Smart Investment Moves to Make Before You Turn 40

Turning 40 can feel like a big milestone. It’s often a time of reflection, on your career, your achievements, and yes, your finances. If you’ve ever thought, “Am I where I want to be financially?” you’re not alone. The good news? There’s still time to build a strong financial foundation and set yourself up for success. With some smart, intentional investment moves, you can make the next few decades the most secure and rewarding of your life. Let’s dive into some practical strategies that are as approachable as they are impactful.

Smart investment moves to make before you turn 40

Start with the Basics: Building a Financial Safety Net

Before you think about stocks, real estate, or mutual funds, it’s important to get the basics sorted out. A strong financial foundation is like a safety net, it gives you peace of mind and protects you from unexpected surprises.

First up: an emergency fund. If you don’t already have one, now’s the time to start. Ideally, you should aim to save three to six months’ worth of living expenses. Think of it as your financial cushion. Life happens, a sudden car repair, a medical bill, or even job loss, and having this fund means you won’t have to scramble or rely on credit cards.

Speaking of credit cards, high-interest debt is a sneaky enemy of financial growth. If you’re carrying balances on your cards, make paying them off a priority. Start with the highest-interest ones and work your way down. Imagine the relief of being debt-free and redirecting those monthly payments toward savings or investments instead. This article on credit score monitoring can help you prioritize and improve your credit health.

Finally, a budget is your best friend. Yes, the word budget can feel restrictive, but it’s really about knowing where your money goes. Tracking your spending helps you prioritize what matters, whether that’s saving for retirement or splurging on a well-deserved vacation.

Take Advantage of Retirement Accounts

You might think retirement is ages away, but here’s the thing: the earlier you start saving, the more time your money has to grow. And thanks to compound interest, those early contributions can snowball into a much bigger sum over time. It’s like planting a tree; the sooner you plant it, the more shade it’ll provide later.

If your employer offers a 401(k) plan, take full advantage, especially if there’s a company match. That’s free money! Not maxing out your match is like leaving cash on the table. If you don’t have access to a 401(k), consider opening an IRA (Individual Retirement Account). 

If you’re eligible, a Roth IRA account is a fantastic option because it offers tax-free growth on your investments and allows tax-free withdrawals in retirement, which is a huge advantage for anyone focused on long-term savings. Not sure how much to contribute? Start small and increase your contributions gradually. Even an extra 1% a year can make a big difference. Your future self will thank you.

Diversify Like a Pro

You’ve probably heard the saying, “Don’t put all your eggs in one basket.” It’s true for investing, too. A well-diversified portfolio spreads your money across different types of assets, like stocks, bonds, and ETFs, reducing your risk and increasing your chances of steady growth.

If you’re new to investing, don’t feel overwhelmed. You don’t need to be a Wall Street expert to build a solid portfolio. Start with a mix of index funds or ETFs, which give you exposure to a wide range of companies without the stress of picking individual stocks. Over time, you can explore other options like real estate or REITs (Real Estate Investment Trusts).

And here’s a pro tip: revisit your investments every year. Life changes, and so should your portfolio. Adjust your asset allocation as you get closer to retirement or as your financial goals evolve.

Invest in Yourself

Here’s something people often overlook: one of the best investments you can make is in yourself. Why? Because improving your skills and knowledge can open doors to higher earning potential and more career opportunities.

Consider taking a course, earning a certification, or even going back to school if it aligns with your career goals. The money you spend on education now could pay off tenfold in the future. And don’t forget about financial literacy. Understanding concepts like compound interest, tax strategies, and risk management can help you make smarter decisions with your money.

If you’re not sure where to start, there are countless free or affordable resources out there, books, podcasts, and online courses, that can help you level up your financial know-how.

Plan for Life’s Big Moments

Life is full of milestones, and many of them come with hefty price tags. Whether it’s buying a house, having kids, or starting your own business, planning ahead is key.

Let’s talk about homeownership. If buying a house is on your radar, start saving for a down payment now. The earlier you begin, the easier it will be to hit your target. And don’t forget about the hidden costs, like property taxes, maintenance, and insurance, that come with owning a home.

If you’re thinking about starting a family, factor in expenses like childcare, education, and medical bills. It’s not just about saving; it’s also about having the right insurance in place. Health insurance, life insurance, and disability coverage can protect you and your loved ones from financial stress when the unexpected happens.

Make It a Habit to Review and Adjust

Here’s a question: When was the last time you checked in on your financial goals? If it’s been a while, you’re not alone. Life gets busy, and it’s easy to put these things on autopilot. But regular check-ins are essential to staying on track.

Set aside time once a year to review your budget, savings, and investments. Are you on track to meet your goals? Is there room to save a little more or invest differently? Small adjustments can make a big difference over time.

And don’t forget to celebrate your wins! Whether it’s paying off a credit card, reaching a savings milestone, or seeing your investments grow, acknowledging your progress can keep you motivated.

Think About Tax-Efficient Investments

No one loves paying taxes, but the good news is, there are ways to minimize what you owe and keep more of your hard-earned money. First of all, take advantage of tax-advantaged accounts such as Roth IRAs, conventional  IRAs, and Health Savings Accounts. These accounts not only allow you to save for specific purposes,  but they also come with considerable tax benefits, both in the present and future, through tax-efficient investing, which is the ability to reduce your tax bill now and in the future.​ Traditional IRA donations, for example, are tax-deductible, whereas Roth IRA withdrawals are tax-free in retirement.

Smart investment moves to make before you turn 40

Another strategy? Look into municipal bonds or other tax-exempt investments if they align with your goals. And when you sell investments, be mindful of capital gains taxes. Holding onto investments for more than a year can often result in lower tax rates.

The Bottom Line

Turning 40 isn’t a deadline; it’s an opportunity. It’s a chance to take control of your financial future and set yourself up for decades of stability and growth. Whether you’re building an emergency fund, investing in retirement accounts, or diversifying your portfolio, every step you take now brings you closer to your goals.

So, where do you start? Pick one thing, just one, from this list and focus on it this week. Maybe it’s setting up a budget or increasing your 401(k) contributions. The key is to start. Because when it comes to investing, the best time to begin was yesterday. The second-best time? Right now.

What’s your first move going to be?

Updated: February 3, 2025 by Michael Kahn

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