6 Assets You Should Own By Your 40s

Hey there, real quick before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. Are you in your 40s and wondering if you're really on track to build the life you always wanted? Here's the truth. Your 40s are a financial tipping point. It's a critical time. And time is no longer on your side. It's becoming probably the biggest constraint. But this is the decade that is also known as the millionaires decade, if you take the right steps now. So in this episode, I'm going to break down the six critical assets you need to own by your 40s to set yourself up for financial freedom, to protect your financial future, to create the life of choice, the one that you wanted. These are the building blocks that will ensure you not just to stop working hard, but to truly give you wealth without regret and to get your money to start working for you.

Well, the 40s.

This is a tipping point where time and money start to converge. It's, it's a critical decade in your financial journey, in your financial life, because this is the time for us to start to build financial momentum where you start to reach the acceleration zone. You know, I've, I've often talked about the fact that we start off our wealth building journey and we end up in this, this wealth flatline. It looks like this is that, that our wealth isn't linear. It starts to do this and then it ramps up at an accelerating pace. And the challenge is there's this section right here which, which we call the flatline. And the challenge is that many, many people don't get past the flatline because they lose the patience to continue to, to move through the 40s is where you really start to see that you tip past the flat line. You get, you get to this zone here, which I call the tipping point. Okay. I call it the, the, the acceleration zone. And the acceleration zone here is where the money starts to work harder for you than you did for it. This is the space and place where you start to gain wealth creation momentum in, in the things you do. This is why this decade is to have the right assets in the right places, in the right way, in the right proportions to make that happen. So the decisions that you make here in this decade will compound, and they can compound in both directions. They can compound in the good direction, building wealth, or they can compound in a bad direction, eroding. Well. So prioritizing this at this point in time becomes huge. So let's talk about a couple of action steps, some things I want you to consider and then let's talk about the 6, 6 assets I think you ought to have at this stage. So the first thing is to, to really assess your current financial standing. This is the time where you should be figuring out what is your net worth, you know, what are the assets you have, what are the liabilities you owe. Income, debt, investments, all of it. This is why one of the first steps in us doing a money machine master plan for our clients and with our clients to build it out. We start to build this out. We know exactly what they own, what they owe, we know exactly where the income's coming in from, where it goes, we know all of it. So we can build the plan to facilitate and make their wealth not a dream, but a reality. All right, so then I want you to write a financial vision statement. It's what is your life? What does financial success look like 10, 20 years down the ride, down the road? Okay, so these are the things that I would start with because when you start to understand what your current reality is and you have a vision for what your desired outcome is, now we just have to fill the gap. Now there's some cautionary things or primary things I want you to focus on before we get to the assets. Okay? And the first is this debt is not the devil, but it certainly can destroy your wealth, especially in this decade. What I want you to do in this decade is I want you to one, avoid destructive debt. And we'll talk about what that is and eliminate destructive debt, destructive debt is that debt that is for consumables, it is for your lifestyle, it is stuff that you're buying just for stuff. And so destructive debt I want to avoid. So the big screen TVs that you're financing, the luxury vehicles that your financing, those kinds of things, especially high interest debt on credit cards, it'll destroy your wealth. Okay? Compounding. Growth of wealth is compounding from the time value of investment, growth from time value of money, time value of, of interest. But if you are in debt, it compounds against you. And this is why we don't want it now, there is constructive or productive debt, as I call it, and that is debt that you take on that increases your ongoing cash flow or your net worth. This could be debt for a rental property or something like that. That's a different story. What I'm talking about here is the stuff that you are financing that is material stuff, that doesn't increase your net worth. It is to finance your consumables and your lifestyle. I want you to avoid it, and I want you to get yourself on a debt payment plan if you are not on a debt payment plan. We want to get rid of this destructive debt as soon as possible as you move forward, okay? Because without doing that, it's going to. It's going to really bog you down. It's like an albatross around your neck as you're trying to climb the hill of wealth. Just not going to happen. It just. It destroys you. So prioritize getting out of destructive debt and avoiding destructive debt during this decade and beyond, for that matter. Okay? The other thing that I want you to consider just as an overall concept before we get to the assets is this is a time now we follow something called the wealth priority ladder in my book, okay? In building your money machine in chapter 12, I walk through basically the recipe of what to do with every single dollar that comes into your life. Where does it go first? Where does it go second? Where does it go third? So you know that you have the highest likelihood for success and growth and wealth building, and you're taking advantage of the tax, tax ramifications, all the things done the right way. And when it comes to investing, one of the recommendations we make is that we want you to fund your investments 20 to 25% of your income. 20 to 25% of your income. I get. You might say that that's hard, Mel. That's hard. And in your younger years, it's definitely hard because you're in this. You're in the messy middle, you're starting a family. But here in the 40s, we have to get to that point. We have to get to that point because we don't have time on our side. We actually can see the retirement light at the end of the tunnel potentially as you start to get into your mid-40s. So I want to make sure that we're setting up. So your aim is to put 20 to 25% of your income consistently away. Now, it could be in a combination of 401ks, it could be IRAs, it could be Roth IRAs, it could even be HSAs. Could be regular brokerage accounts. So I'm not telling you specifically which account to put into in the book. I do, I tell you what the pecking order is, but in, in aggregate, I want to make sure that you're putting 20 to 25% of your income away following the wealth priority ladder. Okay? Because what that's going to do is it's going to give you the, the, the critical mass you need to start to build wealth, but more importantly, to have a financial machine, a money machine that's going to grow over time, that is invested properly to make that, to make that happen. So, you know, at this stage, this is the time to start thinking about, am I maxing out my employer plan contributions? If I'm working for a company and there's a 401k with a match especially, I want to make sure that I'm getting that. Okay? So I want to max out my 401ks, my retirement plans. If I am eligible to do a traditional or Roth ira, at the same time, I may want to consider doing that. I want to set everything up on automatic so the funding of it is automatically happening in the background and you don't have to pull the levers. Okay? So, so the first is I want you to avoid the destructive debt. The second is I want you to be in a place where you're funding 20 to 25% of your income into various investment accounts. The third, and you should be doing this beforehand, but let's talk about it now, and that is this. We need to focus on health. In your 40s. In your 40s. This is when your health begins to impact your longevity and your wealth. Okay? When you have poor health, it leads to one, massive expenses, reduced earning capacity, the inability to focus. A whole host of things come about with this. And so someone who has kind of gone through the health scares with the cancer and everything. Now, it wasn't in my 40s, it was in my 50s. But nonetheless, it's a challenge. And when I see clients that have gone through it and they have not taken care of their health, then they are challenged during this decade to build their wealth. But more importantly, if they don't take care of their, their health in this decade, and even though they get through that, and now they're in their 50s and their 60s, it impacts their ability to enjoy their wealth down the road. And so it's important for, for you here to start to look at your health. Are you seeing the doctor? That's not what the, you know, what this show is really about. Is health. But without health, we can't have wealth. Okay, so are you seeing doctors regularly? One of the reasons that the tumor that they found in my bladder turned out to be seven and a half centimeters is I literally had not seen a doctor in seven years. Seven years. And part of it was because I felt healthy, I was doing all the right things, I was working out. I. I didn't have any indication, but by the time I had any indication there was something wrong, the tumor had grown to seven and a half centimeters. Now, would it have have avoided the cancer to have.

Seen a doctor more regularly? No, it probably would nip, but it would have avoided allowing a tumor to grow to seven and a half centimeters. We probably would have caught it a lot sooner. Not gone through, putting my bladder in jeopardy, my life in jeopardy at the level that I did because I thought I was fine. So I think this is a time where you got to look at, especially if you have a family, you have a family depending on you. I think this is a time to really look at it and say, am I taking care of myself? Am I seeing the right doctors? Not do I feel good? Because I felt fine until I didn't. Okay? And I don't want that for you. So I go to doctors regularly now, and I want you to do the same. Because there's no sense in building wealth if I don't have the health to enjoy it. And so that's the overarching kind of umbrella. Now I want to talk about the six things that you should have in your portfolio and why they're important to move through it. And the first is this. The first one is. This is. One is cash, okay? Cash. And this is for your liquidity. Okay. One of the things that's happening in your 40s is that I want you to have cash or near cash assets that accessible for two reasons. Two reasons. One is emergencies. So we call it a peace of mind fund. I want you to have a peace of mind fund in place. We say nine to 18 months, depending on your age, stage, or circumstances, to cover you if. If there is an unplanned expense, an emergency of some sort, anything like that. There is data out there that shows that 40% plus of people could not afford an unexpected expense of like $400 without going into debt. That's a travesty. And in your 40s, if we have to go into debt because we don't have the liquidity to take care of emergencies, that can destroy our wealth building because retirement's on the horizon. So. So it's important for you to understand that we need cash on hand. Now I hear it now the trolls will come out and say, oh, cash is trash and you're not making money on it. Remember this, every dollar that comes into your life has a job description. Some of those dollars are to pay expenses, some of those dollars are for investing, some of those dollars are to protect the investments. And that's what this is that I'm talking about. So want cash on hand to protect you from any kind of downturns, emergencies, unplanned things that come in place. The other reason I want cash on hand is during your decade of the 40s. This is a time where all of a sudden you start to see more opportunities and things present themselves because your relationships, because your knowledge, because of your journey. And if we don't have the cash available to take advantage of those opportunities, then we have to let the opportunities go. And so this one asset, cash liquidity, call it whatever you want to call it, cash or cash equivalents, is that is there to protect your assets, but to also to allow you the opportunity to take advantage of opportunities that present themselves. Now, if you're unsure about, oh gosh, nine to, to 18 months of, of cash, I did a separate episode that will link up here in, in the show notes in the description that explains how to fund your emergency account, why I say that you need to do it the way I say to do it, and why it puts you in a better place. Okay, I give you a specific framework to make that happen, but this is the thing that I would do. Now the action steps here is really simple. Open up a high yield savings account or a money market account, something that you're getting more than 2/10 of a percent. Okay, at least for the time being, but it needs to be 100% liquid. In other words, you're not putting it and locking it up for, for a year, two years, three years. It needs to not be exposed to the stock market volatility. So you're not investing it in the market where it could go down 20%. If we have a market correction, it has to be completely free of fees. In other words, you're not paying fees to have your money in, in that high yield savings account. And it needs to be insured. Okay, it's, it's there for safety. So I want to have it insured. Most, most banks and, and other savings accounts are insured up to $250,000. But many of the online high yield savings accounts are insured well beyond that. Into the millions because they're networks of banks. So you want to look at those as you're doing that. So open up a high yield savings account. Set up automatic transfers. Make sure you have nine to 18 months in, in there to cover yourself and make sure that you dial that in. Okay, so that's number one. Number two. Number two is diversified ETFs or index funds. Okay, diversified ETFs or index funds. Here's what I'm trying to do for you. I want you to build an unshakable foundation of safety first. And then we use that unshakable foundation of safety to grow and build our money machine. When we invest in an index fund or an etf, we are investing in a liquid portfolio that is a broad range of stocks, meaning that we have diversification on our side. We're not investing in a single stock. We're not investing in Tesla or Meta or ge, that if there is a correction in that stock, you get hurt really badly. But you're investing in a bucket of stocks that might be 500 to 1000s of stocks that if one of the stocks go bad, yes, it affects it, but nowhere near the kind of risk that you take on if you invest in a single stock. So I want you to invest, start investing in ETFs. It's liquid, it's diversified. You've got the history of, of historical performance. You've got low fees. And it's very simple. Okay? You start out by either coming up with a portfolio structure when we work with people in our investing simplified course, or, or even in the money machine blueprint course or my money machine master plan. That's what we're doing is we're giving them the path to build a one fund, two fund, three fund, or four fund portfolio. Simple, simple, simple, diversified, liquid and accessible. To make that happen, it starts to minimize the risk, gives you liquidity. And here's the other nice thing is you don't need a lot of money to get started and I want you in the game. And lastly, you don't need professionals. So you're not paying 1%, 1 1/2% fees to someone because you can do this on your own through Robo Advisors and things like that to make it really easy to make it happen. So action steps on this one, you need to be accessible on a platform. That means that you need to have an account at Vanguard, Fidelity, Schwab, platforms like that. I, I like those platforms more so than something like Robinhood. I'm not a fan of Robinhood. Or any platform that gamifies investing. When you gamify investing, you are creating investments that create dopamine hits. And now you're bringing emotions into your investing and that will completely destroy your financial intellect. Okay? Trust me on this. That's how I got caught in a Ponzi scheme. So I want a platform that is low cost discount brokers, that has access to advisors if I need it, that has access to a population of investments that are low fee and, and low cost. Vanguard, Fidelity and Schwab are where I have my, my funds, my investments and where I buy my ETFs. So I would look at those, open up an account. Now, the account could be Roth, it could be ira, it could be a regular brokerage account, depending on the situation. Follow the pathway in the wealth priority ladder in the book building your money Machine or follow the plan that maybe you're working from to make that happen. So you're going to build the portfolio in there and you're going to look at the portfolio at least once a year to rebalance it. That's it. Okay? And so, so that's the, the second thing is I want you in a diversified portfolio of ETFs and index funds, okay? That's where the lion's share of your wealth building should be, at least in this stage, in this decade of life. Okay? That leads me to number three. This is a time where you're going to start looking at bonds, okay? I say start looking at bonds because they're not a, they're not something that you're going to do a lot of investing into because you don't have the growth potential. And in your 40s you still have at least two to three decades ahead of you of growth. But it is a time for us to start looking at are there bonds that I want to take on that can give me a stability of income, Especially when we start to get towards the latter years in this decade. And it could be government bonds, it could be corporate bonds, it could be municipal bonds, and they come into with different tax structures and different tax benefits. You know, some are federal tax free, some are state tax free, some are completely taxable. And don't kid yourself to think that a bond has no risk. They all have risk. Okay? They all have risk. But it is an addition potentially to a portfolio. Now one of the things you can do here, just like the ETFs that I talked about previously, is they're actually bond ETFs so you can invest in, in a bond ETF that has a diversified portfolio of bonds. Therefore, you're again, reducing some of the risk. It reduces the volatility in there. By doing that and having a bond exposure in your portfolio at least a little bit, will start to reduce the volatility in your overall investment portfolio. And so that's the way that I would do it. There is a way to use bonds, you know, in a way that gives you liquidity also, which is called bond ladders. In fact, we do this in, in my investing, where we actually have a portion of bonds that are expiring every 90 days. So if I need the money, I can get it within 90 days. So it's a mix of bond funds and a mix of individual bonds. Okay, so that's, that's number three. Number four, this is where I would start to look at real estate. Okay? Now I know some people have said, gosh, Mel, you leave real estate till later. I do leave real estate tiller now, absent your home. Okay? That's a different, a different thing. But when, when I talk about investing in real estate, I don't use real estate as the starting point. And I know there's some people that have made a killing and huge wealth in real estate. And I love real estate. Here's why I don't like it. For someone just starting out one real estate to get into it usually takes a lot more money. So if you have only $2,000 that you want to invest, you're probably not going into a piece of real estate, but you can get into a diversified ETF. Okay, so let's say you accumulate $50,000 for the real estate. Now you can buy a property, a property it's not diversified, it's a single property, which is totally fine. The problem is if you buy it wrong or you get a bad property, then it could destroy you financially. And this is why I say, let's wait until you have critical mass in the portfolio and you can sustain a bad real estate decision. And here's what I mean by this. And this is a story of a client out here that bought an office building. So they bought an office building and they needed to do some roof repairs. And when the contractor came in to do the roof repairs, now they, they put hundreds of thousands of dollars down on the building. They took a huge loan out on the building. They bring in this contractor to do the, the work on the roof. And he looks at it, he goes, huh, there's asbestos in the ceiling. And he says, we need to remediate the asbestos first before we do anything. And in Order to remediate the asbestos, all tenants had to be removed from the building. So they had to vacate the building. They had to spend $150,000 for the remediation, then they had to spend the money for the repairs. The time to do it was, was almost six months. So they bought a piece of property, they had to pay the mortgage. They had a property that didn't have any cash flow or tenants in it for six months. They had the repairs, the remediation cost, which were hundreds of thousands of dollars, and then they had to rent it again to get it cash flowing again. Okay. This is why I think that real estate, investing in properties, in physical properties may be better suited down the road when you have the liquidity to carry it if something like that happens, God forbid. Okay, so, but it is one of the assets in your 40s that I think we should have in our portfolio. There are different ways to do it. So if I'm not buying a property like I don't own, truth be told, I don't own a ton of physical real estate directly, but I have access to real estate because I own it through syndications, real estate investment trusts and things like that. So I'm buying into a diversified portfolio of real estate where I'm not directly the landlord or anything like that. So, so I think that this is a, a way that you can get into it. And one of the reasons I like real estate, it's one of the only investments that actually give you four different benefits. Okay. Most investments don't give you all four. The first is this. You can get appreciation. Real estate value goes up. Okay? Now you can get that in stocks just the same. Okay. But it doesn't have stocks don't give you some of the other ones. You can get cash flow from the rents. So you've got appreciation, you got cash flow. Okay. You can get equity buildup even if the property doesn't appreciate. But if I have renters in there paying the mortgage, I build equity in the property and you get tax advantage, so you get tax write offs. So it's one of the only assets you can invest in that gives you appreciation, cash flow, equity build up and tax shield at the same time. Most of them will give you one, two or only three of these, but not all four. It's why I love real estate, but I just love doing it in a way that is smart and isn't going to jeopardize the rest of your portfolio or your whole financial life. Okay, and that leads me to number five, Number five is what we, what I would call alternatives. Now this is only when you have critical mass. Okay? And what I mean by this is that you have a portfolio that is building on itself and that you have enough in there to carry you. Alternatives are going to be a very small sliver of your portfolio or they should be. And alternatives could be private equities, they could be hedge funds, they could be crypto, they could be the non traditional types of assets that, that you can get get into. Now most of them and why we also keep them till later on, most of them are more complicated investments. And like I said, one of the key and core rules of investing is you never ever invest in something you, you do not understand. So if you don't understand or is too complicated, stay away. Stay away. No matter how much the returns are and what they promise you, stay away. They're typically a bit more speculative unless you have specific expertise in them. So but they also typically will offer a higher rate of return. Now you trade that off because many of these alternatives, once you're in them, you can't get out. If I buy an ETF and I need the money, I can sell it on the market that day and get the cash. Okay. If I'm in an alternative investment and I happen to be in a few of them, that, and I would, if I needed to liquidate them to get the cash, I can't. And if I could, I'm going to take a huge haircut, I'm going to take a huge discount and it's going to cost me a lot to do that. So this is why I think that the action steps here is that you have to educate yourself on the specific alternative before you invest. You would allocate no more than I would say 10% of your portfolio to alternatives. And then you've got to monitor them very closely and be very specific with them. It's not a big piece of the portfolio. It is a sliver of the portfolio that, that you can put in place. But know that it comes with some additional risks of not liquid, higher, higher speculative kind of nature and it may have more volatility. Okay, that leads me to number six, which is an asset, but maybe not an investment. But I think it's important for you to consider. Doesn't mean that you will need it. But I'm going to say term life insurance. I'm not a fan of insurance, but there are things that you need and, and so I'm not, I don't buy into whole life policies and, and cash Value. I never believe that you should in most cases, there's very few cases that I would, I would say it makes sense for you to wrap investments and insurance into the same envelope. It just doesn't. Okay? The fees, the cost, the commissions, the inefficiencies, all that stuff you bear the burden of and you will never get the same investment returns that you could in the market. So when it comes to life insurance, then I look at term, term insurance now it is an asset. While you have it, it's once it expires, there's nothing there. And that's why it's called term insurance. But it is essential.

When it comes to protecting your dependents, your family and folks from the loss of your income, especially to cover mortgages, liabilities, college expenses, things like that. So in your 40s, typically your family's growing, you have a mortgage, you might have a spouse and, and, and people depending on your income. If that's truly the case, then what you want to do is get the insurance to protect the assets and to protect your loved ones in that way. And in your 40s, it's typically still very affordable because.

You'Re relatively young, hopefully you're relatively healthy. And if you do a 20 year or 30 year or 25 year level pay, it'll take you into your retirement years. Okay? And so, so I think that this is something to consider in your 40s to get into place, to give you financial security, to give your loved ones financial security and to avoid anything that could happen from a financial hardship perspective in doing that. So, and you get a chance to re evaluate it on an annual basis because it's term, you're not under contract, you can let it lapse, you continue to pay it, you can do what, what you need, but you can look at it on a regular basis. An offshoot of this is that you may also want to consider something called long term disability insurance. If you're the primary income earner in your family, there is a problem obviously if you pass away, but there's also a problem if you become disabled and having the proper. And I think you should do an own occupation. It's called own occupation.

Long term disability policy that will cover you if you can't earn for a long period of time. I have a long term disability policy that I've used two times. Once when I herniated the disc in my back and the other when I had my bike accident, okay? And literally they paid me well into the six figures tax free to allow me to pay my bills. Do What I need to do but focus on my healing. Having a long term disability may be something to consider here in your 40s to protect it. So some of these assets I talked about are to build your wealth, and these last few are to protect your wealth. That leads me to this last piece, which I think that is really important and that is this. No matter what you're doing, no matter what your age, stage or circumstances are, you do it with a plan. If you don't have a plan tailored to your vision for your life, then you're just kind of walking the haphazard.

Financial choices of life. And you may get the wealth you want, you may not. You may get the life you want, you may not. I think you should be deliberate. And so this is a time where you really need to dig down and look at what's my vision for my life, what's the plan to make the vision a reality? Okay, this is why we do the money machine master plans. You build the plan out, you test it, you think about all the things that, that could go if inflation comes back, if we have a decline in the market, if you decide to retire early, if you decide to work longer, if all of a sudden your expenses go up, you test and test and test because now you can test the probability of success in that plan. So, so you, you work the plan off of your vision and then you build the spending around that so the investing will give you the money machine to fulfill the plan. Okay, you can start basic, you can start with spreadsheets, you can go to something like we do with a master plan. You can build things in different apps, but by all means, in the decade of the 40s, you need to be working from a plan and not just arbitrarily, just wandering around saying, well, I'm just putting Money in my 401k, I'm putting things away. I don't know where I'm going. That's not the way to be. All right, so this is the thing to look at your 40s, this is a critical pivot point in your wealth journey because you can see the light at the end of the retirement tunnel. You still have plenty of time ahead of you, but it's getting eroded away. We can correct any kind of issues that, that maybe problems that have come up and fix it. We can still build the wealth that you need to have the life that you deserve. If you're disciplined, follow a plan, have the right vision, and work through it. All right? I hope that you found this of value. I hope that this is helpful that you start to look and say, how many of these assets do have in place, whether you're in your 30s, 40s, or 50s, and what do I need to do next to get them in place? If you have questions, if you have comments or anything like that, please let me know. Because I want to guide you. I want to help you. I want to help you on this journey to financial freedom. I think that it happens to be your birthright.

Now it's time to go claim it. And I want to light the path for a million families to go claim that birthright, to see the path to financial freedom. And I want one of those families to be you. All right? So I hope that you found this helpful and I hope that you found this valuable and that I get a chance to see you on your road to financial success. Until I see you in the next one, always, always strive. Live a life that I will see.

Thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

And that's it for this episode of Building your money Machine where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this help valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcasts, or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.