To build generational wealth, focus on spending habits, create passive income, and continue to learn.
Generational wealth is like a torch that illuminates the road to your family’s financial destiny. It’s not only about amassing wealth; it’s about leaving a lasting legacy that will create a solid and secure future for your loved ones. The money you create and pass down to your descendants is a means to give them a head start in life and assure their financial well-being for years to come.
If you aren’t a “nepo baby” or someone who was born into a famous or wealthy family but would love to be the Sam Walton, Andrew Carnegie, or John D. Rockefeller of your family to bestow your wealth onto future generations, it’s entirely possible. In fact, it is one of the many goals that ambitious people consider and endeavor.
In an extensive blog on ruleoneinvesting.com, Phil Town, an investment advisor, shares six methods to create generational wealth (you can also watch his accompanying videos here). Below, you will find a summarized version of each of them.
Spend Your Money Wisely
Avoid common money traps like not having enough money set aside for emergencies, spending too much, and buying things you don’t need. You can avoid these pitfalls if you save ten percent of your take-home pay, organize your expenses, and invest the rest.
Focus on Your Cash Flow
According to Mr. Town, 10 percent of one’s salary is not sufficient to create long-term generational wealth due to the low rate of return. Instead, one should focus on finding more cash flow, such as through a side hustle. Self-help gurus recommend driving for Uber or opening an Etsy shop to sell goods online. However, he recommends finding a better way instead of working harder and longer.
Fifteen Minutes a Week
One can create cash flow by becoming a casino-type investor and taking the house side of a gamble with the odds massively in their favor. In the stock market, the casino is already there, where smart investing can create generational wealth. The goal is to provide cash flow with little effort and achieve financial independence that can be passed onto future generations.
Create Passive Income
Passive income is money gained without traditional employment that affluent people like Warren Buffett and Bill Gates rely on. Even though being a casino brings in cash, it still requires activity. However, long-term investments made using the casino trading method can bring in money without anyone doing anything. You can earn passive income by putting your money into businesses where it will grow year after year.
Continue to Learn New Things
To create generational wealth, you need to continue learning new things about investing and trading. While hard work is essential, working smart is more crucial. To become a successful investor, one must keep learning and staying up-to-date.
Start Your Journey to Financial Freedom Now
Apply the Rule of 72, which calculates how long it takes to double your money given a fixed interest rate. The sooner you invest in a company with a high annual rate of return, the sooner you can double your money.
To Sum Up
Building generational wealth is not just about accumulating wealth; it’s also about creating a lasting legacy for your future family members. But before passing on your riches, Laura Suter, head of personal finance at AJ Bell, recommends considering the potential impact of inheritance tax. To avoid any surprises, you should seek the advice of a knowledgeable inheritance tax attorney. This way, you can ensure that your hard-earned money goes to the people you intend, not the government.