How can you create generational wealth?

The good thing about wealth creation is that it is very simple. The bad thing about it is that it is not easy.

The rules of wealth have not changed in the last century. The vehicles have only become easier to access. 30 years ago, if you wanted to buy shares in a multinational or invest in government bonds, you would probably need to save a huge chunk of your salary. Today you can do both for less than $50.

So how does one create generational wealth? I could create a seminar off this topic (I probably should) but I’ll try to summarise what I know in 6 simple steps. The sad truth however is, as with most things in life, the challenge is not a lack of knowledge but a lack of will to do what needs to be done.

1. Always Think Long Term

Thinking long term implies thinking way beyond your demise. It’s hard enough to picture the next 5 years, not to mention 50. What helps though is being able to identify what is (and will be) truly important to you, now and in the future.

Answer this question, what would you regret on your deathbed, if you got everything else you wanted, except that one thing?

2. Partner up with the Right People

This involves carefully choosing who you decide to work with (employers, employees, or business partners), the service providers you select for yourself and your loved ones (schools, doctors, banks, lawyers), and most importantly, who you decide to create that next generation with — your spouse.

3. Earn As Much As You Can

This requires you to acquire the skills and qualifications that will maximize your earning potential. It may also involve relocating to a different city (or country) with better economic opportunities than your current location. You may also consider diversifying your income streams. As Yoruba people would say, ona kan o woja (i.e. There is more than one route to the market).

4. Spend Less Than You Earn

To spend less than you earn you need to understand exactly where your income is going. This requires a budget.

But more than just minimizing your monthly expense, you also need to harness every legal opportunity to reduce your tax liabilities. This is an age-old method of wealth preservation.

5. Invest Wisely & Consistently

Investing wisely is simply the slow but steady habit of accumulating appreciating assets over an extended period of time. It involves keeping things simple and boring.

I personally believe anyone can achieve the same (or better) long-term investment returns as professional or “big-time” asset managers if they simply apply the same basic investment principles that have existed for decades: Diversify and hold for the long term.

When it comes to investing, your greatest ally is not your smarts. Your greatest ally is time. Time and patience. Regularly contribute to a moderately diversified portfolio and forget about it till you’re ready to retire.

6. Raise The Next Generation Right

This is the inter-generational part of generational wealth. And while it may seem controversial, you simply can’t leave any part of this to chance. Not your children’s health, education, or their careers.

Laszlo Polgar believed geniuses were made, not born, so he set about proving this with his own daughters. Much like Richard Williams, Mathew Knowles, and Earl Woods, he consciously carved out his children’s careers right from an early age.

Preparing the next generation also involves making sure you have a well-thought out estate. Much like step 1, you need to have a clear plan of what happens to your assets and your dependents after you’re gone. For readers of African origin, you want to spare your children the burden of black tax.

Next steps? Take a step

More than any other time in history, information about any of the above points is readily accessible to anyone who can read. The challenge, as always, is applying that knowledge.

So start applying that knowledge today.

Discover your values

Create a budget

Open an ISA account (for anyone in the UK)

– Set up a will

– Download Hinge! 😂

Do one thing today to bring you closer to your goals.

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