Generational wealth as the name says is the art to generate wealth that will pass to the next generation (assuming there are children in the family) but a recent study by Pew Research Center stated that 44% of non parents from 18 to 49 say it is not too or not a all likely that they will have children. In addition according to the Global Wealth Report, an estimated of only 12.5% have enough wealth in the range of $100K and $1M. So if the odds are not in our favor how or why should we generate generational wealth? The first step to answer the question, is to change the way we see the concept, then create smaller goals and finally make it habitual in all stages of your life.
Starting out single with no children – it is normal that at this point your net worth (assets minus liabilities) is barely positive. This is the time to realize that its not cool to live paycheck to paycheck and that our cash flow (income and expenses) is not the only tool that is going to help us in building our financial future. It is hard to explain this if you grew up in a developed country all of your life where there is manageable balance between the economy and government. However, having lived part of my life in an underdeveloped country filled with both economic and political instability, it is easier to understand the need to plant seeds and if possible, trees (to create your own sources of income). The point here is start thinking of your money like a seed of a fruit like an avocado, if you save the pit it can take 15 years to grow one, however, if you plant a tree it will only take 3 to 4 years to start seeing the fruit. Make sure your money’s purpose is more than just spending, make room for a retirement account even if it is just the minimum and also start making ambitious goals with your cash flow in terms of growth.
Generating income with a partner – ideally, your partner will compliment your financial strengths and weakness and make your financial well being growth. Take advantage of this period, it is the time to divide and conquer in terms of choosing how to best compliment your sources of income. For example, who will have the steady job vs who will develop a business for the future. The key is to communicate clearly your goals, since most of the relationship’s conflicts in my experience are somehow based on financial differences. And differences are normal, we all grew up in different households with different values, but when these are not communicated well, they can create resentment and worst; a stop to your financial growth. Here is the time to convert your cash flow to assets (than can generate income with a business or property). To go back to my planting the seeds analogy, your aim is to buy the trees to shorten the process of generating your own fruit (money). This will not only generate wealth to pass on but give you more freedom to travel and do the things you have in your dream list.
Contributing to some kind of family help – if you are helping your parent, a niece or a brother financially, you need this tip most of all. Think of the time you will not be able to provide for them, either because you will move out or there will be an adjustment in your income/assets, how will they find a supplement for that help? Ideally you can create or even better help them create a source of income that can give them what they need without additional effort. There are many ways you can do this, read “ways generating passive income” but also making sure that your assets are purposeful and titled legally correctly. For example let’s say you have a niece that you want to provide for her college education and you are saving a 529 college savings plan for her sending $250 every month to her account, if your income stops she may not have enough, thus a life insurance with a beneficiary as a trust may help or a note in your will stating that a portion goes to fund the 529 plan will ensure she can go to college. Another example, if you help your mother with rent, start saving for a down payment to buy her an apartment with your other siblings, this way when you are not around she can still have her house. Finally if you are helping a brother or sister instead of giving them money, challenge the cause and think of ways that that amount of income can be generated by “planting the seeds or buying the tree” i.e investment with high dividends or setting up a business or franchise and employing them.
Building generation wealth is about tweaking your lense, creating smaller goals, involving the family and making it habitual so it can continue to grow when you are and you are not in this World.
