How Smart Families Build Generational Wealth

How Smart Families Build Generational Wealth

Take a look at some of the wealthiest families you know. Take a look at some of the most affluent families around the world. Despite their location and a particular source of wealth, you might have noticed that they almost always have one thing in common: Their wealth is generational. It’s the accumulation of hard work and planning paying off over multiple generations.

Some get lucky or work extremely hard to accrue wealth for retirement. For most, the wealth was handed down by people who knew how to grow what they had. We are talking about people who started with two sheep and knew how to turn them into four, eight, sixteen and thirty-two – and then pass that foundation on to their sons and daughters who then went ahead and did the same thing.

This form of wealth creation does not happen overnight, but the strategies employed are simple, requiring only your discipline and diligence, one day and one year at a time.

Here are five fundamentals that savvy families employ to generate wealth, not only for themselves but for future generations.

They have a Realistic Retirement Plan

Your superannuation plan shouldn’t be the only source of retirement. Those who do well at developing wealth are typically also engaged in production. They produce something of value – or add value – to the supply chain.

They may be directly involved or investing in new technologies that solve real-world problems.

There is no need to enter high-risk activity until you are a more seasoned investor. Take a look at some of the low-risk ventures you could be contributing to. Choose investments in areas of genuine interest with a view to handing these investments on to your children.

Consider your risk profile before jumping feet first into an investment.

They are Usually Investing in Property

Bill Gates is an excellent example of those who increased their future wealth in recent years through property investment and is now among the biggest landowners in the United States.

Again, think local. Learn how to negotiate buying a house or other property investment through research and by talking with those on the same journey. Start small and grow your land and property investment portfolio as funds allow.

They Have Learnt to Keep What They Earn

The most obvious way to build future wealth should be obvious: Start saving money. If you are not putting aside something each month for the future, you are unlikely to see results.

As simple as this is, it’s not always that easy. People who are taken in by social pressures to acquire material possessions (which lose value over time) are not usually good at developing wealth long-term.

They Stay on Target with Their Budget

There is simply no better way to plan for your financial future than a realistic and precise budget. Having a family budget means monitoring debt, determining sensible expenditure and savings, and countering unexpected costs with minimal impact.

Your budget should not be a wish list but a realistic account of what you can and cannot afford, as well as what you are genuinely able to save. It’s not the amount of savings that is key, but your ability to maintain and monitor spending.

They Know How to Cut Spending

This is perhaps the most challenging aspect of all when it comes to wealth creation. The family budget should be viewed in a way similar to any other financial enterprise or business.

A reasonable budget will highlight rising costs, frivolous spending, and areas and opportunities to reduce overall spending.

Like any innovative business, the intelligent family is generating wealth for both their retirement and their future generations is a family that can see opportunities to buy better and spend less while still enjoying some of the fruits of their labour today.

Building generational wealth means having an eye on the future. It means being able to imagine the grandkids climbing that great oak your grandfather planted but never got to climb himself. This calls for both a smart – and unselfish – attitude to wealth.

Some rewards you will reap straight away, and some you will enjoy in retirement. But all of them should in some way build upon a foundation that will not only be enjoyed by you but by the generations to come.