The Ultimate Guide To Generational Wealth Building: 11 Steps to Success | INVESTEDMOM
Creating a better life for your children than you had growing up is a common and understandable desire. After all, you want only the best for your family. Here's what they don't tell you, though.
You don't need to break your back your entire life to make that dream a reality.
Building generational wealth isn't a walk in the park, but it also doesn't have to be rocket science. Everyone starts somewhere, and no matter where your income level currently stands, there are guaranteed ways to have your money work for you instead of relentlessly working for your money. In this guide, we'll share with you fifteen actionable and proven ways to build a financial legacy for your family.
Why Do You Want To Build Generational Wealth?
Before we get into the meat of this guide, let's take a moment to transfer your mindset. In order to begin your path to financial independence and family wealth, you must first identify your motivators. What exactly is it that's driving you to make this leap in your financial literacy?
You may want to begin this journey because:
You're tired of living paycheck-to-paycheck
You want to afford your child's education
You're stuck in a cycle of debt
You have poor credit or a low income
You're struggling to save money for your retirement
If you identify with any of these unfortunately common issues, this guide is for you. Growing up and struggling within a low-income family can be difficult. You might have some unresolved wounds related to this experience, and that's okay. You can take this feeling and find solace in it because you'll know that your own children will never have to go through what you have. I should know. I went through the very same thing.
Nice To Meet You. I'm Your Generational Wealth Coach.
My name is Inge, and I am a single mother who has gone through just about every item on that list up there. I had spent most of my life trapped in a sea of debt, empty savings accounts, and seemingly closed doors. This all changed when I began my generational wealth journey.
I knew I wanted future generations of my family, specifically my children, to thrive in life instead of merely surviving. I was tired of the standard 9-5 and realized that it was useless to try and save up when I was relying on one stream of income. I started researching and developing a solid foundation to build my wealth.
When I began my journey, I quickly realized that:
Not everything you invest in is a long game. Some pay off pretty immediately!
Most big-wig investors are men (Warren Buffett, Charlie Munger, Etc.), which was definitely a contributor to my hesitance to start investing.
Becoming a generational wealth advisor was my calling because so many people out there have the tools and attitude they need to start accumulating wealth but simply don't know where to begin (just like me!)
The fact is, financial assets are only one of the things required to build this kind of long-term growth. The true essential ingredients are determination, drive, and passion. If you possess these traits and hunger to secure your family's financial future, read on as we go over the eleven steps it'll take to get you there.
Step One: Start To Save Seriously
When you start building generational wealth, you'll begin to notice that the process gets easier the deeper you get into the investing process. It takes money to make money, or so they say, which is why your first step is to begin an emergency savings account. Shockingly, according to Zippia, 42% of Americans hold less than $1,000 in savins as of 2022.
You might think this step is arbitrary because perhaps you already have been saving money, and it hasn't been working. But here's a question for you: Are you saving your money wisely?
Obviously, the first thing to eliminate is impulse purchases. It would also help to take the time to cancel any subscriptions you don't need and put a limit on what you buy online. But, from there, you must implement a saving strategy.
Ideally, you should have a target amount of money to save each month. This could be as little as $50 to as high as $300. This depends, of course, on what you can afford at the time. The key here that will make or break this strategy's effectiveness is whether or not you are consistent.
A good way to self-ensure consistency in your savings accounts is to treat it like a bill. You wouldn't miss rent, and you wouldn't miss a student loan payment, so try to maintain this kind of thinking when dealing with your savings.
Besides, knowing that you have a nest egg for emergencies means you can invest with little worry.
Step Two: Developing A Mindset of Abundance
Now that we've established that you have a little something set aside, it's time to work inwards. If you've heard of the Law of Attraction, which I'm sure you have, you shouldn't be shocked that it has some serious truth. When it comes to creating generational wealth, sometimes the process of unlearning is as critical as learning.
What do I mean by this? Well, it's simple. Society has trained us to think that elevating ourselves is impossible. Money comes, and money goes, and there's no way to guarantee that what you're making now can trickle down to a third generation or even your own children. Sometimes our limiting beliefs are the very thing that's holding us back.
Instead of a mindset of scarcity or worrying and doubting, replace this mentality with one of abundance. Positive thinking leads directly to positive results, and that's no joke. If you think it's impossible to create generational wealth, it will become so. If you think it's feasible, you may find that your income will improve with much greater ease. This is the Law of Attraction.
Something that aids this kind of thinking is positive affirmations. These are statements that you should repeat to yourself regularly, whether verbally or written. Here are some affirmations that will have a very positive impact on your mentality:
I know that financial security and generational wealth are possible for my family.
I have what it takes to create investments that pay off in the long term.
I possess the knowledge to care for my loved ones and earn a consistent income.
My past does not determine my future, and my wealth will only grow by the day.
You might think this is arbitrary or foolish, but I implore you to try it seriously as a step in your daily routine. Learn to associate money with positive characteristics instead of negative ones. Don't be afraid of success. Capture it.
Step Three: Implement Focused Goal-Setting
Before you have any chance of reaching the goals you have regarding your wealth, you have to first establish what exactly these goals are. Goals are critical and according to Reliableplant.com, 80% of people are not setting up goals for themselves.
They can't be broad, like "I want to have a lot of money," or even anything like "I want my family to have a good future." They need to be distinct if you want them to be achievable.
The best way to start setting these goals is to have the SMART method in mind. If you're unfamiliar, here's a breakdown of the method:
Specific – Define your goal using specific terminology
Measurable – Measure your financial success with evidence
Achievable – Identify the experience and skills you’ll need
Relevant – Decide whether the goal will help you build wealth or not
Time-based – Choose a time frame for you to achieve your financial goals
Now that you've familiarized yourself with the SMART goal method, let's review an example of what that would look like in practice.
Instead of this goal: I want to save enough money for my child's education.
Set this goal: I want to spend the next six months putting the money I've earned through my real estate investments into a separate account dedicated to my child's education.
Do you see the difference between these two goals? The first one is vague, and the second is very particular. This is the kind of thing you should be mindful of when developing your goals in building generational wealth.
Step Four: Audit Your Financial Habits
Now, extreme budgeting isn't the key to building wealth. You don't need to start living off of noodles and fast food. That being said, you do need to take a look at your financial habits as they stand and see where it makes sense to cut the fat.
If your family goes out to eat a lot, you can create weekly traditions involving the children in cooking meals. According to EatPallet.com, Americans spend more than $1,200 every year on fast food, making it a good place to start if you are trying to cut back. If you find that you spend a lot of money shopping, consider hitting up a thrift store instead of the mall. But most of all, ask yourself this before purchasing items: How will this object serve me?
Think of the things you buy as investments instead of mere purchases. Consider how often you'll wear that new blouse or how much of a food item will go to waste if you buy it in bulk. If you audit these behaviors, even slightly, your cash flow is bound to increase over time. You'll build your wealth mindfully when you make space for what truly matters. Remember, it isn't about limiting or suppressing your spending but rather ensuring that you spend wisely!
Step Five: Audit Your Personal Habits
Now that you've figured out what purchases you should cut out to improve your financial situation, it's time to think critically about the habits and behaviors setting you back on your journey to generational wealth.
Most people spend a lot of time each day on their digital devices. Whether that be watching television, surfing the web, or scrolling through social media, consider what your time could be better used doing. According to Smart Insights, users spend an average of two hours and twenty four minutes on social media. Are you consuming content that increases your financial know-how and skillset, or are you merely watching pointless entertainment that doesn't help you become fulfilled?
Something that many people take for granted on their journey to try and build generational wealth is their personal health. For instance, going to bed and waking up an hour earlier could do wonders for your productivity. It's also good to ensure you're eating right and getting a decent amount of daily movement.
Generally speaking, in order to give your best output, you need to guarantee your best input.
Step Six: Starting A Side Hustle
Your full-time job might be treating you well, but there's always time for something extra. If you're familiar with the side hustle culture, you might already know what kind of business you want to get into. According to Self.Inc 45% of American’s have a side hustle.
A side hustle that brings in an extra $500 a month quickly turns into $6,000 a year. This could make a substantial difference in your income level, and establishing your own business, no matter how small, will be a very wise move in the long run.
When starting a side hustle, there are endless options available based on your particular skill set. Having multiple streams of income and extra cash flow means you are that much closer to financial security.
Here are some of the most popular kinds of side hustles:
Food delivery services
Rideshare services
Ecommerce businesses
Selling thrifted or old clothing online
Creating a crafting business
Babysitting
Dog walking or dogsitting
Freelancing a media skill
The best part about a side hustle is just that: it's on the side. The amount of time and dedication you want to give it is entirely up to you, and that effort will correspond with the wealth it will provide you with in turn.
Step Seven: Upskill Yourself
You might think there's no way for you to create multiple streams of income because you don't know anything other than what you do at your day job, but the good news is that it's far easier than you might think to teach an old dog new tricks.
Not that you're old!
It's just a saying.
Anyways...
There are two different kinds of skills: soft and hard skills. Soft skills are personal qualities that make you easy to work with, such as being a team player, problem-solving, and communication.
A good way to develop your soft skills and learn something from industry experts is by taking advantage of your dusty old LinkedIn account. If you become more active on the platform, you can learn from people just like you who recently began developing their generational wealth.
When it comes to hard skills, the good news is that having a solid grasp of just one or two skills will be enough to take you a long way. Most people only have a basic understanding of technical skills, so knowing one inside and out will make your professional life much easier.
Here are a few examples of hard skills that have a very high payout:
Coding and software enhancement
UI Design
Copywriting
Digital Marketing
SEO
Content creation
Data analysis
Step Eight: Learn About The Stock Market
Building generational wealth can be a lot simpler when you know that a large amount of money is invested in the next generation. In fact, the most reliable way to guarantee more money over time is through stocks, bonds, and mutual funds. According to Statista, 58% of Americans invest in stocks. Before you start investing, though, you definitely want to take the time to learn the difference between these three valuable assets.
Stocks:
Represent ownership in a company
Offer the potential for high returns but also come with a higher risk
Shareholders may receive dividends and may have the ability to vote on company decisions
Can be bought and sold on a stock exchange
Bonds:
Represent debt that an investor lends to an issuer, such as a government or corporation
Typically offer lower returns but also come with lower risk
Investors receive periodic interest payments and repayment of the principal amount at the end of the bond's term
Can be bought and sold on a bond market
Mutual funds:
Represent a collection of stocks, bonds, or other investments managed by a professional fund manager
Offer diversification and reduce risk in how you invest
Can be either actively managed or passively managed (such as index funds)
Investors buy and sell shares of the mutual fund rather than individual securities
If you're unfamiliar with investing, the stock market is a topic worth discussing with a financial advisor. It's a very complex thing, but once you have a reliable amount of know-how, it's an investment that is absolutely worth considering.
Step Nine: Learn About Real Estate
Having a real estate plan, or even basic knowledge around the topic, can be an incredible opportunity for an additional stream of wealth that can turn into a passive income very quickly. With the market growing more lucrative by the day, real estate is a worthwhile investment that is certain to solidify a lasting legacy for your family. According to Bay Property Management Group, 74% of rental properties are owned by rental investors.
Real estate can be tricky to get started in, but once you have your foot in the door, the investment begins paying itself off almost immediately. Your life becomes much simpler when you have multiple properties at an early age, but frankly, there's never a bad time to get started.
The most important thing to remember regarding real estate is that this kind of generational wealth transfers directly. Your family will have access to that property forever, and that kind of investment is one that is sure to pay off. However, make sure you learn all you can before putting money into real estate property.
Here are some things you should consider regarding your real estate plan:
Where the property is located
Whether it's a commercial or residential property
Whether you plan to renovate and flip the house or use it as a rental property
How much you'll have to pay upfront and whether or not loans will be needed
You should start building your real estate knowledge ASAP, as these kinds of assets will impact your family's future generations.
Step 10: Invest In Family Businesses
If you're looking for somewhere to invest that isn't a large corporation, consider a small, family business. There are over 31 million small businesses in the US, and all of them could certainly benefit from your hard-earned money. Plus, you get the added benefit of knowing that while you build generational wealth for yourself and your family, you're helping someone else, too.
If you want to generate passive income from business investments, you can either do so in the form of equity or debt investing.
Equity investments represent ownership in a business. When you invest in equity, you become a shareholder and own a portion of the company. Your investment is represented by shares in the company, and your return on investment comes from the company's profits and potential increases in the value of your shares over time. These are generally riskier than debt because the returns are tied to the success of the company, which can be unpredictable, especially when dealing with a smaller family business.
Debt investments, on the other hand, represent a loan to a company or organization. When you invest in debt, you essentially lend money to the company in exchange for regular interest payments and the repayment of the principal amount at the end of the loan term.
Step 11: Let Your Investing Pay For Itself
Family wealth truly lies in being independent from a day job. Eventually, investing will change from a little something on the side to your primary form of cash flow. It only takes one generation to change the trajectory of your family's financial security.
Once you've implemented the previous steps into your life, think about what works and what doesn't. Your key takeaways should determine what you want to put more time and money into in the future, and by this point, you'll have the cash to do so.
Take what you've learned and give this information to your children so they understand the basics of investing at an early age. Continue to compile your savings, and learn more closely how stocks and estate plans will pay off long-term. Generational wealth isn't created in a moment, it's developed throughout a lifetime.
Now Look Who's In Business!
By the end of these eleven steps, I hope that you've managed to complete some of your SMART goals, whether paying off student debt or cushioning your retirement accounts. Creating generational wealth is truly rewarding.
That being said, it's okay if you need additional advice. These steps might seem simple on paper, but taking the jump into investing your income can be something scary that you might not want to take on alone. If that's the case, don't worry. Contact me today, and we can arrange a personalized discussion on how you can start creating generational wealth for your family one day at a time.
Remember: Becoming the first generation within your family to break the cycle of debt is far from impossible. The flourishing financial life that you deserve is merely steps away.
Meet the Author:
Inge was born and raised in Cape Town, South Africa, and moved to Canada in 2010 looking for a better life. She always had an entrepreneurial spirit and started her first side hustle when she was 9 years old – selling fudge at school during lunch breaks.
It wasn’t until much later that she realized that saving isn’t enough to get ahead. She was always very interested in real estate, but saving up for a down payment was grueling and slow, and the demands of life kept getting in the way.
She started investing in herself and upgrading her skills while learning how to invest. She quickly became debt free and compounded her money at a staggering rate.
It wasn’t until she became a coach that she realized how significant an impact she can make in people’s lives by sharing her journey, learnings, and processes.
So here she is, advocating for everyone who is invested and wants to build their wealth, especially the mommas!