Investor Nears 40, Sets Ambitious Financial Goals
As the milestone age of 40 approaches, a seasoned content creator and investor is sharing a personal roadmap of financial goals designed to build wealth and security. With just a few years left before hitting the big 4-0, the focus is on maximizing tax-advantaged accounts, avoiding lifestyle creep, and preparing for future needs, including family and health.
Maxing Out Roth IRA for Tax-Free Growth
A primary objective is to continue maxing out a Roth IRA annually. Five years ago, this account held about $29,800, primarily in four Exchange Traded Funds (ETFs).
These included broad market funds like Vanguard Total World Bond ETF (BNDW), Vanguard FTSE Developed Markets ETF (VEU), and US stock ETFs such as Vanguard S&P 500 ETF (VO) and Vanguard Total Stock Market ETF (VTI). The strategy aimed to mimic a three-fund portfolio, balancing US stocks, international stocks, and bonds.
However, the investor has since shifted strategy within the Roth IRA. Recognizing that all gains in a Roth IRA are tax-free and typically held until retirement (age 59 and a half), the focus moved to individual stocks with higher growth potential. This approach accepts more risk for potentially greater rewards, a strategy made more viable by the long-term, tax-free nature of the account.
Since 2020, the Roth IRA has been consistently maxed out. It has grown to nearly $100,000, fluctuating between $98,000 and $102,000. The portfolio now consists of five individual stocks: Tesla, Microsoft, Robin Hood, Nvidia, and Meta.
For those earning above the Roth IRA income limits (over $168,000 for individuals or $252,000 for couples in 2026), the backdoor Roth IRA method offers a way to contribute. This involves contributing to a traditional IRA and then converting it to a Roth IRA.
Avoiding Lifestyle Inflation
Another key goal is to avoid lifestyle inflation, a common trap where spending increases in line with income. The investor has tracked expenses since 2014 and notes that while spending has risen slightly due to inflation, there hasn’t been a significant increase in discretionary purchases like luxury clothing or designer goods. This discipline aligns with the principle from ‘The Millionaire Next Door,’ which suggests that significant wealth is often built by keeping lifestyles modest even as income grows.
The focus remains on widening the gap between income earned and money spent, allowing more capital to be invested. This contrasts with some high-earning friends who spend their entire incomes. While acknowledging a potential trade-off in immediate enjoyment, the investor finds satisfaction in reinvesting funds into assets like the S&P 500 and considering major purchases such as a house.
Boosting Emergency Fund to 12 Months
The emergency fund is being expanded from a previous target of six months of expenses to a new goal of 12 months. This expansion is driven by a desire for greater mental freedom and flexibility. Having a full year’s worth of expenses saved provides a substantial cushion, allowing for significant career or personal changes without immediate financial pressure.
This larger fund is also a proactive measure against anticipated future expenses, such as homeownership or supporting a family. The emergency fund is kept in a high-yield savings account, currently offering rates between 3% and 3.5%. While a 3-to-6 month emergency fund is generally considered sufficient, the personal goal is set higher for increased security.
Establishing an Estate Plan
A crucial, though often overlooked, milestone is establishing a comprehensive estate plan. The recent passing of the investor’s father highlighted the importance of clear documentation and instructions for executors. Even with a plan in place, a lack of specificity in areas like property distribution created complications during the estate settlement process.
Key components of an estate plan include documents like a living will and healthcare power of attorney, which outline personal preferences in case of incapacitation. Consulting a trust attorney is recommended to ensure all details are thoroughly addressed, making the process smoother for loved ones responsible for managing the estate.
Adding a New Income Stream
Diversifying income is a significant goal, especially since approximately 95% of current earnings come from the content creation business (YouTube, Instagram, TikTok, Substack). While dividends from investments provide some income, they are not yet sufficient for financial independence. The plan is to add at least one more income source, potentially through real estate investment, such as purchasing a rental property, or by starting a new side business.
Even an additional $500 to $1,000 per month from a new stream can be reinvested or used to cover expenses, further strengthening financial resilience. This move aims to mitigate the risk associated with relying heavily on a single platform or business model.
Supporting Family and Filial Piety
In line with cultural values, particularly filial piety common in Chinese culture, taking care of aging parents is a priority. This involves ensuring the well-being of a mother in her late 70s, which could mean investing in a condo for her or providing regular financial support. Having lived at home for an extended period, there’s a strong sense of obligation to reciprocate the care received during childhood.
The decision to live in the Bay Area was partly influenced by proximity to family, prioritizing connection over opportunities in other cities. This commitment extends to ensuring parents are well-supported as they age, reflecting a deep-seated value of family care.
Considering Homeownership
The possibility of buying a house is on the horizon, though the decision is not yet firm, especially given the high cost of living and renting in the Bay Area. While financially, renting and investing the difference might be more advantageous currently (especially with mortgage rates around 6.5%), the desire for homeownership stems from psychological benefits. These include providing a stable home for the investor’s mother and the ability to customize a living space.
Owning a home offers predictable monthly payments through a mortgage and the potential for the investor to eventually live there with their own family. The current leaning is towards buying, but the investor remains open to input from others.
Investing in Health for Longevity
A non-traditional but crucial money milestone is investing in personal health. Good health is seen as fundamental to living longer and, consequently, earning more over a lifetime. This involves a commitment to regular medical and dental check-ups, a balanced diet, and consistent exercise, especially as metabolism slows and physical discomforts increase in the mid-to-late 30s.
Being proactive about health is emphasized as a better approach than reacting to illness. This focus on well-being is viewed as an indirect but vital financial strategy, ensuring the ability to enjoy and benefit from accumulated wealth for many years.
Vision for the 40s and Beyond
Finally, the last milestone before turning 40 is to develop a clear vision for the subsequent decade. This involves answering fundamental questions about lifestyle, career satisfaction, and location. The aim is not to have a perfect plan, but to establish a ‘northstar’ or guiding principle for the next 10-15 years.
This forward-looking perspective will inform financial decisions, guiding how money is earned and used to achieve future aspirations. The investor continues to find fulfillment in content creation and plans to offer a more generalized version of these financial milestones for a broader audience.
Source: Money Milestones I Want to Accomplish Before 40 (YouTube)
