At a certain point, we should take a step back and stop thinking about ourselves, and begin to think about our legacy. We should begin to think and live in such a way so as to build generational wealth. Luckily, if you are living a life with your financial future in mind, building generational wealth does not take much effort. Just keep on doing what you are currently doing. Know that each action you take today is not just for you, it is for those who will come after you. Build a stable foundation and provide a spring board for those who come after.
Generational Wealth Begins With You
No matter how rich or poor you are today, building generational wealth begins with you. If you are wealthy, learning how to grow, maintain and not completely erode your wealth is important. If you are poor, start today to build a stable foundation. Rich or poor, to build generational wealth, you must have something to pass on to the next generation. It takes, saving, investing and reducing your debt. The same concepts relevant to you building wealth, are vital for keeping and passing on wealth.
Increase Your Wealth
When it comes to saving money, the math will never work if your expenses are higher than your income. To reduce expense, consider moving to a smaller home to reduce rent/mortgage, moving closer to work to reduce the cost of commuting, bringing your lunch to work, stop/reduce eating out, cut your cable or other subscription costs. But do not forget the other side of the equation.
To increase wealth, do not only reduce debt, also increase your income. For example, work toward a raise, invest in your education and return to school/learn a skill to get a better position or research a side hustle that may provided additional income? The goal is to increase your income such that your income is higher than your expenses.
Begin Saving
If you have gotten your income above your expenses, it is time to save. Many fall into the trap of spending their disposable income each month. Do not fall into this trap, remember, your goal is generational wealth, not to simply reduce your expenses and increasing your income. Your goal is to save and grow your wealth. So save your money.
There are a number of tools available that facilitates saving money. For example, you can automate your savings by automatically transferring money from your pay to a savings account or you may save in a high yield savings account that provides higher interest rates than the typical brick and mortar banks. Research the options available to maximize and grow your savings. Further, to consistently save, while it is not required, a budget may provide a financial guide.
Saving Money And Your Future
Now that you are saving, do look towards the future and your financial health. Look to paying off debts, investing, and contributing to your retirement. Saving is only the first step on the path to growing financially and financial independence.
Generational Wealth Is Built On Investing
Generational wealth is built on investing. Investing in your future is an extension of investing in yourself. Once you begin to look to the financial markets, look to learning more about the opportunities that are available to you. Educate yourself.
Retirement
No matter your age, begin thinking about your retirement and related investment options. In thinking about your retirement, you will no doubt hear about traditional IRAs, roth IRAs, SEP, roth 401Ks, 401Ks, 403Bs, 457Bs and TSPs to name a few. Do not simply get lost in the alphabet soup of different retirement plans. Do your due diligence. An investment in your retirement plan education is invaluable to your financial future.
Do Not Give Up Free Money
If you have access to an employer match, take advantage. Employer 401K match can come in a variety of shapes and sizes. In one instance, the employer will match a portion of your contribution up to a limit. Typically, this limit is represented as a percentage of your salary. In some instances, an employer may match your contribution if you contribute or irrespective of if you contribute.
If your employer provides a 401K match only if you contribute to your 401K, ensure that you are contributing at least up to that threshold. An employer 401K match is free money. Take advantage. Free money will only turbo charge your journey to building generational wealth.
Generational Wealth Is Investing In The Future
Think about your legacy, your children and their future. To put your kids on the right path and build generational wealth, think about a 529 plan. By contributing to a 529 plan, you are able to offset some or all costs associated with a college education. In many States, two 529 plans are available, an investment plan or a prepaid plan.
- The investment plan allows you to contribute by buying and selling shares offered by the State or the State’s agent (similar to investing in the stock market).
- The prepaid plan is based on the cost of attending a college. Here, you are prepaying the cost of attendance.
While 529 plans are not deductible on your federal tax filings, many States allow you to deduct a set portion of your 529 contribution from your State tax filings. Essentially, your State may be helping you to build generational wealth.
Conclusion
At a certain point, we should take a step back and stop thinking about ourselves, and begin to think about our legacy. We should begin to think and live in such a way so as to build generational wealth. Luckily, if you are living a life with your financial future in mind, building generational wealth does not take much effort. Just keep on doing what you are currently doing. Know that each action you take today is not just for you, it is for those who will come after you. Build a stable foundation and provide a spring board for those who come after.
In part 2, we will discuss how to maintain wealth.
Follow me on Twitter @JoToFI_com
Follow me on Instagram @JoToFI_com
