5 Investment Strategies to Build Generational Wealth
Building generational wealth is an important mission for any individual. This is because it has something to do with acquiring assets and cash for the sake of leaving your loved ones living comfortably without having to worry about money.
However, this crucial journey is not easy for many people to embark on. The major reason is that many of us already have pressing issues on which we spend most of our time. Such issues include paying off your credit cards, mortgage, or car loan. We are so consumed by these things that we think we do not have time to start building generational wealth. But, in this article, you will learn five ways to help you build generational wealth even in the middle of all the noise and ‘pressing issues’ we mentioned above.
Therefore, what are the five ways or strategies to build generational wealth?
Bulk up on savings
Many of us fear building generational wealth because we look into our bank accounts and see nothing. However, if you create a savings plan, you can start building a cash reserve. To do this, you will need financial discipline and a budget where you allocate a specific amount of your earnings towards saving.
You could be asking how you will save if you are not employed. The truth is that almost all of us get our hands on cash from time to time. This could be pocket money from our parents or spouses or a general cash flow frequently coming from well-wishers that you know. You can use this money to save because no rule says you can only save money from wages or salaries. Once savings build up, you will be ready to take things to another level.
Insure your assets and your family
The next step you should take before investing is to protect the money you already have. How do you do this? You must get insurance for your family and assets. If you already own a home, ensure that it is insured; the same goes for everything you own. The reason for doing this is to protect the money you have already saved as you get ready to start investing.
Imagine, after saving $100K, you ignore getting house insurance, and boom, a tornado strikes, leaving your house in the ground? This means you would have lost a home, and no insurance money is going to pay for it. The next step is you will dig into your savings to try and replace that house, which leaves you back to where you started – with zero money, zero savings, and zero investments. The same applies to health insurance; it ensures that your saved money is protected in case one of your family members gets sick.
Invest in index funds and government bonds
Index funds are low-risk investments that protect investors through investing in various companies. This reduces risk because those many companies in an index can dilute each other’s risk until it is almost zero. These, together with government bonds, are the safest assets to invest in. They should be the first you must invest in as soon as your savings are enough to embark on this journey and you have finished insuring your family and assets.
These investments are first in line because, as a rookie investor, you may have less knowledge about the markets, hence exposed to so much risk. However, you can protect your money by simply targeting these low-risk assets. As such, invest in them at this stage and wait.
Invest in equities
After some time, your investments in index funds and government bonds would have resulted in two things. First, you could have earned more money or returns. Secondly, you would have gained valuable information about investing and protecting your investments. Armed with more money and this knowledge, you may be able to start investing in more targeted listed companies that present high risk and high rewards.
You may also target dividend-paying companies known as dividend stocks. By doing this, you increase your total investments in the market. This can result in more of your money building up, increasing your net worth to some exciting levels. But remember, this all has to work as planned, and you must not withdraw your investments prematurely. Instead, invest with a long-term view because you want to build generational wealth, not withdraw your investments to buy an expensive Gucci bag.
Invest in real estate and REIT
The final play in this game is buying real estate properties or putting money in a Real Estate Investment Trust (REIT). Many generational wealth builders love real estate because buildings provide the safest protection for your money. When inflation rises, so does the value of properties. Therefore, if you own them, you would have protected your money in the long run. More so, owning buildings provides constant cash flow because you can rent them to individuals or businesses, depending on the types of properties you own.
In conclusion, building generational wealth is an intentional process. You should decide and commit yourself before starting. Many people fail to get off the ground because they think too little about their incomes. But no one can excuse themselves from saving merely because you earn less; you can always make a plan; you can always draw up a budget and start saving. However, if you need help or an assessment of your situation and how you can start building generational wealth, contact my team to book an appointment with me. I will help you figure it out.
Frequently Asked Questions
1. How do we generate generational wealth?
Generational wealth is created in various ways. But one major way to do so is to create various income streams and consistently maintain them until your income is enough to buy expensive assets such as rental buildings or shares in major companies.
2. What is generational wealth?
Generational wealth is wealth that can be passed down from one generation to another. It is also known as legacy wealth.
3. Why is generational wealth significant?
Generational wealth gives your family members a good start in life. They will have advantages such as not having student loans or waiting until they are 40 to buy their first house. More so, generational wealth creates a family culture of making money that can be passed down from generation to generation.
4. How can I build wealth fast?
There is no way of building wealth fast. People who believe in building wealth fast take shortcuts that sometimes end them in jail. So, to build wealth, learn the ropes, be patient, and steadily apply financial discipline as you build upon what you already earn or have.
