How to Build Generational Wealth

Achieving generational wealth and or building wealth that is longstanding is something that anyone and everyone can accomplish. In America there are most often two ways in which wealth is accumulated, either via business or via investing. This is how most people get ahead financially. However, you don’t necessarily have to be a good investor or a business founder to build generational wealth. Having a great business acumen can definitely help and watching markets and learning how to spot good investments can definitely help, but they aren’t prerequisites. If you can save money, invest it, optimize for tax-based incentives and make good financial decisions there’s no doubt that you can build generational wealth that’ll positively impact future generations to come.

What Kind of Income is Required to Build Generational Wealth?

You don’t necessarily need a high income to build generational wealth. In order to be successful, you need to save more from what you earn. A consumer who saves $2,000 from a $6,000 monthly income will build generational wealth quicker than a consumer that only saves $1,000 from a $10,000 monthly income. Saving and then investing that savings is typically what’s most important when it comes to trying to generate long term wealth. If you don’t hold onto what you earn it won’t do you much good.

How Do You Start?

The first step you should take is to evaluate your financial situation. You need to understand what and where your strengths lie and focus on those. If your employee grants a great 401k match, try to max out your contribution. If you’re a great crypto investor, make sure you’re allocating savings to your investments. Everyone has a different path, the most important thing to do is to start, even if you feel like you’re behind your peers. The sooner you start the better. Figure out how much you can reasonably afford to save each month and start from there.

What’s Best for Tax Savings?

All financial products and tax advantage accounts have their benefits and downsides. More often than not the best strategy involves diversifying for tax savings. What this means is you should invest into a 401k and try to maximize any employer matches but you should also look to after-tax investing like a traditional Roth IRA (especially if you think you’re earning potential and subsequently your tax liabilities will increase in the future).

How Important is Consistency?

Consistency is key to growing wealth in the long term. Consistent saving and subsequently consistent investment will help you close the gap between your peers that might have a head start or earn more income. Remember, it’s not what you make but it’s what you save. You can make less money than other households but if you save more you will come out on top in the long term.

How Should You Manage Debt?

Managing debt is important for many reasons. Spending money on interest payments is effectively wasting money. Your first priority should be to eliminate high interest rate debt since it will null any positives from your investments and eat away at your momentum. Although interest payments are required for many consumers to purchase property and advance in life they should still be avoided whenever possible. Always look to evaluate the opportunity cost of your interest rate vs. a potential investment. If you’re paying 25% interest but your investments are generating 15%, it behooves you to pay down debt ASAP.

How Does Compound Growth Play a Part in Generational Wealth?

Compound growth is a game changer for many in the long term and compounding growth is key to generational wealth for many consumers. You need to start somewhere! Even if you only start with $100, investing that $100 will lead generate the same return in terms of percentage gain as $1,000 invested. Although you’ll net less total, the percentage is the same and that’s what matters. Little by little, as you save and invest more you’ll see a larger return and eventually the desired outcome.

Can Trust Funds Help?

Trust funds are typically a highly effective way to transfer wealth but you should speak with a financial/tax advisor to see what is best for your particular situation.

What Separates Good Decision Makers from Bad?

Understanding opportunity cost and having a positive and determined mindset will be the most important thing to helping you build generational wealth. If you understand what you are losing for every potential decision you make you will be all the better for it in the long term and you will be able to make better decisions.

How Does Diversification Play a Part in All This?

Diversification into different investment segments can typically help keep wealth from being destroyed by swings in the market in the long term. As a consumer, if you can diversify into commodities, real estate assets, cash, equities, cryptocurrencies, etc., you’ll be all the better for it in the long term. You can also look towards contrarian viewpoints besides just standard diversification of income.

How Can You Increase Your Financial Security?

One move you can make to increase your financial security is to eliminate all high interest rate debt and look towards increasing your weekly investment amount. Passively or actively investing more in the long term will help you succeed in the future and will help you and your family achieve financial success.