6 Money Traps to Avoid in Your 40s | Phil Town

hi guys I'm Phil town from rule 1 investing today I'm gonna run through some money traps that you need to avoid in your 40s if you want to make it to retirement [Music] so by the time you reached your 40s you're probably earning more you're saving more maybe you're certainly traveling a little more often maybe and maybe you're feeling more comfortable I don't know you know man but be careful it really is important in your 40s you still face the potential to have your cost of living creep up to a level that could really create problems for you if it isn't already so let's go into the six common money traps to avoid in your 40s so you can set yourself up for financial freedom and you know someday be able to stop working if you want to if you're in your 40s you want to learn more about financial freedom okay so join me on my next investing webinar where you can learn how to invest the same way as the best investors in the world I can't think of a better way to get the financial freedom so just click on the link on the screen to sign right up alright the first money trap probably won't surprise you much its overspending on your kids I mean man this is such a trap we all love our kids and in our quest to give them everything they've ever wanted you know we can kind of put ourselves in a major financial disadvantage and that's not just right now but also out in the future it's really easy to get caught up and buying them that new car right the latest iPhone like taking them along for a luxury family vacation we so get wrapped up in what you know how we're impacting our children and we should but if you can't afford these things and you're dipping into your potential retirement savings you're gonna have problems in the long term and at the end of the day that's not going to do them any good either there's also the cost of their college education to think about you don't want to spend money from your time and savings to help pay for their degree in you know Oh comparative religion or something I'm saying that because my daughter danielle has two degrees in comparative religion and when she went out to find jobs comparing religions there weren't so many jobs so telling you if you end up paying for a degree particularly one that doesn't get them into a profession you can end up being a greater burden on your kids when you can't afford to live on your own just because you had the wrong priorities in your 40s thought you were putting them ahead and maybe you weren't by the way the cost of higher education is crazy and it's only gonna rise and in most cases your kid will benefit much more from a college degree then they will from a brand new car so prioritize that but come on there's a lot of ways to get a college degree I personally flunked out of two community colleges so I can tell you that they're very hard and they they make you work into homework and if you don't do it you know you're wasting your time there so I'm gonna suggest that's a great way to go that's two years in California it's almost free and many states it's a really great way to go for the first two years and then okay great when they know what they're doing then go and start paying better money all right the second big money trap people followed you is thinking that the government or pension payouts are gonna get them safely through retirement pensions are not as common as they used to be right these are called defined benefit plans they they tell you what you're gonna get and they promise you that you're gonna get it not as common as they used to be because a lot of companies stop taking that responsibility so if you're lucky enough to have one then chances are you can't rely on it alone to get you through retirement a lot of reasons why not one of which is that company may not be around to pay it so you really got to pay attention here plus there's no way to beat around the bush here Social Security benefits and not the same as they used to be guys very likely you won't be able to live in the same type of lifestyle in retirement that you're living now if you're just gonna rely solely on Social Security benefits all right the third money trap is really really simple most people in their 40s are just not adding enough to their investment portfolios your 40s are when you should be really stacking up a decent nest egg and making sure that you're getting good consistent returns from compounding interest now for most people who are not going to learn how to invest what that means is investing long-term and stocks through an index of some sort now you keep riding that momentum by adding regularly to these index investments ultimately if you do that in your 40s and you keep doing it for 25 years you keep come on just go out there and put the money into an index you're probably going to come out pretty good all right now the catch is if you want more things for your children and you want to still have a great retirement the only way for most of us to be able to do both of those things together since there's only a limited amount of money to put away is to raise the rate of return and for me what I did was I went out and I found good companies that I added to a watch list and said okay I want to buy these like eight or ten companies and here's what I want to pay for them and when an opportunity came along that said I can buy these at a margin of safety price they went on sale in other words I could buy them so this is a really big deal here if you're thinking how do I handle the things I need for my kids how do I handle a lifestyle I want to have in my 40s and still have a great retirement investing on your own and individual companies is the best way that I know to get there now the fourth big money trap is buying bonds or CDs certificates of deposit you might think that as you get a little closer to retirement bonds and CDs are a much safer choice for your money and everybody's going to tell you that that's in the financial services industry the problem is that right now at an average interest rate of under 3% these bonds are barely going to cover the cost of inflation every year right in other words your money's not growing at all in actual purchasing power so instead of continuing to add to your investments and take advantage of that compounding in the stock market of really good companies that rise with inflation you're essentially stagnating your potential for growth 40 is not the time to quote play it safe with bonds or CDs okay now the fifth trap this one is a doozy not taking care of your health not taking care of your health is one of the worst things you can do for finances remember caring for your money isn't the only important thing for you to focus on your 40s you guys you also need to take care of yourself right this thing's got it last a bunch of years so you want the last another 60 years you got to stay fit you got to go to the doctor you got to make sure you're staying up on things you got to make wellness a priority you got to look at what you're eating look at what you're drinking this is something that will pay dividends long long into retirement save you a lot of money save you a lot of pain so think of all the money you can save by diverting those funds into investments rather than giving them to hospitals and high insurance deductibles so prevention is so much less expensive than treatment all right the last big money trap for those in their 40s is the panic that drives them to take money out of their investments when the market goes down okay now there's a common fear that when you're getting closer to retirement you won't have as much time to recoup losses if the market goes down like it did in 2008 and 9 by 50% because it has to go up a hundred percent for you to break even but you've got to avoid the knee-jerk reaction of trying to yank your money out of specific time and getting yourself stuck in some major money trap by stopping compounding returns you could be making for the next 20 years now here's the thing I'm gonna confess to you that I am gonna take my money out of the market but I know what I'm doing I know the signals that the markets giving me when it's time to move to cash for most people who are not gonna learn to invest the worst thing they can do is try to guess what's gonna go on in the stock market the worst thing they can do now for those of you who are really learning to invest okay another story and we'll cover that another time about yeah when do you exit when is it time to protect that nest egg from going down 50% cuz think about it if the nest egg goes down 50% has to go up a hundred percent break even what if you were out and you have your nest egg and you can invest it down here and it doubles then you've got twice as much nest egg as you had instead of just getting your money back there's a huge advantage to knowing something about doing this but the main main criteria is you've got to know how to invest you can't just do it casually so if you're in your 40s there's still plenty of time to grow your wealth before you reach retirement age to learn how to invest I think is the best way to do it if you're following rule one strategy of investing then you've probably already started putting great companies on your watch list and know what price to biomat so that when they're on sale you can go in and get them and that's gonna be the best way in the long term the rates of return that the best investors in the world get dwarfed the market I mean smash bond returns smash the stock market returns so if you want to get that done then just start learning how to invest with rule one number one strategy and get started today just watch my webinar down here by clicking on the link below that'll get you going now I'd love to hear from you guys have you ever fallen into any of these money traps leave a comment below with your answer and I'll be sure to follow up with you and thanks for watching you guys now go play if you enjoyed this video and you feel it was valuable and teaching you more about money traps in your 40s then please hit the like button and share this video with your friends and if you want more investing content subscribe to my channel and don't forget to click the button on the screen for a free gift thanks again for watching

Channel: Phil Town's Rule #1 Investing

Views: 168,544

Rating: 4.8168812 out of 5

Keywords: money traps to avoid, money traps, financial mistakes to avoid, phil town, rule one investing, money mistakes to avoid, rule #1, learn to invest, investing 101, how to save money, saving money, 40s, retirement planning, how to invest, money tips, money pits, save money, financial advice, money mistakes in your 20s, investing money, money mistakes, financial mistakes, bad with money, cost of living, money management, investing, biggest money mistakes, wealth management

Id: BH01ABIopbM

Length: 10min 45sec (645 seconds)

Published: Thu Apr 25 2019