One of the most common misconceptions about money is that income is the biggest driver of wealth.

While of course income helps, in reality, the main determinant of wealth (or erosion of) is dictated by your spending habits, and many people fall into the habit of spending more as they earn more.
Making smarter decisions about money presents a big opportunity for people under 40.
The benefits of making smart money moves now will compound over time and have the potential to make a big impact on your financial picture.

1. Don't stop after maxing out your 401(k) contribution

If you're able to make the maximum annual contribution to your 401(k) and still have funds left at the end of the month after your other obligations, congratulations!
But that doesn't mean you should spend the extra cash. What you should do is investigate other opportunities to put your surplus funds to work for you.
The most flexible type of investment account is a brokerage account. There are no limits on how much you can contribute and the funds can be liquidated and used for any purpose at any time. It's important to keep in mind that a brokerage account is a taxable account, so unlike tax-deferred retirement account like a 401(k) or IRA, you'll need to square up with the IRS every year based on your gains, losses, and proceeds from dividends or interest.

2. Keep your investment strategy boring

Buying single stocks in search of the next unicorn is certainly more fun than a diversified low-cost investment strategy, but trying to win big comes with a lot of unnecessary risks and questionable rewards. Especially if you have a day job, it's probably unrealistic to find the time to pour over financial statements and speculate on earnings reports in hopes of competing with Wall Street analysts who use satellite images to count the number of cars in the parking lots of major retailers.
Instead, keep your investment strategy boring. Don't try to time the market or buy a stock because you like a company's product. Diversify your holdings with a global portfolio of investments, like low-cost ETFs and bond funds aligned with your risk tolerance and time horizon. Try not to limit yourself to just one or two asset classes either. For example, if you only hold an ETF that tracks the S&P 500 you will miss exposure to small cap and mid cap equities in the U.S. and abroad.

3. Get life insurance right

There are many different types of life insurance — all of which have additional options and variations, and it can be confusing and overwhelming for many consumers. However, when it comes to buying life insurance, it's really important to get it right.
Of course, what is "right" for you will depend on your goals, budget, family situation, and so forth— but it's important to keep these key points in mind:
Term life insurance is the cheapest option, and for many individuals, completely adequate for their needs. As the name implies, term life insurance will provide a death benefit if an individual dies within the policy's term, up to 20 years typically.
In contrast, whole life insurance is permanent insurance and will cover your entire life. Before buying (or getting sold) a whole life policy, step back and assess your needs. Many parents realize they would only need coverage from a life insurance policy until their children are out of college.
If you are single, depending on your situation, whether you have dependents and so on, you may not actually need life insurance at all.
Finally, don't buy an annuity without doing your homework. Annuities are complex and expensive insurance products that aren't appropriate for a lot of investors.

4. Take an honest look at your spending

Let's dispel one big money myth to start: the more you earn, the more you save. For most people, spending on lifestyle items — like houses, cars, vacations, and so on — only increases with income. Sometimes growth in spending even outpaces growth in earnings.
While it is important to enjoy your success, the truth is that it doesn't matter how much you make if you spend all (or nearly all) of it every year. Taking an honest look at your spending and finding ways to cut back can really pay off later in life.
To do this, consider focusing on your big ticket items, ones that really move the needle. Keep the ones that really make you happy and add value to your life. Consider cutting back on the others.
This may be particularly important if you have children or plans to in the future. Getting a head start by saving aggressively while expenses are lower can provide a lot of flexibility down the road.
You can only spend a dollar once, but a dollar saved and invested can grow significantly over the long-term, which is a unique opportunity for those under 40.