We strive today to build a brighter tomorrow.
And yet, the journey seldom stops with ourselves.
Our families are our ultimate focus.
We know that life is finite and that our possessions are rented, not owned.
We can’t take it with us, so we endeavor to pass on our wealth to future generations.
As it says in Proverbs, “A good person leaves an inheritance for their children’s children.”
In this blog, we’ll introduce the building blocks of generational wealth.
Then, we’ll conclude with a brief overview of the ways you can protect your assets from taxation.
6 ways to build generational wealth
To build and transfer generational wealth, you must first generate wealth.
In America, you’ll have many, many years to build your fortune.
For example, if you start your career after college (at the age of 22), you’ll work for 48 years.
After all, you’ll receive your maximum Social Security benefit at the age of 70.
Whether you strike gold early in your career or intend to work well past the age of retirement, here are six tips to help you build generational wealth:
1. Budget & Save
Your budget is the engine of your financial life.
It’s what keeps you out of debt and moving forward with confidence.
The best budgets are constantly revisited and revised. So aim to build a scalable budget that can adjust to new seasons and evolving earnings.
Remember: even when you start earning the big bucks — and you will! — don’t stop budgeting.
Past performance is no guarantee of future success.
Why else do 70% of Lottery winners end up broke just a few years after cashing in their tickets?
To build generational wealth, you first need cash flow.
Ideally, that cash flow will come through multiple streams.
If you currently have a 9-to-5 job, consider incorporating new ways to increase your passive income — the money you earn while you sleep.
Maybe that means renting out your car (Turo and Getaround are great car-sharing companies), exploring side-hustles (through apps like TaskRabbit or Doordash), or investing your time (and money) into more profitable ventures.
Speaking of investing…
Investing is a prime way to beat inflation and build generational wealth.
Your 401k and IRA are truly powerful tools to “pay yourself first.”
While day trading in taxable accounts can be exhilarating (and yet risky), you’ll never go wrong by putting your money to work in an established index fund.
Patience is key.
For example, if you had invested $10,000 in an S&P 500 index fund back in 1980, it would be worth over $760,000 today.
Note: Looking for a great entry point for investing? Check out Robinhood, one of the most popular online investing platforms.
The stock market isn’t the only place you can grow your wealth.
If you’re looking to diversify, you can invest your money in “alternatives” like real estate, private equity, lending, commodities, and art and antiques.
Even non-fungible tokens (NFTs) — and Metaverse real estate — are driving digital investments.
The possibilities are endless.
5. Pursue Entrepreneurship
Family-owned businesses are at the heart of the American economy.
They’re also a powerful source of generational wealth.
If you’ve nurtured a desire to build a business, unleash your entrepreneurial spirit with full force.
While running a successful business can be challenging, the effort may be well worth the risk.
After all, you won’t just be giving your children money. You’ll be leaving them a business that actively makes money.
Plus, you’ll be able to employ members of your family in the process.
Note: Only pursue entrepreneurship if you’re truly invested in the process. So long as you’re passionate about your business, it’ll never feel like work, despite the inevitable ups and downs.
Financial literacy is vital, especially for your children.
While growing your income and investments, ensure your heirs learn the financial basics at a young age.
Teach them about investing, about taxes, and about the importance of saving money.
Their education will ensure that they act wisely with your wealth and become deserving stewards of your financial legacy.
How to protect (& pass down) generational wealth
Generating wealth is one thing, but successfully passing it down is another.
Unfortunately, estate tax laws can raid assets and eliminate years of heavy lifting.
In fact, if your net worth is over a certain figure, some states will take up to 20% of your total wealth upon your death.
Note: That’s in addition to the federal estate tax, which can tax up to 40% of your wealth that exceeds the 2021 exemption of $11.7 million.
You work hard for your money, and you deserve to pass it on as you always imagined.
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Proverbs 13:22. New International Version. The Bible. https://www.biblegateway.com/passage/?search=Proverbs%2013%3A22&version=NIV
Ghilarducci, Teresa. “How Many Years Do You Have to Work Before You Retire?” Forbes. Forbes, May 28, 2021. https://www.forbes.com/sites/teresaghilarducci/2021/05/28/how-many-years-do-you-have-to-work-before-you-retire/?sh=3266ee09706d
Steele, Kari. “Curse of the lottery: The tragic stories of big jackpot winners.” ABC News. ABC, April 5, 2021. https://www.abc15.com/news/state/curse-of-the-lottery-the-tragic-stories-of-big-jackpot-winners
Nasdaq. “Here’s What a $10,000 Investment in an S&P 500 Index Fund in 1980 Would Be Worth Today.” Nasdaq. Nasdaq, February 8, 2018. https://www.nasdaq.com/articles/heres-what-10000-investment-sp-500-index-fund-1980-would-be-worth-today-2018-02-08
Farrington, Robert. “Why Big Brands Are Spending Millions on NFTs.” Forbes. Forbes, December 25, 2021. https://www.forbes.com/sites/robertfarrington/2021/12/25/why-big-brands-are-spending-millions-on-nfts/?sh=5b1deb496117
Block, Sandra. “18 States with Scary Death Taxes.” Kiplinger. Kiplinger, February 23, 2022. https://www.kiplinger.com/retirement/inheritance/601551/states-with-scary-death-taxes