How to Create

Generational Wealth

As I was cruising Facebook recently, a Facebook friend of mine asked, “How do you create generational wealth for your children?” I loved the vulnerability and inquisitiveness of this person to put this out on a forum that can be kind or ruthless, honest or deceitful, transparent or obfuscatory. It also is prone to capture all opinions, many from those who don’t have generational wealth!

The answers were interesting. One person responded that it took luck. Another person responded that generational wealth has historically been reserved for people of certain colors. Another person suggested brown bagging lunch to save money. Another person said wealthy people had smart advisors that guided them. A few people (my kind of people) responded that generational wealth is most often created through real estate. And that my friends, is why I am writing this article.

My back story, condensed into a few short sentences, is a story of creating wealth, which will be passed along to my children, mostly through real estate, but also through business creation and diversifying investments. Neither my husband Darren nor I were given any “wealth” and had to work to create our current situation. I paid for my college and left law school with more than $80,000 of debt in 1997. Through the last 25 years, we have studied, learned, risked, succeeded, failed, laughed, cried, dreamed big, worked hard, shifted gears, pivoted, open businesses, closed businesses, and overall ended up in a good place. As my husband always says, “You only need to be right 51% of the time.”

Here are my tips to building generational wealth, from my own trial and error, from stories of my friends and clients, and from loving the concept of wealth building, especially through real estate.

Mindset

Before you begin writing your business plan for the next big thing, you must have an abundant and wealthy mindset. You must believe that money is abundant. That it is your birthright to have it, make it, keep it, circulate it, and enjoy it. That having abundance for you doesn’t mean that you are taking it from others. Understating there is plenty to go around and money is just energy that is created, enjoyed, shared, and multiplied. This sounds easy, but most people have unconscious beliefs about money that block it from flowing to and through them. Here are a few:

Money doesn’t grow on trees
You must work hard for money
I never have enough money
Only certain people have money
Me being rich means I’m taking money from others
Rich people are greedy

Any of these sound familiar? If you are like the Facebook commenter that thinks wealth is reserved for people with certain skin colors, that will be her truth. If you are like the Facebook commenter that luck is what you need, you better believe you are lucky, or you won’t be wealthy. Have you seen people who make money and then lose it all, over and over? These people have beliefs about money that keep them from claiming and keeping it as their own. Cleaning up these nagging beliefs that keep you from your own personal free flow of abundance takes self awareness and work, but is the necessary first step to be on your way to creating generational wealth.

Here are some resources I found helpful:

A Happy Pocket Full of Money: Infinite Wealth and Abundance in the Here and Now, David Cameron Gikandi

Where to Begin?

People are at very different places in their lives, financial circumstances, education, etc. This article isn’t going to capture the millions of differing situations, challenges, education levels, geographic constraints, etc. So, before I get chastised for being “capitalist,” “libertarian,” “elitist,” or whatever other narrative is out there, let me first preface this section with a basic tenet. I DIDN’T CREATE THE GAME – I’M JUST PLAYING IT. I’m not making judgments about how the economy works, I’m just telling you how I have seen others and how I have garnered “what is” to create wealth. If this makes you uncomfortable, please go back to Point #1 and work on that issue.

In 1997, Robert Kiyosaki wrote the book, Rich Dad, Poor Dad. I believe that I read it in 1999 or 2000, and it changed my life. It entirely shifted my perspective about how people make money. For this article, I just read the reviews on Goodreads and there are some people who are really angry about it, and are commenting that it’s too “capitalistic” and “simplistic,” and “not everyone can be a boss or landlord” but let me tell you, 20 years ago, it was an accepted way of thinking.

But, I digress. If your goal is to create generational wealth, this is a good place to start. Then read the rest of Kiyosaki’s books. Kiyosaki will break down how, in order to create wealth, your money needs to be working for you while you sleep. You own assets that generate income. By methodically acquiring assets that generate income for you, you eventually remove yourself from the equation from having to work an hour for an hour of pay. There is also a Cashflow game that he created which takes players out of the “Rat Race” into a life of cash flow. It’s a grossly simplified version of life, but it reinforces the concept of assets generating income and creating the ultimate reward: PASSIVE INCOME.

Kiyosaki, in this book and subsequent books, also lays out the financial differences between being an employee versus a business owner. The U.S. tax code highly favors business owners and real estate ownership and treats business income and real estate assets differently than W2 wages. (Again, don’t hate the player . . .) With business write offs, depreciation, and pre-tax v. post-tax spending, you can see the benefits to being a business owner versus an employee.

Taking Risk and Embracing Failures

Let’s face it, some people have higher risk profiles than others. I have friends who tell me that they will always have a job because they want to know exactly how much money they are going to get each week, they need health insurance, and they thrive on stability. And you know what? That is perfectly fine! There are others who cannot imagine working for someone else and will always be business owners and/or entrepreneurs. These people I call “unemployable.” Investing in assets that generate decent amounts of returns will require some risk tolerance. You cannot be guaranteed anything. The larger your appetite for risk, the more money you stand to make.

It’s taken me two pages of writing to get to the part where I’m going to talk about real estate, which is my passion. Real estate is the ONLY, and I mean ONLY investment where you can put down as little as no money (for a primary home) to up to 25% of the purchase price, yet enjoy the appreciation on the value of the entire asset. Read that sentence again. To expand, if you want to invest $100,000 in stocks, you need $100,000. If you want to buy a $100,000 condo, you need $20,000 for 20% down. Let’s say both appreciate at 8% a year. After one year, you have $108,000 in stocks, and $108,000 condo. But you made $8,000 on $20,000 cash with the real estate and made $8,000 on $100,000 investment in stocks. The cash on cash return for real estate wasn’t 8%, but was instead 40%. Nice huh? Now imagine that the condo is one that you rented out and in addition to the $8,000 appreciation, you were able to generate $1,000 month in positive cash flow with tenants renting out the condo. You have now made $12,000 cash, $8,000 appreciation, and we haven’t even begun to take into consideration the tax benefits of real estate ownership.

The bottom line is, What is important to YOU?

Everyone has different goals, budgets and ideas for their mountain home. The more thought you put into what you want, the easier your choices will be.

We can help you get all the information and advice you need to make the best decision. Let us put our experience and market knowledge to work for you.

SCHEDULE A FREE INDIVIDUALIZED CONSULTATION

Contact The Amy Nakos Group

Summit County, Colorado 80443
+1-970-389-8388
group@amynakos.com

The Amy Nakos Group
Summit County Real Estate Experts
35 E Main St #630, Frisco, CO 80443