9 Financial Goals You Must Hit By 40

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. Have you ever wondered if you're on the right track, you know, on your path to financial freedom or building wealth? Where should you be with your money, depending on your age? Well, I recently did a video.

On the 9 things that you need to have in place by age 50. And someone came back to me and says, well, what about 40? You know, what do we need to be thinking about by the time we get to age 40? Well, in this video, I'm going to break it down for you. I'm going to give you the nine milestones that you need to have in place by age 40 to make sure you're on track with your money, with your finances, and on your path to financial freedom. Welcome to this episode, the Affluent Entrepreneurship. Let's go do this.

All right. Welcome back to this episode of the Affluent Entrepreneur Show. It's in this episode, I'm going to break down the nine financial goals you should be trying to hit by the time you're age 40. Now, this is a follow up to a prior episode that I did when I talked about that at age 50. And some people came back and says, what do I need to do at age 40? Well, I got your back in this one. We're going to break it down for you. You're going to see some of it is going to be similar, but much of it is going to be different. Here's what we know. You're age 40, and when you start to get into your 40s, this is, this is kind of like the millionaires decade is. The way I look at it is the, it is the decade of transition. In fact, they say that most people statistics show that most people hit their first million dollars around late 40s, age 48, 49. Now, here's the thing that I think starts to transition here. And I say it's a, it's a time of transition. The 30s are what we call the messy middle. This is when stuff is happening in our, in our lives, like family is growing we're buying a house. There's additions to the family, and there's all kinds of things. But 40, 40, 40 is a time where you ought to be adulting. And I'm not saying that adulting is fun. My wife doesn't think that I'm, that, you know, I'm going to be 63, but she's, she constantly says, go, you asked. Act 12. Now that's okay, because I'm going to always be a kid. And you should always be a kid and be playful and have fun. But know that as you stand in your 40s, depending where in the 40s you are, you are young enough still to remember the, the earlier years, your 20s and your 30s and, and some of the things that you got a chance to do. You're also old enough to possibly look at the horizon and, and see, wait a second. The idea of retirement actually isn't so far off anymore. The idea of my golden years isn't so far off anymore. This becomes the tipping point. This decade becomes the tipping point of where you start to look at and say, have I done enough right to set me up in my 50s, 60s, and 70s and beyond? And if you haven't, this is the time to get real, real serious with, with getting it dialed in and put together. And I'm going to walk you through the nine goals to make that happen. Because this is a time frame in people's lives usually where things start to shift. You, your kids are growing older, you're looking towards college expenses. You maybe are already in college expenses. Those get pricey. You might be also in that, in that sandwich kind of era where you're trying to take care of kids that are growing and you're trying to take care of parents that are aging, which puts you in a precarious position financially because, trust me, for someone who is trying to care for an elderly mother who's been on dialysis and is 90 years old, it gets costly. I see the numbers okay, now. So this is a, this is an interesting era and decade for you to try and balance this, the desires of today.

The needs of tomorrow, and making sure that you're serving all the different things in your life. The kids, the parents, you, your relationship, and your dreams. So it's an interesting dynamic. Now there are nine things that I want you to focus on. Nine goals that I want you to try and hit by age 40. The first one, which I think I start with all the time because of the way I see finances. The bottom line is this. I want you to have an unshakable foundation. That means that I work from safety first, growth second. Okay? Because if we're going to try to build wealth, if we're going to try to build freedom, we don't build, build it on a bed of sand. We don't build it on a shaky foundation because one strong wind and it's gone. I want to make sure that you are put in a place where you're stable, you've built it on a solid foundation, and even if there's a strong wind, it may leave a mark, but it isn't going to absolutely destroy you. Okay? So the first element that we need to think of is this idea of liquidity. Now I say this all the time, but this is really important because if you're going to survive any kind of downturn, if you're going to survive any kind of, of problem, you got to have the liquidity to do it. The problem with, with, with it is that if we do not have enough liquidity, this is when we start to go into debt that is uncontrolled, it is panic debt, it is becomes destructive debt because we don't have options. So we need to take the time to, to build liquidity. Now in the wealth party ladder, which I talk about in detail in my book, I, what I'm talking about in my, my newly released book, building your money machine, you should have it if you don't have it. But the bottom line is this, is that it, it is something that we need to focus on. Now I tell people that as much as some folks will say, oh, you need three to six months, I think that that's wrong. I think that's too short. Depending on your situation, I think that you should be playing with a nine to 18 month window. Okay, nine to 18 months now.

Oh my God, 18 months of cash now, mind you, look, I want it in a high yield savings account, okay? Right now you can get between 5 and 5.5%. It'll go down at some point, but it's not going down yet. But why do I say nine to 18 months? It's because I think it takes us longer to get on our feet than we anticipated. And where you land in that nine to 18 months is really dependent on facts and circumstances. I am not dogmatic about it. I am saying use these as boundaries, use these as guideposts. Because let's say for instance, you're 45, okay, at 45 years old and you're the sole income earner in your family and you have two kids and a Spouse, okay? You have a family of four that is depending on you and you're the only income earner. If God forbid, something happens, you lose your job or, or there's a downsizing or you have a health issue like I had, what do you do? Okay, nine months may not be enough for you. You might push to 10 or 12 months to make that happen. Now maybe it's different. Maybe you have no kids, okay? And you have two incomes in the household and you're living off of one. Well, now you might push it down to the nine months or less. If you're older, we'll push it up a little higher. If you have a unique circumstances about around your job, in other words, it's hard to get a job like yours. It'll take a long time and there's a long, a long lead time to the interview process, then you might push it out. All I want to do is I want you to concentrate on building liquidity and making sure that you have enough cash to sustain yourself should something unexpected happen that is prolonged, that is, that is prolonged. If you want to truly understand how to do this, I want you to follow the steps in the wealth priority ladder in my book, building your money machine. And so you want, you want to grab that book at your money machine, book.com, if you get a chance and go through it. Now that leads me to number two in, in this process. Number two is debt management, okay? Now what I mean by this is, is that it is really important for, for you at this stage, especially in the 40s, to start making sure that you're dialed in with your payments. Now I am one. You've heard me say this before. I don't believe all debts. The devil. All debt has two personality traits, okay? All that has two personality traits. All debt costs, okay? That's called interest. You're going to get charged interest, okay? And all debt. The second personality trait is that all debt stresses, okay, it stresses you financially, it stresses you psychologically, it stresses you throughout whatever it is you're doing. And so you have to realize that that is a trait. Whether it's good debt, bad debt doesn't matter. It's. It's still something that's going to impact you going forward. And so it becomes really important to look at it. Now, what's the difference between destructive debt and productive debt?

Destructive debt is the debt you use to finance your lifestyle. It is luxuries, it's consumables. It is all those things that are momentary pleasures of that go away. It's the big screens, it's the vacations, it's the cars that you can't afford so you have to finance for seven years. Don't do that. This is a time to completely avoid that debt. This is also a time to look at it and you follow the wealth priority ladder process. If you are in debt, if you have that kind of debt at this time, this is a time to make sure that you are on a debt payment plan to get it paid off. Because as you get into your 50s and 60s, at some point I want you completely debt free. I don't want that stress on you, I don't want that cost on you. Okay? And we can talk about mortgages another time. When do you pay those off? But it is important to look at it through, through those eyes. Now, productive debt, what is that? Productive debt is debt that you use to build your net worth or build additional cash flow. It increases your wealth and increases your cash flow. This might be debt that you use to buy a rental property. Okay? It might be debt you use to buy a piece of equipment that you rent. Okay. But it isn't debt that you use to finance a vacation. That is a consumable. Okay? So number two is one, avoid destructive debt and then get a debt management plan in place. If you have destructive debt and start to get control of the debt. That leads me to number three. Okay, Number three is I want to make sure that you're fully funding your future. What does that mean? What, what I mean by this and when you talk, when you see me talk about it in the wealth priority ladder, we start, we work from Comfort fund. We do, we do the destructive debt and, and the peace of mind fund. And then we do investing. The Freedom fund is what I call it. That freedom category is in the, in the wealth priority ladder. I want you to start funding 20 to 25% of your income into investments. And we can talk another time about the investments. The first thing is that the investments don't matter if you're not funding it in your 40s. If you have not been fully funding.

Investing to the tune of 20 to 25%, it's time. It is time. Because now you're starting to lose time to, to help you build wealth. Think about this. Every dollar that you put away at 20 years old turns into $80 by the time you retire. If you wait five years, that's cut in half, it goes to 40 times. If you wait another five years at 30, it goes to 20, 23 times. If you wait till 40, all of a sudden it's close to seven times. Bottom line is you gotta get yourself in the game. At 40 years old, it is really important that you are fully funding your financial future. Fully funding your financial future. What accounts you put it in. And that type of thing I talk about in the book, get the book, walk through it. It literally tells you, do you put it in a Roth, do you put it in an IRA? Do you put it in 401k? Do you put it in a brokerage? When do you do real estate? I literally give you the whole recipe. But the important thing for you is to make sure that you're funding because it doesn't matter where you put it. If you're not funding it, let's get you funding it first. So number three is fully funding your financial future. Okay, Number four. Number four is actually knowing your target. Where are you going? What's your destination? Now I'm going to walk through a formula here. And I did it in, in, in a prior video. This is not my formula, okay? This is a formula that came initially, originally from the Millionaire Next Door, okay? And the Millionaire Next Door is a classic, classic book on, on personal finance that, that walks through, you know, the things to consider in doing it. Now in that book they talk about this, the average accumulator of wealth, the A W. And there's a formula that they, they bring in there and that, and then what that is is your income times your age divide divided by 10. Let's just look at a 40, a 45 year old. So you're 45 years old. And at 45 years old, let's say you're making $100,000 a year. So using their formula, this tells you that your net worth should be $450,000. Because 44, 45 years old times 100,000. That gives you 4.5 million, that gives you 4.5 million. Divide by 10 and that gives you 450,000. Now they also talk about this idea of a prodigious accumulator wealth. Someone that's an overachiever, which I know you all are. And what they do is they take this and multiply it by two. So a prodigious accumulator of wealth would be $900,000. What this number represents is what your net worth should be. $900,000 as a prodigious accumulator, 450,000 as an average accumulator of wealth. Now, there has been criticisms of this and I anytime you put some generic general.

Formula in place, it's not going to fit every situation. And we're talking about you in the 40s. And so if you're under 40, then we want to. We want to look at it slightly different. And this is, this is a tweak and an adjustment that was made to this formula by, by my dear friends Brian Preston and Bo Hansen. And what they did is they, they took the same formula. They took the same formula, and they said income times age divided by 10, plus the years to age 40. Okay, so let me run the numbers for you. Let's assume that you're 35 years old and you still have the same hundred thousand dollars of income. Okay? What that means is you take 35 times the hundred thousand and that leads to $3.5 million. Okay? Now you're going to divide it by 10 plus the number of years before you're 40. Well, that's five years, because your age 35, 40 minus 35 is five. So divided by 10, 10 plus five, so divided by 15. That means that if we divide it by 15, your average accumulator for under, under 40 would be $233,000. Okay? If you're a prodigious accumulator, multiply it by two. That gives you $466,000. So rounded up, if you're at 35 using this formula, you're going to want about a quarter of a million dollars or half a million dollars, depending on where you're at. But the point is, is this. You gotta know where you're going, otherwise you don't know how to get there. You know what your current situation is, but. But you don't know where you're going to. You never know where. When you cross the finish line, it is important for you to know where the finish line is. This is a ballpark. This is generic or general, but it is a starting point. As you get closer, as you start to refine your money journey, your financial journey, you will get more and more precise. I sit with my wealth team regularly. We either do it via zoom or via calls. On almost a monthly basis. We'll have a conversation, but more meaningful at least every six months, typically every quarter. Where we break it down, we say, are we on track? Do we need to make some adjustments? So know that this step is really setting a. A ballpark target. That gives you a direction, but it requires you to refine it and get more and more precise as you. As you go down, down the road. Which now leads me to the fifth, the fifth thing that you need to have in place, and the fifth Thing is this is that if you know your target, okay, then you just need to start thinking about a definitive plan. Okay? Do you have a plan to get there? You now know now that means spending plan and investing plan, an income plan, all of it put together to say, I am here. This is where I want to go. This is the gap in between. And this is my plan to get there over the next 10, 15 years. Because you're in your 40s, you probably have a couple of decades left where you might say, I want to keep working as hard as I am. Maybe you don't. Maybe you sit back and say, I want to get this done in a decade. Great. You gotta have a plan to get there. Remember, you start with the vision in your life. The vision will define the plan, the plan will set the strategy. The strategy will, will help you determine the tactics, and the tactics will put in place the action, items to take. But we gotta get this plan in place. And too often at this point, people are just kind of floundering. I don't know. I don't really have a specific plan. No, we need to get a plan in place. Now. This is where, where we start to look at things a little, little differently. And that is starting to understand the things that might drive your wealth maybe a little deeper in the sense of, of how to, how to really drive the, you know, protections, transitions, the things in life. Because remember I said you've got kids that are probably growing up and probably on the way out of the household. You've got parents that are getting older that you might have money coming in from. Maybe not. It doesn't matter. But what does that transition look like? If you haven't started having these conversations with your family, it's time to have them. I think you should have them much earlier. But we want to make sure that everyone is on the same page doing the same thing, doing the right things to make that happen. And so this number six is kind of an offshoot to the plan. And that is, what does the transitions look like? Do I need to put things in place like a trust? And I'm hoping that you have a trust before this, but if you don't have a trust and a will, this is the time to really start to dial it in and everything. You might make a, and review your insurance in this, in this category too. Do I need more life insurance? Is this something that I need to. I can lessen the lives or where am I on, on what, what we're really trying to do now? This is also the Time where we go to number seven, where I think that this is the time to get really clear on your values and how to, how to make sure that they are carried out after you. Here's what I mean by this. You took the time to get yourself here. You're starting to build wealth. You're in that millionaire decade. How are you going to turn around and make sure that it is sustainable and that the people around you are going to carry it out? My wife and I had multiple conversations around my vision around the money machine that I talk about and building and all that stuff and her vision for the money machine so we can be on the same page to make that happen. Too often you have one person in the relationship possibly that's driving the bus. I, I'm not in a relationship alone. I'm in a relationship with my wife. So I need her side by side with me on this bus. And she gets a voice, she has a conversation. This is about us creating a vision for a life. And so I want to make sure that we're on the same page. That then allows you to start looking at number eight. And number eight is what do you need to learn? So, so this is really about your education, because here's what's happening right now. You spent your, your twenties and your thirties all about income. All about income, all about income, all about income. I gotta make, make income, income, income. But what are you doing to use the income effectively and to steward it? Because you're now going to start to transition from the, the become wealthy kind of mindset, behaviors and attitudes to, to the stay wealthy behaviors, mindset and attitudes. And they're different, they're different traits, they're different skills, they're different elements that need to be in place. That means that the stuff that got you to earning the wealth isn't the stuff that's going to preserve the wealth, to steward the wealth, to keep it going. And so there may be some things that you need to understand and learn about yourself, about your needs, about managing a portfolio. Not that you're going to like, I've got a wealth team that manages the portfolio primarily, but they don't do it without me. I don't relinquish responsibility. I don't ever want you to relinquish responsibility. And so that means that you need to understand things like risk management, risk mitigation, risk. And this is where you start to have more conversations around that you've shifted from a, you're starting to shift. You haven't shifted completely, but you're starting to think about preservation strategies. How do I limit losses, how do I make sure that I'm not taking undue risk? All those things come into place, into play to do that. And then number nine is those people that are going to steward this beyond, you need to gain some skill sets before they ever get the assets. So the same education that you are talking about and learning here in number eight, you've got to be able to communicate that in number nine. So when you're starting into this decade, there's a lot of moving parts in the millionaires decade, in this 40s decade, because you got to have the liquidity for safety. You've got to make sure that you've got control of your debt. You've eliminated or you're eliminating your destructive debt. You're taught you're not getting buried in debt, so you've got that. You're fully funding your, your financial future by 20 to 25%. Following the recipe in the wealth priority ladder in my book building your money machine, you have an idea of what your target is. If you're not, if you don't have a specific number, use the AAW calculation, the average accumulator of wealth and prodigious accumulator wealth calculations that I showed you here. So you know that and you have a plan to kind of get you there to bridge that gap. Because now you're going into your, your next decade, the 50s decade, which I've talked about before, and then 60s and 70s. And now you're also looking at the transitions that are coming, transitions with the kids, transitions with the parents to make sure that you're set up on that and that your partner is, is skilling up along with you. Because you're moving from, into a space where preservation starts to become more of a priority. It's not the priority yet because you still have plenty of decades to accumulate and build. In fact, you're just starting. But I want you to have a mind towards preservation and then asking yourself what skill sets does everyone else need to have to be able to earn the right to have the wealth and steward it beyond you? That's it. That's it. Now that's plenty. But the 40s is a critical tipping point on your financial journey because there is a lot of stuff that is changing. You have envisioned the past of your, you, your younger years of, of earnings and growth and, and building a family. And you also have in the future the vision and the possibility of your golden years, your, your ability to retire. It's now you can see both sides of the equation when you're in in this decade. And so we got to think about both sides of the equation. I hope that this helps. I hope that gives you something to think about as you move forward and that you follow this checklist to see where you are on your journey and what kind of goals you should be thinking about hitting by the time your age. 40. All right. I look forward to seeing another episode. I look forward to seeing you on the road as I speak. And until then, always, always strive to live a life that outlives you. Cheers. Thank you for listening to the affluent entrepreneurship 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 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.