“You can’t change your circumstances until you change yourself” – Stedman Graham
8 Smart Ways You Can Create Generational Wealth
You’ve probably heard about generational wealth – but what exactly is it?
Generational wealth is the idea that you’ve built a financial legacy and portfolio that can be passed down to your children and their children. The thought is that you’re able to provide for yourself and your family when you are alive and have enough money to help support your family after your death.
Sounds great, right? So, how does one start down this path? Let’s take a look.
Why is Generational Wealth Important?
Passing on generation wealth can help your family get ahead in life.
If you’re able to provide college at no cost to your child, think about where they will be financially after college. Then, think about the inheritance you could provide and how that may impact your life.
Another way to think about the importance of generational wealth is to ask yourself how would having a college degree paid for by a parent put you ahead in life?
Many of us have student loan debt that can take years to pay off. The money that you put toward your loans could have been used towards investing, real estate, or starting your own business.
The compounding effect of generational wealth is that one small action can provide so much financial relief to your family in the future. If you can give your family generational wealth, they can build on that wealth and help pass it down to more generations.
8 Ways to Build Generational Wealth
Creating generational wealth is not difficult, but requires effort and certain steps to be taken.
The younger you start, the easier it will be to build your own wealth that you can pass down to your children. You do not have to be an entrepreneur or have had the generational wealth yourself to build it.
There are multiple ways to build generational wealth, but three key ways:
- Creating multiple income streams
- Teaching your children financial literacy
- Proper life planning
Create Multiple Streams of Income
One of the best ways to build generational wealth is by creating multiple income streams. This will ensure that you have different ways to earn an income and can invest it to provide passive income.
Investing is a key way to create an income stream. There are two parts to it – you will grow your money as well as create passive income.
Most investments will either grow, and you can use the growth as passive income, or you will receive dividends and can use dividends as passive income. Anyone wanting to pass down generational wealth must start investing in different accounts and diversify their portfolio.
Real estate is another stream of income of many people who create and pass down generational wealth.
It’s another way to invest your money in something that will grow, as well as create passive income. Real estate usually grows in value, which can be sold for cash if needed, but using real estate for passive income through rentals is a way to build wealth.
You can pass down your real estate to your family, who can use it for passive income through rentals.
Build a Business
The more income you can generate, the more of it you can use to invest.
Many people who build wealth build their own businesses because they can earn more money than they would with a traditional job. It will take a lot of work and isn’t easy, but the rewards of building a business can be immense.
Similar to real estate, a business can be passed down to the family, which is key to building generational wealth.
Teach Financial Literacy to Your Children
Passing down generational wealth is one piece of building it.
Another key piece is to keep the wealth for future generations. If you pass down your entire portfolio to your children, you need to ensure they know how to use that money wisely.
Many parents pass down generational wealth, but their children weren’t taught financial literacy, so they spend all the money and end that wealth for future generations.
If you are working on investing and generating multiple streams of income, you should also focus on learning about financial literacy and passing that knowledge on to your children.
Talking about money and teaching them to be financially responsible at a young age will ensure they will be responsible for their inheritance in the future.
It is crucial to make life plans around your life insurance and estate to ensure your inheritance will be properly distributed to the people you want to take care of. Without proper planning, your estate, from real estate to your investment portfolios, may not be handled how you want.
Many individuals who pass generational wealth utilize life insurance to protect and build wealth.
Depending on the life insurance policy, there can be cash provided to your family to cover funeral costs.
Emergency costs and subsidized loss income or retirement income could also be covered.
Estate planning creates a will and even a trust to pass your wealth to your family.
Without any actual plan, your estate could be split up in a way that you do not want. To ensure you can pass down generational wealth, create a will with your exact plans when it comes to your:
- real estate
- anything else financial
Being able to provide for your family and pass down this wealth is a great thing to do. If you do not come from generational wealth, you are able to provide this for your family. With proper planning, financial literacy, and financial moves, creating and passing down generational wealth in your life is possible.
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Check out this quick video discussing the implications of the January jobs report on Commercial Real Estate (CRE) property types in the short term vs long term
A self-made millionaire shares 8 money secrets rich people know that ‘most of us don’t’
Lean how this person achieved multimillion net worth after over 20 years of trial and error. His experiences and relationships with other multi-millionaires have given him perspective that most people don’t have access to.
Here are the eight money secrets that the wealthy know and most of us don’t:
1. They don’t diversify their investments right away.
It’s generally good practice to diversify your portfolio by investing in a mix of different stocks, funds and other investments.
But as the wealthiest people build their net worth, they often go all-in on their own projects, and then diversify as they start earning more.
Elon Musk, for example, bet the $22 million he made selling his first company, an online business directory called Zip2, entirely on his next business, an online banking service called X.com.
After X.com merged with PayPal, he made $180 million off PayPal’s sale to eBay. That gave him the cash to invest in Tesla, SpaceX and other ventures.
As I built my net worth, I did not accumulate debt on non-essential purchases like designer clothes or luxurious homes.
Even if I could afford the bills, I didn’t want to waste money paying interest. Instead, I wanted to put everything I was earning into generating more money. For me, that putting my income into my business.
I also paid cash for my homes, and I have never accumulated interest on a credit card.
In some cases, if you’re trying to build a business, debt can help you earn money by giving you access to income-generating assets sooner rather than later.
You might think that buying a primary residence is The American Dream, but it is rarely what you see the wealthy go for first.
In my opinion, homeownership doesn’t always see the same return on investment as other places you can put your money. I own three homes, but I didn’t purchase them until I was able to buy them in cash.
On the flip side, cash-flow real estate — commercial real estate where you are making a monthly profit off of rent after your mortgage payments, property taxes and maintenance — is a great way to grow your money.
You can make passive income off ownership of these properties, and it is often easier to sell them than a primary residence. When you sell a primary residence, you have to find a buyer who can envision themselves living there. When you sell a profitable rental property, you only have to find a buyer who wants to make a profit.
The wealthy are willing to spend more on each purchase in order to get a better price per unit and save time spent on repeating useless activities.
This can apply to a business — the rich may contract to buy bulk supplies or equipment — or to you personal life. When I can, I buy everything without an expiration date in bulk.
I have never had someone invest in me that didn’t know me. And most of the real estate I own today was purchased from sellers who picked me over other qualified buyers because we had existing relationships, and they had confidence in my ability to close.
The more someone gets to know you, the more they will trust you and believe in your talents and skills. This leads to better opportunities, speedier decision-making and higher margins.
So invest time and resources into making and maintaining the right connections.
One of my friends, a serial CEO, has worked with some of the wealthiest people in the world.
I once asked him what they had in common, and he said: “None of them were ever satisfied with what they had alreadyaccomplished, but instead focused on the next thing that could be accomplished.”
The wealthy are never satisfied with their previous achievements. They believe they can always achieve more. This helps them think big about future business ideas, inventions, investments and other wealth multipliers.
The wealthy know that time is the only truly scarce resource. You can’t buy more of it.
So they maximize their time by letting go of the need for control every small detail of their business or portfolio, and learn to effectively outsource and delegate to good, smart people who will trade their time for money.