3 Basics That Must Be Part of Your Financial Foundation by 40

1. Invest in more than your 401k

Your employer 401k probably has a match, and we all love a 100% return. The thing many don’t realize is the 401k plan was not meant to fund a full comfortable retirement - and leaves you with a huge tax risk in retirement that could significantly reduce your spendable income if tax rates increase. 

2. Have a fully funded emergency fund, but it doesn’t have to be in savings.

If you’re investing in the right accounts this fund can be grown over time and accessed easily if you need it. A true emergency fund is money you never touch - adding an extra step will guarantee you only use it for an emergency. If you never use it for an emergency then it becomes retirement income!

3. Have a plan to pay off any existing debts

Not all debt needs to be paid off prior to investing. Sometimes it’s actually better to hold a debt at the minimum monthly payment for a longer duration of time and invest the extra, a fixed mortgage is a good example where this is the case. Any existing debts you hold by 40 should have a pay off plan in place.

Money invested in your 40’s is worth ¼ what you invest in 20’s after adding compound interest. If you’re investing early you’ll be on your way to becoming financially free and enjoying a comfortable retirement.

Related: 3 Ways You Can Reduce Your Spending Without a Budget