For people who are looking to leave a lasting legacy, creating generational wealth is a thing. But what is generational wealth, and how do you go about creating something that will last?
Generational wealth is usually referred to the assets that are passed on from one generation to another. It can be in the form of investments, shares, real estate or anything that can be used by the next generation as a financial advantage. However, it is not always easy to maintain generational wealth if the people who will inherit your wealth do not have the financial education on how to manage the funds. It all starts with the simple things such as defining your worth, budgeting, savings and learning to make sound investments.
Defining your worth
Creating something that will exist long after you are gone tends to boil down to what you define as your worth. Knowing what your strengths are and what are the areas that you are weak at can help you leverage your way into leaving a lasting legacy. Look at skills, assets and personal values that drive you forward and increase your worth. Do the same for things that take away from you creating a lasting legacy and work on these. It is always good to start as soon as you can than to delay the process.
Start with the basics and work your way up
Building generational wealth takes a lot of work. It is also just as hard to maintain it. According to a recent study, 70% of rich families that have inherited their wealth usually lose their wealth by the second generation. Therefore, it is crucial to grasp the basics of financial education to make sure that what you leave behind is used wisely. Start off with the basic things such as:
Budgeting is an important foundation to know if your income and expenses align with your financial goals. Creating a realistic budget can paint a clearer picture of where your money goes to and help you cut back on things that are causing you to lose money.
Investing your money into financial products that are designed to protect your finances such as life insurance, income protection and disability insurance. You can gradually make your way into things such as shares and stocks once you have protected your main source.
Saving between 10-25% of your income against things such as becoming unemployed or being faced with an emergency can help you avoid out of pocket expenses. Save 3-6 months’ worth of your living expense to cover expenses.
Diversifying your financial portfolio
Diversifying what you use your money towards in the form of investments can save you from putting all your eggs in one basket; should anything go wrong, you will not lose everything. Speaking to a financial advisor can give you insight on the best option that is suitable for your finances. It can be anything that helps you generate passive income. But always remember to start small and gradually work your way into accumulating more assets.
Using your worth as an anchor and combining this to what you value can create a legacy. It is also important to remember that your journey is not the same as the next person.