Most articles about wealth building after 50 have tips with a minimal impact on true financial independence. If you’re over 50 and far short of reaching your big retirement number, it’s time to take some serious steps beyond investing pocket change and cutting out lattes. While these aren’t bad ideas, they ’re not going to build wealth. In this post, I’ll address and even debunk some of the more common “solutions” I see online for wealth building later in life. Then I’ll share some strategies that worked for us from our 15 years of implementing alternative wealth building strategies starting in my mid 40’s after seeing stocks and bonds may not get us to financial independence.
My Rant on Common Tips for Wealth Building After 50First, let’s look at some of the more common suggestions to build wealth later in life. I won’t be too harsh; while many of them don’t really build wealth, they contain some good financial tactics.
Track Your SpendingWhile tracking your spending is an important task it alone is not going to build wealth . What tracking your spending will do is show you where you are choosing (subconsciously or not) to use your money. And by tracking your spending, you lay the foundation for bigger decisions, such as whether to downsize, take advantage of potential tax saving strategies, or change your lifestyle. Plus, almost everyone finds expenses which they can easily cut when tracking spending. So, this is an important financial task, but it’s not going to deliver financial freedom. Do you have to do it to have track your spending to maintain financial freedom? Maybe, otherwise getting and spending are a never ending cycle. Having clarified that tracking spending is important but not a wealth builder, there are a number of apps online that help with tracking spending. I still like to quickly download and group expenses onto a spreadsheet, then total them, but then I’m a nerd. When I grouped out grocery spending, for example, I saw that we were wasting a lot of money every month just on groceries, simply from lack of organization and planning. (Lack of organization and planning, I have discovered recently, is at the root of almost every problem I create for myself, financial and otherwise.) Likewise, from tracking our spending I was easily able to see the real benefit of downsizing. (After seeing the real cost to move, and the savings, we decided to stay put for now although I do keep bugging Larry every time I see a potential new home online.) And we find that every single month there is at least one expense mistake or easy reduction found just by looking carefully at our spending. In our small businesses, we usually find several unneeded expenses, especially since several people are involved in setting up our various business accounts. Much like overlooked high investing fees, companies can easily make money off of busy consumers who fail to track their spending. So, track your spending and phone or email companies right then to address errors. Will this make you wealthy? No, but it will help you save more, and that can lead to accumulating more wealth.
Invest Spare ChangeAnother suggestion I’ve seen for wealth building after 50 is to invest your spare change or found pocket money. Seriously? This may work when you’re a teen or in your twenties but by the time you’re over 50 you’ll need to do more than invest spare change to reach that magical financial independence number.
Stop Buying Your Favorite CoffeeAnd once again, the “The Latte Factor” surfaces as a way to build wealth. This quip (I can’t call it a strategy, really, other than a smart branding strategy for the author) became famous by author David Bach. Bach explained that your latte money would grow to almost $95,000 in 40 years. But wait. If you’re over 50, does this really make sense as a way to build wealth if it takes 40 years? Knock $500 or more off my expenses and you’ve got my attention. Knock $20 a month off my expenses for a simple pleasure and I’ll keep my beverage.
Read More to Build WealthAnother interesting wealth building solution for the over 50 crowd that I saw is to read more. This hints to me that there is truly a lack of information on how people over 50 can reach financial independence since the staple and usually promoted long term buy and hold stock strategy gets less effective as you age. Reading doesn’t help you build wealth directly, rather, the information you gain from reading could help you build wealth. But reading information from a biased or incorrect source can actually hurt your wealth building efforts. In fact, some of my worse investing decisions came as a result of listening to financial gurus, both advisors and outside the mainstream financial industry, and taking action on their advice.
Lack of Wealth Building for Later in LifeIn fact, I find very little information online about what to do if you’re building wealth after 50 beyond possibly delaying social security, buying insurance products (very popular) and seriously cutting back on your spending. This lack of dynamic and firsthand information is partly what drove me to create this blog based on our personal outside of the box wealth building after 50 strategies, not cutting out coffees or investing pocket change. Almost all the investment advice is geared toward simple very long term investing, which can work well when you’re young. It’s very easy to sell long term buy and hold wealth compounding, but by the time you’re 57, let’s face it, you need a different strategy if you want to retire at 65. This is especially true if the stock market has risen for many years during an economic expansion. This is because both the economy and stocks move in cycles, usually related to each other. There has to be a reversion to the mean, which means that stock returns have to cycle back below to average. When they do this, later in life investors, look out. If stocks drop for an extended period just before or after retirement, your retirement plan can be ruined. Click here to read my post How to Know if the Stock Market Will Go Up or Down. Take a look at the data below which was complied at Market Watch in early 2018, so the 201o’s would be even higher than the already astounding 13.2% shown. But look what happened in the first decade of the 2000’s. The total return was a negative 1% for the entire decade. Yikes! This means if you invested in early 2000 and bought and held for 10 years you would have a negative return on your stocks in the S&P 500. This is what caught so many baby boomers over 40 and 50 off guard. While you may be able to count on another decade of positive returns after the 2010’s, it’s unlikely there will be more than one more positive decade next based on history. For people planning to use a traditional retirement withdrawal strategy (selling some stocks each year to pay for their lifestyle), this could mean not being able to rely on capital gains for several years. It could get tricky. Click here to read my related post how Will a Stock Market Crash Affect You? Retirees may be able to make it, but they may not. And what about the millions of people over 50 who have no where near enough money saved to retire? Click here to read my post Retirement Withdrawal Strategies – Do They Still Work? Now that I’ve ranted a bit about investing pocket change, it’s time to get creative. That’s exactly what my tips below are.
Wealth Building Strategies for Later in Life with Big ImpactHere are some tips for building wealth after 50 that can have a significant impact on reaching financial independence.
Create Online Assets with Marketable ValueThis is the wealth building opportunity that I am most excited about right now for people over 50. That’s because you know a lot by age 50 and beyond. Then there’s the unbelievable math on this opportunity. You can easily build an online property for less than $100. Within six months, you can generate $500 a month (or more) net income a month from it. This means that you have created a cash flow asset that pays for itself within a year. This strategy works best for people who know a lot about a topic that they would like to help others master and like to write or make videos. If you don’t have or want to do any of that, no worries. You can outsource the entire project for less than $3,000. Or you can buy an existing online asset. Click here to read my post Is It Too Late to Start an Online Business.
Change Your MindsetThis late life wealth building tip is perfect after suggesting that you consider creating an online asset. What are you thinking at this moment? Are you thinking “She’s crazy”, or “Sure, you can do that but I can’t.” Or maybe you’re thinking “I could never do that. I’m not __________.” Whatever it is, neither were we. We weren’t tech savvy, young or brilliant when we began online businesses over 10 years ago, but we’ve learned a lot from it and made some serious money. [bctt tweet=”Creating or buying cash flowing assets that increase in value build wealth #retire #wealth” username=”retirecertain1″]. If no assets are cheap Another tip below , you can now easily build assets, which become online global properties within a few months. Is that insane? And when and how else has an opportunity like this ever existed? This works. We are doing it and have done so for years with online businesses, along with real estate, stocks and alternative investments. But our favorite strategy has been online businesses for many reasons that expand far beyond money. Click here to read my post Businesses to Start Later in Life – 115 Cool Ideas And changing your mindset isn’t just about creating online businesses. This clearly isn’t for everyone, but… ♦ Wealth Building Tip – Implementing alternative wealth building strategies takes a different way of thinking than the way that got you where you are right now.
Consider downsizingRemember the 1980’s and 1990’s? Bigger was better, for everything. Does it make sense to have the house you are currently in? Do you use the space, or is it a burden to keep clean and pay taxes on? Downsizing can significantly lower monthly spending and deliver a nice fat capital gain. If this interests you, click here to read my article Is Downsizing Right for Me?
Own Your Highest SkillAs children most of us were taught to play small and not own our skills (unlike younger generations). As a result, you may not be seeing the assets you can use to build wealth. Once you recognize your best asset or two, the world is your oyster. Are you great with analysis, teaching or technology? Are you good at investing, creating or managing people? You can create wealth with your highest personal asset, and you already own it. What is your highest personal asset right now?
Create a List of Wealth Building OpportunitiesThis is one of my favorite things to do every quarter or so. Different opportunities present themselves at different times, different quarters and certainly different decades. Park the mentality we were all taught to save and invest in stocks forever and then create a list of wealth building opportunities that appeal to you. I put my ideas on a spreadsheet and rank the opportunities with various aspects and potential results. Then I prioritize and implement, looking at my spreadsheet every week before I ask myself “Now why am I writing this again?” and get distracted elsewhere. Click here to read my post Starting an Online Business after 50.
Think Wealth Not Bill PayingIf your goal is to make an extra $1000 a month to cover all the bills without dipping into savings, your wealth building ideas are completely different than if your goal is to accumulate a (or another) million dollars within five years. Both goals are very respectable, but see the difference? With the later, your ideas will be so much richer and expansive. Click here to read my related post Retirement Income Goal.
Buy Cheap Quality AssetsTo state the obvious but often overlooked reality, the less you pay for something the more you can buy. Many people are excellent at applying this wealth building principle to groceries and clothes. What if you apply this principle to stocks, real estate rentals and even your home? This works the same for stocks as it does for cashmere sweaters yet it has a much bigger effect on wealth building. This is called value investing. Taking buying cheap assets to another level beyond just value investing is “buy when there is blood in the streets” investing (like on March 9, 2009). Both work. The former is easier to implement emotionally but the later builds wealth faster.
Invest Your Bonus in Cheap AssetsInvest your bonus was one of the better online tips I found for building wealth after 50. But, what if you threw your entire investment into stocks at the top of the market in mid 2007 at age 63? I’d change this wealth building tip to invest your bonus in cheap assets. If there aren’t any, wait. There will be. (In the meantime, you can build one for $100 as mentioned above.)
Leverage TimeDon’t have time to implement any of your wealth building ideas? What can you delegate to a student delighted to make $8 to $12 an hour (depending on age and where you live) so you can do something that will change completely your financial future? Would this be a good trade off? Most universities have online hiring. I’ve used these successfully several times. There’s also nextdoor.com where you could post that you are seeking an assistant. (Speaking of building online assets, former little nextdoor.com is now worth a lot of money!)
Leverage MoneyLeverage has a horrible reputation. You can use it, for example, to buy an undervalued property with only a 30% down payment. That property could produce positive cash flow while also having some tax benefits. Then you could buy two more properties.
Capitalize on This Tax Free Capital GainAs of this writing (and for many years) you can sell your home every two years and pocket up to $500,000 tax free (with a few rules, of course). This can be a huge windfall. Several couples have bought homes in my neighborhood, done some updating, and sold two years later. Every time I’m jealous of their creativity and implementation prowess. When coupled with downsizing, this can be a real wealth building strategy that can make a lot of sense for people in the 50 to 70 age range (or older) who are still up to moving and looking for adventure. Let’s do the math. If you did this 3 times over 10 or 12 years, making $100,000 each time, you could pocket $300,000 tax free. That’s a nice sum of money. It’s also perfect for people who have decided to live with less clutter, or for second home owners.
Be StrategicWhen you create your wealth building opportunity list you will naturally become strategic as you consider various factors. This “way of being” is a far divergence from scrimp and save, invest in stocks and bonds based on your age (maybe in expensive funds) and hope for the best mentality. Instead, it’s thinking about what you can create, build, buy, or learn that can change your financial future, and doing it. Click here to read my related post Wealth Building Steps.
Max Out Retirement Plan ContributionsThis no work required wealth building strategy is amazing. Fewer companies offer this now, but some employers still match your savings contributions. It’s free money. Take it. Looking back, this was one of the best deals ever for me, financially speaking. I think I would have gone without groceries to get my employer matched savings when I was working corporate. Fortunately, I didn’t have to do that. Employer matching in my retirement account, and investing the funds in the stock market, is what allowed me to leave my accounting job in my twenties and venture out on my own. (Remember, the stock market tends to under perform for several years following years of good performance. This means investing blindly into the stock market isn’t necessarily the solution.)
Diversify Assets and Income StreamsThere is something to be said for not spreading yourself too thin by doing too many things. This was so well explained in one of my favorite books, The One Thing book by Jay Keller and Jay Papasan. But then there is the lack of diversification that can seriously damage your wealth accumulation if your one thing stops working. As someone who loves to start new things, I have found that you can create a balance around this dilemma if you choose between projects that can be mostly delegated and those that cannot. I see a lot of value in diversification. Even when you mess up (and who doesn’t?) you have another asset that is doing well. This applies to stocks and bonds (often), consulting and online ads, and real estate rentals and stocks. I think diversifying among types of investments is very valuable, as well as diversification in income streams.
Lower Investment FeesBy lowering your investment fees from 1.5% to .5%, you can add an additional 1% of wealth that you get to keep every year. Do you know how hard it is to beat the index consistently with passive investing (or even by active fund managers) by 1%? And compounded over a decade or more this can be even more significant. The great thing is that this strategy requires little if any work beyond the initial research and lower cost investment setup. I have worked with some financial coaching clients that were unknowingly paying over 2% total wealth in total management fees, as is often the case.
Keep a High Credit ScoreWhile this won’t exactly build wealth, it can increase cash flow by lowering expenses. When your credit is high, you can borrow easier when an opportunity presents itself. Plus, financing is cheaper with a higher credit score. I even learned that our insurance was cheaper due to our good credit score. Put it on your calendar to check your credit score every quarter and keep it pristine. This is really not my thing, so if I can do it, you can too. Plus, it’s free, and takes little time.
Use CalculatorsThere is a calculator for almost everything yet most people don’t use them to strategize and plan. Once when meeting with a coaching client who had inherited a million dollars, she had no idea how much her returns could grow to over the years even though she worked with a financial advisor. (To be fair, they have to be so careful about not predicting or promising “future results”.) It was easy for us to enter this information into a calculator. Yes, you often have to estimate when using calculators, but estimating is great for guidance. Always estimate on the lower side of potential future returns. I’d rather be pleasantly surprised than caught off guard. For example, don’t plan for a 10% return every year from stocks over a period less than 20 years or more. (Many of my YouTube viewers who presumably have never experienced a bear market have argued with me about this.)
Plan and Save with Lower TaxesIn the third quarter, estimate your estimated total income for the year. Meet with your CPA to see if it makes sense for you to contribute to retirement savings plans or do other things such as tax loss harvesting before year end. Be proactive with this.
Wealth Building After 50 SummaryThat’s what I wanted to share after almost 4 decades of buying my first stock fund (yikes!) and having created and lived off income generating assets for the past ten years. Don’t get me wrong; I love stocks and bonds. They can be an excellent wealth building strategy when you have decades to buy and hold, when you buy them cheap or use other strategies. As I have written here, by buying cheap municipal bonds yielding up to 25% tax free in the early 1980’s, my dad completely changed my parents financial situation after 50. I saw tactical alternative investing work then, and alternative asset investing has worked well for us. In fact, it completely (and somewhat surprisingly) changed our financial situation too. I’m convinced that this can work for many people over 50 who are not where they had planned to be financially. As with any project, you just have to first identify, and then take the first step.
The information on this website is for education only and is not to be construed as personal financial advice.