Someone said that success happens when opportunity meets preparation, and he was right. However, he didn’t tell you one critical thing about success: success without proper succession is a successful failure! Well, that might sound contradictory, but many financially successful people end up there.
Millions of Americans work hard to become financially wealthy and successful. So far, so good as long as you earn and build your wealth justly and legally. However, many don’t know that creating a succession system to pass on their hard-earned wealth is one of the greatest measures of responsible wealth management. That means you are the poorest economic steward if your wealth can’t outlive you.
But how do you build generational wealth? Well, you don’t need to be a wealth management geek to do it because anybody can build generational wealth. But before proceeding to learn how to do it, it’s imperative to define it. It is the wealth handed down from one generation to the other through asset accumulation to provide security in the future.
Now, proceed and learn the top five tips for building generational wealth.
It Starts With You
First, the journey starts with you, the principal custodian. You should start by changing your view of wealth, and the mindset should shift from mere financial success to succession and then successor. You also need to transition from mere financial prosperity to posterity.
Additionally, educate yourself about money (if you’re still financially illiterate). Start by learning how to use the money to fulfill long-term goals. However, learn from a reputable source, like a wealth management expert or coach.
Lastly, have open and informed discussions about financial management with trusted friends or family members. They can enrich you with valuable ideas that can move you forward.
Educate Your Successors
Here comes the core of this discussion, the successors. It’s inadequate to educate and empower yourself financially if your financial heirs are financially illiterate. Thus, teach your children financial literacy. Why? Because estimates show that 70% of American families lose their wealth in the second generation, while 90% lose it in the third! How do you like that? Definitely, it’s saddening. But unfortunately, you may not live to witness your financially illiterate children wasting what you labored all your life to earn within ten years.
So, educate your children early to avoid becoming a part of these sad stats.
Build a Family Business to Pass Down
You also need to build a family business you can leave behind. Nothing is more powerful than a family business empire passing on to future generations. The good side of this story is that over 30% of family-owned businesses transition to the second generation.
You can look at the Ford empire and many other iconic businesses as examples. You, too, can build yours. It’s not a must for it to become a multi-million or billion-dollar empire. You can leave yours to your children and let them grow it. Remember, the Ford Corporation isn’t the size it was when Ford died.
However, make sure that your family business aligns with your children’s talents and interests. Otherwise, they might sell it a few months after your burial.
Diversify Your Income
Diversifying your income streams is another way of building generational wealth. But here’s the catch. Whenever you start earning extra cash through a new channel, and that money exceeds your current lifestyle, remain sober. Don’t become extravagant and unnecessarily change your lifestyle. Instead, use it to build generational wealth.
The way to diversify your income is to be willing to take jobs that don’t pay a lot of money. You can use the extra money you earn to invest in the market or to sock away in a bank account or some other savings account.
Invest in Real Estate
Lastly, invest in some sort of real estate. Again, you can start slowly with your current home(if you have one) and build from there. Real estate is a great way of building wealth for your children. Moreover, your children can earn from their career interests, not-withstanding a secure and passive income stream.
Yes. The case ends here. It’s your turn to wake up and convert your wealth into generational wealth today.