As you enter your mid-30’s and 40’s, you gain more perspective on your finances. It becomes apparent that strategic investing and saving is the key to wealth building. But keeping this in mind, you need a plan.
Wealth Management Wisdom for Middle Life
When you’re 25, single, and living with your friends in a loft downtown, it’s easy to get swept up in the mentality that your paycheck is for spending now. Whatever doesn’t go to the staples like rent, utilities, insurance, and groceries is going to be spent on bar tabs, concert tickets, shopping, and hanging with friends. Spend now and save later is the unofficial mantra.
While not exactly a smart strategy, this approach is understandable when you’re in your early-to-mid-20’s. But once you reach your 30’s and 40’s, you don’t have this flexibility. The passing of time also means you have to look towards the future and face the reality that you need to be smarter with your money.
This realization also tends to coincide with an escalation in earning power. At this point in your career, you’ve hopefully climbed some rungs on the proverbial ladder and increased your income.
Having money but not knowing how to properly manage it is a dangerous spot to be in. However, you don’t have to be clueless forever. The sooner you leave your irresponsible youth behind and get serious about wealth management, the brighter the future will be for you and your family.
Whether you’re totally new to the idea of wealth management, or you’ve received mixed information, here are some basic suggestions designed specifically for mid-life:
Get Over Your Fear of Stocks
Many people who personally experienced the Great Recession of 2007-2009, or saw friends and loved ones lose a bunch of money during the market crash, are very averse to investing in the stock market. They see it as a huge risk and would rather pile up their money in cash and bonds. Yet, while they think they’re avoiding risk, they’re actually inviting it.
Keeping your money in cash means that, over time, you’re actually losing money to inflation. Bonds, which are often viewed as a safe haven, actually average negative real returns roughly 50 percent of the time during any 20-year period (and 40 percent of the time over any 30-year period). The stock market, on the other hand, has never lost money in a 20-year period. Even if your grandparents had invested all of their money into the stock market the night before the crash of 1929 – the single worst time in history to invest – they would have earned a positive return by 1948.
Considering that you have at least 20 years until retirement, there’s less risk in stock market investing than in keeping your money in cash and bonds. Take the plunge and enjoy the benefits of compound interest and market appreciation.
Stop Managing Your Own Investments
The internet has certainly opened up doors for doing things on your own, but financial investing isn’t somewhere to take a DIY approach. Even with all of the “robo-advisors” and sophisticated algorithm-based software on the market, you can’t beat having real people on your side.
As Coral Gables Trust explains, “We know that wealth management is a living, breathing process. We work as a team with the client’s accountant, attorney, and insurance broker to present a holistic approach — something a robo-advisor can’t do.”
When managing wealth, you need to be directly involved, but you want to surround yourself with experts.
Look for Hands-Free Wealth Building Opportunities
For the most part, the days of retiring at 60 and spending the next 25 or 30 years living off a pension and nest egg are gone. Most people in their 30’s and 40’s are going to need some sort of additional income in retirement. Now’s the time to begin looking for hands-free wealth building opportunities that are largely passive.
Take Wealth Building Seriously
Whether you’re worth $20,000 or $2 million is irrelevant. What matters is that you’re directing your energy towards wealth building, not consumption, at this point in your life. Your 30’s and 40’s are critical decades in your life, and you won’t be able to enjoy a healthy and wealthy tomorrow if you don’t make calculated steps today.
Take wealth building seriously and your family will reap the rewards for years to come.
Author: Oliver Curtis
Hi there. I’m Oliver. I’m just a young boy from the outskirts of… Okay, that’s a lie, I’m not a young boy anymore, although I certainly feel that way at heart.