Ways To Build Generational Wealth
By Brian @ My Millennial Guide
Generational wealth is usually referred to as financial wealth that is passed down from one generation to another even though it can take other forms like traditions or heirlooms.
I’m currently in a position where I am trying to build wealth so that I can pass it down wealth from generation to generation.
I’ll get into ways to build generational wealth later in the article but first I wanted to get into defining generational wealth…
What Is Generational Wealth?
Generational wealth is acquired by building generational assets which can include real estate, stocks, businesses, and many other types of assets.
In the aspect of financial planning, generational wealth is a term that is geared toward passing down stable, significant financial resources for future generations.
Okay, now that we covered generation wealth, how can one grow it?
How Can I Build Generational Wealth?
To build generational wealth, generally, you need to have an income, whether as a job, career or a business.
Once you have set your earning capacity, then you can adjust your thinking to shift from an income-based mentality to an asset-based one which will help you to create wealth. I published another article recently about growing your wealth here that you may found beneficial.
Basically, you need to have the right mindset and the discipline to stick to your financial goals.
This is not a one-day activity and requires consistent and diligent action, and above all the belief in what you are trying to achieve. It goes without saying that you must spend less than you earn, or top savings skills, so as to have some excess funds for investments.
However, because you want the wealth you are accumulating to last beyond one generation, you also need to empower your children with financial literacy especially budgeting and good money habits and invest in their future by setting up trusts and funds in their names.
Ways You Can Build Generational Wealth
There are many ways in which you can accumulate wealth and it will all depend on your goals and plan of action.
There are four tried and tested steps that you can take to build generational wealth as outlined below
You need a financial advisor. To navigate the complex waters of investing and financial intelligence, you should have a guide who has sufficient knowledge and experience to help you build your investment portfolio affordably.
However, before you commit to a financial advisor, you need to have worked out your budget, the time period you have to invest, and clear goals and strategy. Educate yourself by doing online research, attending workshops or finding a mentor so that you have a clear strategy.
Invest in assets. Assets and this refers to stocks, bonds, real estate, commodities, and currency, tend to appreciate over time, though some assets like real estate are more lucrative than others as they bring greater returns than other stock.
There are subclasses even within these assets that allow you to build equity that you can then pass onto your children.
Build a tax fortress. You need to protect your wealth from being depleted by taxes or creditors. Look for options that are tax friendly, for example, some retirement accounts are not taxed up to a certain maximum amount.
You can open up a Simplified Employee Pension Individual Retirement Account, SEP- IRA, which allows tax-deductible contributions for entrepreneurs and freelancers. The money on this account is not taxable until withdrawal.
Diversify your portfolio. To build generational wealth, not only do you need to have multiple streams of income, but you also need to diversify your investment options so that if one is underperforming, another can cushion the loss.
This requires you to constantly review your portfolio and then adjust your strategy accordingly. This also needs you to take on the element of risk as this sometimes means more returns.
Ways I’m Building It
I’m a Millennial, so my way to wealth is through passive or residual income. To get you started, I want to get into what exactly residual income is.
So what exactly is residual income? Residual income refers to the amount of income you generate even after you have provided your product or services.
It is a stream of income you get after your work has been delivered. It’s basically interchangeable with the term passive income.
For example, writers and artists release a book or a song on a particular day and a particular year but get paid for that piece of work for many years after. The royalties they get paid are their residual incomes.
Residual incomes are a great way to make money “passively”. This way you can have a source of income to rely on even when other sources of income are spent on bills.
For comment section, please scroll down. Thank you.
This website uses marketing and tracking technologies. Opting out of this will opt you out of all cookies, except for those needed to run the website. Note that some products may not work as well without tracking cookies.Opt Out of Cookies