7) Build generational wealth

Generational wealth, also called legacy or family wealth, is wealth that's passed down in a family from generation to generation. This wealth can come in many forms: real estate, stock market investments, financial education, and a positive relationship with money that your family can carry into the future.

If you're starting from zero with your finances or struggling with large debt, then you probably know the importance of generational wealth. But generational wealth isn't just about passing down money. It's also about teaching your kids about finance and helping them develop a positive relationship with money.

Yes, of course, invest and save so that you can build wealth in dollar amounts to pass onto your family, but also make sure that you're modeling a healthy relationship with money. Have conversations with your kids about finances, give them opportunities to practice money management hands-on.

If you need some ideas on how to teach your kids about finance, here's how my parents taught me about money and got me invested, starting at age seven.

It is important to regularly take time to think about where you are and where you want to be.

If you want to learn more about how to develop a money-making mindset, check out our free class, Think Like an Investor. It'll teach you the principles that have helped people with low income and massive debt actually start building wealth.

And in the meantime, work on accomplishing these financial goals by 40: pay off your credit card debt, fully fund your emergency fund, get on track to retire, have a diversified investment portfolio, save for your kids' college, start estate planning, and build generational wealth.

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