8 Ways To Build Wealth in Your 20s, 30s and 40s

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Building wealth looks different for everyone. And it looks different at each stage of life. The moves you should be making in your 20s won’t necessarily be the best moves to make in your 40s. 

These moves will also probably not turn you rich overnight. The choices you make to build wealth now will pay off over time as you get older. But it’s never too early — or too late — to start. Here are some of the best ways to build wealth in your 20s, 30s and 40s.

In Your 20s

Build an Emergency Fund

Think of your emergency fund like a financial safety net. Start small if you need to. Even $500 saved can prevent a minor crisis from becoming a major financial setback. Aim to gradually build this to three to six months of living expenses. Keep this money in a high-yield savings account where it’s accessible but separate from your everyday spending.

“Establish and maintain a liquidity reserve to address unexpected financial challenges,” said Thomas Brock, CFA and contributor to RetireGuide.com. “Make sure to house your liquidity reserve within a high-yield savings account or a money market mutual fund. The most competitive vehicles in this space are offering yields in excess of 4.50%.”

Avoid Debt

Credit card debt can be a wealth-killer. Those interest rates are brutal. If you have any existing debt, make a plan to pay it off as quickly as you can. Always pay more than the minimum payment each month. Every extra dollar helps reduce the total amount you’ll pay over time.

“Avoid incurring any problematic, high-rate debt,” advised Brock. “This includes payday loans, credit card obligations and short-term personal loans. The interest rates on these arrangements are exorbitant and will prevent you from getting ahead financially.”

Use Your Employer-Sponsored Retirement Plans

Free money exists, and it’s called an employer match. If your company offers a 401(k) with matching contributions, contribute at least enough to get the full match. This is literally free money added to your retirement savings, and there’s no reason you should be leaving it on the table.

“Strive to maximize your contributions,” Brock said. “At a minimum, be sure to contribute enough to fully capitalize on any match incentives offered by your employer. When it comes to investing, focus on long-term growth, which means domestic and international stocks. The best way to get exposure to these assets is via diversified, low-cost fund-style vehicles, such as index funds and exchange-traded funds (ETFs).”

In Your 30s

Max Out Your Retirement Contributions

In your 30s, your earning potential is likely increasing. Take advantage of that by increasing your retirement contributions, too; and max out your 401(k) if possible.

“In your 30s, chances are you have significantly more earnings power than you did in your 20s,” Brock said. “Now is the time to maximize your annual contributions to any employer-sponsored retirement plans at your disposal. “

Open an Individual Retirement Account

“If you have spillover savings, fund an individual retirement account each year,” Brock suggested.

An IRA offers additional tax advantages. Whether you choose a traditional or Roth IRA depends on your tax situation. A traditional IRA can lower your tax bill now, while a Roth IRA gives you tax-free growth and withdrawals in the future. Decide which makes more sense for you.

Build a Taxable Brokerage Account

Do you still have extra money after you maxed out your retirement accounts? Invest it. Unlike retirement accounts, a taxable brokerage account lets you withdraw money at any time without penalties. 

“If your cash flow’s especially strong, you should fund a taxable brokerage account with all cash flows in excess of your annual tax-advantaged contributions,” Brock advised.

In Your 40s

Earn Additional Income 

Relying on just one source of income can sometimes be risky. So find ways to diversify your income. This might mean freelancing, consulting or starting a side business.

“In your 40s, if you have capacity, you could leverage your experience to generate additional streams of income,” Brock said.

Join the Gig Economy

Platforms like Upwork, Fiverr and others make it easier than ever to earn extra money with the skills you have. Maybe you’re great at graphic design, writing or marketing. Even a few hundred extra dollars each month will help you build wealth over time.

“According to a comprehensive report prepared by TeamStage, 36% of workers in the U.S. are in the gig economy,” Brock said. “This equates to 57.3 million people, 15.8 million of whom identify as full-time gig workers.”