What Generational Wealth means to me - and why it should matter to you...May 26, 2021
"The things you do for yourself are gone when you are gone, but the things you do for others remain as your legacy." Kalu Ndukwe Kalu
2020 was the year I finally turned things around - I went from Financially Stuck and being tethered to my job in medicine to understanding what Financial Independence would really mean for me and my family - and accelerating towards it. Today I am Financially Free - which means I can live life and practice medicine on my terms. Passive income from my hybrid portfolio (predominantly from cash flowing rentals) will cover all my family's expenses including discretionary spending indefinitely.
And yet as human beings, the celebration of one milestone brings with it scrutiny of the road ahead. Our need for significance trumps all. In my heart I knew that the next phase would be about bridging generations - Generational Wealth and the legacy I would leave behind.
What then does Generational Wealth actually mean? What is it's impact and how do you create and preserve it?
Rich vs Wealthy:
It almost feels necessary to first talk about what I believe being rich means as opposed to being wealthy. Dr Tom Burns, author of "Why doctors don't get Rich" describes being rich as having or making lot of money - but not having choice or time. To be wealthy on the other hand means
- you have taken back your time - to focus on what is important to you - traveling, nourishing your relationships, putting your physical, emotional and spiritual well being first...
- and you have freedom of choice - you can live life and practice medicine on your terms, tailor your job to fit your needs, explore new ventures...
Which brings me back to how as high income professionals many of us are trapped by golden handcuffs - with lifestyle creep and over consumption. Making more money and being rich just does not translate to having the freedom that comes with truly being wealthy. It is my strong belief that wise investments that generate sufficient passive income are the only way to create meaningful wealth.
So what is Generational Wealth??
When I think of Generational wealth - I think of more than just assets and money that you pass on to the next generation. I think of :
- Freedom - call it financial or time freedom or freedom of choice that you have not just created for yourself, but freedom that you can pass on to future generations and use to bridge and connect generations. Wealth that gives you the freedom to bring many generations under the same roof more evenings than you could have otherwise. The freedom to go on more family vacations, freedom to take time off to care for a loved one... which is priceless.
- Security - for the generations before and after you. I was raised by a strong father who to this day supports his extended family financially in small ways. Working towards financial independence and creating wealth that would impact those around me was just me emulating my role model.
- Love and values - that pass down from one generation to the next - especially when you have wealth that gives you the time and freedom to nurture more meaningful relationships
- Impact and Legacy - that we leave behind for future generations and in the society that we are an integral part of. For what is wealth that does not touch and enrich peoples lives? 5 years ago I co-funded a Non Profit Educational Trust in the village in India my family is from. I hope to touch and transform more lives and many generations through GenerationalwealthMD, and donate the majority of proceeds towards social impact initiatives in rural India.
How do you create Generational wealth?
To build wealth you can pass on to future generations, you need to acquire assets or save money you won’t need to spend in retirement. And although you can
- save aggressively or
- invest in the stock market,
both of these strategies involve withdrawing from your portfolio in retirement to fund expenses. Alternatively you could :
- create a family business that you can hopefully pass on successfully to your children or
- invest in cash flowing real estate - which is an excellent way to generate inflation matched tax free passive income in retirement and pass it on when the time comes. Additionally over time, equity in the portfolio keeps growing - which I why the wealthiest families in the country are heavily invested in real estate - it is the most amazing way to create generational wealth and freedom.
But there is something that is more important than creating Generational Wealth.
While it is important for you to get your affairs in order - have adequate life insurance early on and create an up to date will and estate plan... the key to preserving generational wealth is raising fiscally responsible and financially literate children.
Research shows that approximately 70% of families lose their capital in the second generation while 90% lose it in the third.
Although my parents had amassed significant generational wealth quite early, we were not raised with a false sense of entitlement. I attended medical school on a merit scholarship and I was always encouraged to work hard for what I wanted. Looking back, I see the efforts my parents put in to ensure that we were raised to be fiscally responsible. I wish I had been raised with more financial literacy though - I could avoided the investing mistakes I made early on in my career. Not just for the implications on my net worth (which is millions of dollars) but for the years that I lacked choice and time freedom.
There are numerous courses and books on financial literacy, but talking to children and teaching smart money lessons and involving them in the family business early on definitely plays a big role in pushing family wealth forward.
And there you have it - my take on Generational wealth. If you haven't already joined the Facebook group, please do so and share. I would love to hear your thoughts!
"The greatest legacy anyone can leave behind is to positively impact the lives of others" Emeasoba George
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