Why Your 40s is the Best Decade to Build Wealth

You've been told to start early your whole life. Save in your 20s. Let compounding run. And if you're in your 40s right now, there's a part of you that has probably wondered whether you missed the window. You didn't. Let me just give you that spoiler alert. And, and I'm going to show you why the math makes a stronger case for your 40s than most financial advice would actually ever admit. Today, I'm going to walk you through what happens decade by decade that keeps most people stuck and why your 40s may be the most powerful wealth-building window of your entire adult life. The exact moves one couple made to go from $225,000 to multiple 7 figures in 8 years, starting at 40. And now before you go there, if you are over 40, there is still some beautiful stuff that you can bring into your world now. So don't go anywhere just because you might be a little bit over 40. This is Building Your Money Machine, where we help you master your money, eliminate financial stress, and live a life by choice. And I'm your host, Mel Abraham, and trust me, I'm over 40 and I've seen it done. Let's do this. We're gonna walk through every decade of your financial life and I'm gonna show you why the most important part of wealth building has, has been backwards this whole time. Okay? So let's start with this decade by decade, like reality check. You've seen the compound growth chart, probably. Somebody's put a few hundred dollars away in their 20s and that line curves up and 40 years later they're sitting on a small fortune. The lesson is always the same. Start early and let compounding run. That's the game, okay? Time will make you rich. And it's an absolute truth. Compounding is real. I'm not here to argue with the math because it's real. But those charts make one very quiet assumption that nobody wants to talk about. They assume that you had meaningful money to invest in your 20s, that you actually then put it in And that life never intervened with an emergency or a job loss or just simple chaos of living. So that assumption is doing a lot of the heavy lifting here. In your 20s, you've got time, you've got energy, but you've got approximately nothing left at the end of the month, typically. Think about what your 20s look like. You're at the beginning of your career. You're earning less than you probably ever will again. Student loans. You've got your first apartment. You're figuring out how to feed yourself. Something other than ramen. The intention was there, but cash flow just wasn't. You had time, you just didn't have the fuel. Now, then you hit your 30s, income starts to climb, and that's the good news. The problem is this is what we call the messy middle because nobody warned you about the costs start to climb also. This is where life changes. You might get your first home, a mortgage, All of a sudden you're getting married and you have kids. And anyone with kids in their 30s knows that childcare can run as much as a second mortgage. Maybe because you have kids, you got to get a bigger car. Every direction you turn in your 30s, there is another expense that is already pulling and waiting for that dollar to come in just to hit the account so it can pull it out. Yeah, you're earning more than you ever have, and somehow every extra dollar is already spoken for before it lands. That's your 30s. And every year you go, you can't really put real money away, not because you're not disciplined, but because the simple structure of your life is swallowing all the surplus. It's a delay tax, if you will. Quiet, it's invisible, and almost everyone pays it. So when do we get ahead? When does that picture actually change? And I think it really starts to take hold and change in your 40s. In your 40s, a few things start to line up at the same time, and we take it for granted. Your income is at or near its peak. The kids are typically past the most expensive early years. You're chipping away at the mortgage long enough that you're no longer feeling like it's a monster on top of you, and the financial chaos of your 30s starts to settle into something more predictable. Now, This is a time that maybe for the first time in your adult life, you've actually got real money left at the end of the month. Money that you can actually put to work for you. You've still got 20+ 30+ years of compounding runway ahead of you. And you finally have fuel that can actually fill the tank. That's what's going on. And this combination, enough time, enough money in the same place at the same time is rarer than most people realize. See, for the majority of real people I've sat across from in over 30 years of doing this work, that window opens squarely in their 40s, and almost no one treats it that way. Let me show you the math and what the math says, because these numbers changed how every client I've ever worked with thought about it and thought about this part of their life. Because walk with me through some of this, and I know that I'm going to go through some numbers, but I think it's important for you to realize this. A dollar $1 invested at age 20 growing at the S&P 500's historical average becomes $88 times by the time you hit age 65. Okay? And, and I get it, we're talking about the '40s, but that's 88 times. I get it. Wait 10 years, put that same dollar away at 30 instead, and now it only grows 23 times. Same dollar, same market, 10 years difference, the outcome drops by more than 3/4. That's why every financial plan ever written opens with the same sentence. Start early as you can, the math is real. But nobody shows you what comes after that chart. What does the same math look like if you start at 40? Let's make it concrete. Let's start at 40. Let's start by putting $2,000 a month away and let it grow until age 60., you'll land at $1 million. Wait until 50 to start the same habit, $2,000 a month. By age 60, you only have about $410,000, 60% less. Same discipline, same monthly contribution, 10 years apart. The gap between the two choices costs $600,000. That's the difference between financial independence and financial dependency. And I want you to sit with this for a little bit because the 40s still give you serious compounding power. Yeah, 20+ years of your money accelerating. Would have loved for you to do it in the 20s, but we don't have the money then. We have to do it when we can, and the 40s is the biggest decade for us to do it because you'll get your money accelerating, growing faster and longer as it runs. And this window hasn't closed. See, the best time to start was 20 years ago, but the second best time is right now. And if right now is 40 for you, boom, jump in. You're in the right place. If it happens to be older, boom, jump in. You're in the right place. We got to get in the game to play to win the game. Listen, when a client came to me, Denny and Jane was a couple that came to me and they sat across from me. Denny had just turned 40. And his first reaction was that he was behind. And I showed him these numbers and something shifted in him. The window opens in your 40s for most people. The only mistake is waiting another decade to walk through it. But there is a trap that most people fall into, and we'll get back to Denny and Jane in a moment, when that moment that they finally decide to get serious. And it cost me personally before I understood it. Let me save you from going through the same crazy thing that I did when we get there, because I think this is the thing that we don't understand it, we don't realize there is a trap. When people in their 40s finally get serious about building wealth, almost all of them do the same thing, which is what I did. They overcomplicate it. I know because I did it myself. Like I said, when my income was growing in my 40s, I had— my income was growing at an accelerating pace, and I crossed, I crossed something called the accredited investor threshold, which meant that I qualified to get into other investments that I didn't have access to, that most people never see. An advisor had a whole new world of options waiting for me, of alternative investments and all kinds of things like private placements and institutional-grade products. All the things that sounded like I finally arrived somewhere. Now, I'm a CPA and I've spent my whole career inside financial statements, and I figured I could handle that complexity. Yeah, I couldn't. Honestly, I couldn't. At the peak of this, I had over two and a half dozen separate accounts. I had alternative investments so illiquid that if I wanted out, there was no market to sell it in. I couldn't leave even if I wanted to. I had fees that were dragging on the portfolio that were quietly eating the gains year after year. I didn't fully see what I had built until I started working with a new advisory team and asking different questions. The fact is this, that when the team looked at it and they go, "What is this? We got to simplify it." See, we spent the next year and a half consolidating and unwinding everything that we could exit. And what we couldn't get out of, a handful of them, I still have them and I'm still sitting on them right now waiting for whoever controls them to decide that it's time to liquidate. And I have no say. I have no market. They'll move when they move. And we stripped everything in my portfolio back down to low-cost index funds and ETFs. And the portfolio, believe it or not, grew faster than it ever had without the drag, without the complexity tax, or the fees quietly carving into the gains. No drag, none of it, just building. See, wealth creation, it is a simple game, but it may not be easy depending on age, stage, and circumstance. See, the trap in your 40s is thinking that sophistication equals results. Simplification equals sophistication, which equals results. The people who capitalize on this decade do something that looks almost boring on the outside. They follow a hierarchy, a sequence, a clear order of operations, if you will. I call it the wealth priority ladder. I wrote about it in my book. I teach it in my, in my programs that I work with my clients on. And when Denny and Jane sat across from me, he just turned 40, like I said, she was 39. They had $225,000 between their 401s. They had a student loan, they had 2 kids, and they had aging parents becoming a real conversation and that feeling of making good money and going nowhere. This is exactly what they had built together. So let me walk you through some moves specifically, and these moves will apply to you at no matter what your age or stage is, but they are so powerful in that decade of your 40s. And I'll tell you where they ended up 8 years later. Okay. The Wealth Prior Ladder is the way that it's the recipe of how to use your dollars to give your dollars the proper job to optimize building wealth. And the first thing that we did together, what really wasn't to pick the investments, it wasn't even to look at the money. The first thing in every case is to get a clear picture of what the life is that they wanted. What does it look like? Not just financial life, their life, whether it's their relationship, more kids, their health, all of it. What then we look at, what does it cost? And what do they have to account for? College for 2 kids, aging parents who might need help someday, the kind of life together that they intentionally do you actually want to build? The travel, not just retirement, but the full picture of everything. See, what I know is that when money has a destination, it behaves differently. And money with good intentions is just money that just wanders. And all of a sudden, that's when you end up at the end of the month and go, I have more month than I have money. I don't know where the money went. So then we looked at where they were. Once we got the picture of where they wanted to go, we looked at where they were. We said, how much income do we have coming in? And what are the sources? How much do we have going out and where is it going to? So we knew where they were. We knew where they wanted to go. We saw the gap between today and tomorrow, the destination. And now we bring in the wealth priority ladder and start to work through closing the gap. The first move was this: let's build the foundation first. We have to have an unshakable foundation before we build anything on it. And the way you do that is to make sure you have enough liquidity in place and you have your debt under control. So before one extra dollar goes towards investments, there needs to be a cushion underneath you, not just the emergency fund. The emergency fund is 3 to 6 months. But in our work, we try to get them to push to 9 to 18 months of cash in a high-yield savings account to give them liquidity to sustain themselves in a long-term downturn and/or to take advantage of opportunities as they come up. Because if you're building wealth on a cracked foundation, one unexpected event doesn't just slow you down, it tears apart what you've built. So Denny and Jane got their foundation solid before anything else moved. Then move number 2: we never walk away or walk past free money. Both of them were working at employers that had 401 plans, and both of them had a dollar-for-dollar match up to a certain percentage of their income at 100% return. I mean, for every dollar they put in, if the employer is going to put another dollar in up to a point, that's 100% 100% return on their money. You can't get any better than that. There's nothing in any market that guarantees that on day one. So that was the first place that we had them do is that let's max out the 401 to a point that we max out the match every single paycheck. Now, one of the things we do in the Wealth Priority Ladders, I want them to push towards 20 to 25% of their income going into their financial future, into their investing over time. And it's going to be in a lot of different accounts. But the first place that we do is let's get the free money. Move 3, though, we then look at the debt. And at this point, I wanted them to start to get rid of the student loan debt. Now, it wasn't at a punishing high rate, but at the same time, the weight on the psychology is something that I wanted to solve. So we put them on a specific payoff plan to accelerate that debt paydown and get them out of the student loan debt because it slows everything down if we have that drag on it. Then move number 4, we went back to the 401 and we maxed it out. Now, what we would have done if they qualified is we would have looked at possibly going into a Roth IRA to get tax-free income down the road. The problem is that their income was too high. We didn't do that and we didn't do a backdoor Roth. In their case, we maxed the 401 to make sure that we got the maximum there all the way, every single year without exception. And that's where we started to get some of the tax-deferred things. Then move number 5 in their case, and it doesn't apply to everyone. This one, most people will walk past if they have the ability to do it. They don't realize it is an HSA account, a health savings account.. And this is a triple tax advantage account that most people don't think about, but you put money into it and you get a tax deduction and you can invest the money inside the account. And if you take money out of the account and use it for qualified medical expenses, you never pay tax on it. But here's what we did with them. We had them leave the money inside the account. We had it invested just like they do in their 401 and in their brokerage accounts. And then as medical expenses came in, they saved the receipts in a digital file. And they paid for the medical expenses out of pocket and allowed the HSA to grow because there's nothing in the tax code that says you have to pay them in the year that you incurred the medical expenses. You can take them 10 years down the road. And now that HSA account grows tax-free. And when we use it for qualified medical expenses down the road, we take it out tax-free and we still have a growing account so that all that number is tied together to try and get 20 to 25% of their income directed and put away towards their future. Now, in order to do that, some people say, well, do you put them on a budget? Yeah, budget is old school. I put them on a cash resource plan. In other words, we gave every single dollar a job description, which is what the Wealth Priority Ladder does. It says, here's what this dollar does. It's meant for the mortgage, it's meant for the vacation, it's meant for the car, it's meant for the food. And we give that job description to each dollar before that dollars ever earned. So we know what the dollars are meant to do and we know what they're meant to accomplish. And now we can measure against it. So 8 years later, Denny, Jane, they started with $225,000 and 8 years later they literally crossed the $2 million mark. They became multimillionaires in 8 years by following a process. The student loan was gone. The college was being funded for both kids. They had a contingency built for their aging parents, and they didn't put their life on hold to get there. The vacations, the family experiences, the joy points that were built in the plan from the start. But that's what the whole plan was always for. See, the last time I sat with Denny, he said something to me that stayed with me. Had we not had that first conversation, he said, where you helped us see the picture that showed us the path, we would have kept making decisions based on whatever felt urgent that week. We didn't understand how investments grow and how it really works. We would have kept spinning. Then he said, now I wake up knowing that if something happens to me, Jane and the kids will be fine. That's a life outcome, not just a financial one. And it started with two people at 40 who thought they were behind. So let me ask you something. If you're sitting here thinking that the window's closed for you, what's your alternative? To not even try? I get it. You might be beyond 40. You might not even be 40. But wherever you are, you don't know what your income is going to do over the next 5 years. You don't know what the market holds over the next 2 decades. You don't know what could shift for you in ways that you can't predict right now. What you do know is that if you're not on the field, you can't win the game. So we got to get on the field. The 40s aren't the consolation prize for people who didn't start in their 20s. For most people, for real people that I've sat with over 3 decades of this work, this is the decade where the engine and the fuel finally arrive at the same place at the same time and work together. The window is open and the math still works. And all that's left is whether you're going to treat this decade with the way it deserves to be treated or not. And if you're beyond 40, then wherever you are, we need to get started. And it's a choice because the alternative, I'm going to tell you, it sucks. We don't want that. And realize this, it's time to build the machine from wherever you are with whatever you have, to not demonize the past decisions, the past choices, and say, I wish I would have started earlier. Well, if you didn't, you didn't. If you made bad choices, you made bad choices. But those are in the past. Let's follow the process. Let's follow the path and let's get you there. Because earning more doesn't make you free. A money machine does. Let me know if this landed for you today. Share it with someone in their 40s who needs to hear it. Subscribe if you haven't, because I got new stuff coming your way and all kinds of things. And at the same time, if you have questions or things that come up, ping me, send me a DM, drop me a comment. I love having conversations and I actually read every single one of them. All right. I hope that this meant something to you and I hope that you'll take this for what it is, whether you're in your 20s, 30s, 40s, 50s, or 60s, that you get in the game because the only way to win is to be on the field. And until I get a chance to see you in the next one or on your path to financial freedom your way, always, always strive to live a life that outlives you. See you in the next one. Cheers for now.