Jovan Johnson, MBA, CFP®, CPA/PFS

Have you ever heard the term “generational wealth” and wondered what that means for you? For many, this concept may seem unattainable or not possible based on their current financial situation. After all, you may have other pressing financial goals such as getting out of debt, traveling more, buying a home, etc.

As a first-generation wealth builder, I understand the underlying pressures and challenges that come with building wealth. It is certainly unknown territory for many of us. However, with the right mindset and education we can build multi-generational wealth and leave a great legacy. A significant part of creating generational wealth is giving back. The more we serve others freely, the more blessings come to us.

What Is Generational Wealth?

Generational wealth is the concept of passing down wealth from one generation to the next. It is also important to not only pass down monetary wealth, but also wisdom and financial knowledge.

Why Is Generational Wealth So Important?

Imagine if your parents completely funded your college education and provided you with a down payment for your first home. You could be much further ahead financially. This is the power of generational wealth! Instead of paying down debt or saving for a down payment, you could be investing or starting a business. If you have kids, take the time to teach them about personal finance and set up vehicles to secure their financial future.

In this article, I share 6 tips on how you can build generational wealth for you and your family.

1.) Reframe Your Money Mindset

We are taught to think about today and deal with tomorrow when it comes. Once we receive money, we feel the need to spend it for instant gratification. When someone you know receives a lot of money for the first time, what is the first thing that they do? They normally make impulse purchases to keep up a certain image or lifestyle. However, with this mindset, we are not able to save and invest for a better tomorrow. It is possible to enjoy today while embracing a long-term mindset. To build generational wealth, we must think long-term and plan ahead.

Another mindset to overcome is one of scarcity. Many of us tell ourselves every day that we don’t have enough money to enjoy life. We want more and more and think this will solve all of our problems. However, once we receive more money, we find ourselves back in the same trap. This is a mindset issue not a money one. We must have a mindset of abundance to truly build generational wealth. If you can effectively save and use what you have now, imagine what you can do when you receive more.

2.) Education

Once you understand money and how it works, you can use it as a tool to help you reach your financial goals. When you save and invest your money consistently, it begins to work for you. As you begin to learn about financial literacy, make sure you are getting information from a reputable source. Please don’t depend on social media for blanket recommendations. Talk to professionals that have designations and will place your interest first. Understand that you are not alone, and it is okay to seek help from a financial expert. You can start learning more about money through podcasts, books, blogs, etc.

3.) Exposure and Environment

When I started high school, college was not even a consideration for me. It was not an option until my Sophomore English teacher mentioned that I should go to college. She even provided me with an SAT Study book and let me stay after school to study in her classroom. Exposure matters so much when it comes to building wealth! The more we are exposed to the right opportunities and people, the more options we have for building wealth. If you are in a great position, it is important to expose the next generation to some of your financial wisdom.

Try to attend conferences or events with experts who can provide you with advice and help you get to the next level. Believe it or not, there are many people that are willing and excited to help.

4.) Estate Planning and Risk Management

It is amazing to earn income and generate wealth while you are alive. However, generational wealth is about more than you. It is about taking care of future generations to come. Generational wealth is not possible without an estate plan. Having an estate plan and the right types of insurance can help ensure your wealth continues to pass down to multiple generations.

What is the point of you working so hard and building generational wealth if your assets are not protected? One of the biggest blind spots in someone’s financial picture is risk management. Take the time to review your insurance policies, make sure you are adequately insured, and see an estate planning attorney to draft necessary estate documents.

5.) Know Your Savings Options

It is very important to understand the various saving vehicles that you can put your money into. Many people continue to build up their cash without taking inflation into consideration. Although it is great to have cash on hand, it is impossible to build generational wealth this way. You have to understand how to invest your money the right way. Investing is one way to ensure that your money grows and beats inflation. The stock market can be a great way to build generational wealth over the long-term. It is important to read investment books, ask questions, or hire a financial advisor before investing.

6.) Build Assets

Two of the best ways to create generational wealth are real estate and business ownership.

With real estate, you have the potential to earn steady cash flows in addition to increased property value over time. Leaving real estate to heirs provides them with an asset that generates an income stream and tax advantages. The idea of getting started in real estate can be intimidating, but it doesn’t have to be. Start small and save up to it, but also do your research.

Business ownerships is known as another asset that can build long-term generational wealth. Being able to pass down a family business to your children provides them with financial security.

KEY TAKEAWAYS

  • Building generational wealth is no easy feat but it is attainable through discipline, commitment, and education.
  • Generational wealth is all about giving the next generation financial security so that they have more options.
  • Take the time to educate yourself on the right way to save and invest your money.
  • Seek guidance and ask questions.
  • Implement the best wealth-building strategy that works for you and your family. Not everyone is meant to start a business or own real estate.

Disclosures

None of the information provided is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other securities or non-securities offering. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information is at your sole risk. The content is provided ‘as is’ and without warranties, either expressed or implied. Piece of Wealth Planning LLC does not promise or guarantee any income or particular result from your use of the information contained herein.