Building generational wealth can sound like a daunting goal. With market volatility and longer life expectancies, it’s hard enough to make sure you don’t outlive your own wealth! Yet many parents want to create a lasting financial legacy to benefit their children, grandchildren and beyond. In this article, we’ll discuss how to build generational wealth for your family using proven strategies and financial tools shown to protect and grow your family’s assets—plus increase wealth for your own retirement in the process.
HOW TO BUILD GENERATIONAL WEALTH
STEP 1: FINANCIAL EDUCATION
If you want to build generational wealth, the first step is to educate yourself and your family on financial best practices so that you can protect your assets. According to Tom Wheelwright, CPA, author and entrepreneur, “Financial education is what fundamentally separates the rich from the poor—the lack of it is why most people pay so much in taxes, why many fall short of building wealth, and why few ever achieve financial freedom.”
Want proof of the importance of financial education in building generational wealth? When oil-tycoon John D. Rockefeller died, he had amassed a fortune of over $1.5 billion. During that same era, Cornelius Vanderbilt amassed a fortune of over $100 million. Today, the Rockefeller’s fortune continues to grow, while the Vanderbilt fortune is completely gone. Through dynamic estate planning and wealth management, the Rockefellers not only perpetuate their wealth, they ensure their heirs are given the financial education needed to continue their legacy.
So, where do you start?
In order to map out a path, you need to take a closer look at where you’re at right now. To do that, you’ll need to collect your income statement and your human capital statement. Your income statement is the scorecard that measures wealth-building activities—savings and investing. A Human Capital Statement helps you identify wealth-creating opportunities—making more money.
Your Income Statement
Take a deep dive into your current income statement to get a better idea of your income and debts. Where can you pay less, and where can you earn more?
Think about how much interest you pay on your debts. Who benefits from your interest payment? What if you could reduce that interest or recapture it, thereby reducing the cost of your loan? Better yet, what if you could borrow money from yourself instead of a bank or third party lender?
Look at your savings. Do you have 6-24 months of living expenses saved somewhere liquid you can access in case of an emergency? Beyond that amount, do you have money sitting in savings that could be earning more money in a different account or investment fund?
Are you investing on a regular basis? How volatile are your investments? Are they managed by a third party where part of your gains go toward brokerage fees, or are you in control?
And don’t forget taxes. How much do you pay annually to the state and federal government? It might surprise you to know that taxes are the biggest bill people pay.
Your Human Capital Statement
Your Human Capital Statement measures your greatest asset—you. What are your strengths, core competencies, and passions? What are your liabilities—things you’re not so great at that eat up your time. What are you paid for on your income statement and how well does it align with your assets? What do you pay others for and how well does it align with your liabilities?
Your financial results are a function of what you do. By focusing on your own personal development and that of your family, you have the capability to increase your human capital and build generational wealth. It could involve getting more education or certifications that would increase your value in business, looking for new investment opportunities that align with your passions and expertise, or creating your own business.
Now that you’ve identified your wealth-building activities and your wealth-creating opportunities, it’s time to implement a strategy to help you accomplish your goal of building generational wealth.
The Perpetual Wealth Strategy™
The Perpetual Wealth Strategy is an educational system that can help you maximize your cash flow, recapture interest, minimize tax, and leave a lasting financial legacy. The Perpetual Wealth Strategy works for everyone, regardless of your financial stage, whether you’re paying down debt and working to build wealth, looking toward retirement and in need of cash flow you won’t outlive so there’s money left for future generations, or preparing for long-term care expenses without depleting the financial legacy you hope to leave behind.
In our free eCourse, Perpetual Wealth 101, you’ll learn how to reduce reliance on Wall Street and banks, putting you in control of your financial future and reducing fees paid to fund managers or money paid on loan interest. You’ll learn how to earn guaranteed passive income and tax advantages. And you’ll learn how to set your children up for proven financial success.
STEP 2: A PRIVATE FAMILY BANK
Once you’ve completed Perpetual Wealth 101, it’s time to implement the proven financial tool that will help you grow and protect generational wealth—your private family bank.
Private family banking is a system where you save money in mutually traded whole life insurance companies instead of a bank. Your insurance company pays you a guaranteed rate of interest—much higher than you would earn in a high-interest savings account or CD—and also pays non-guaranteed dividends based on annual performance. It’s worth noting that the mutually traded whole life insurance companies Paradigm Life works with have paid out dividends for over 100 years. In fact, private mutual insurance companies are one of the safest and most secure financial institutions.
Here’s how private family banking helps maximize your wealth:
- It allows you to borrow funds from your policy tax-free and on your own pay-back terms. Interest rates are typically lower than banks and don’t require a credit check or any collateral outside your policy itself.
- The cash value of your policy continues to earn a guaranteed rate of return in spite of any outstanding loans. This helps you recapture interest and often results in positive net gains, even while borrowing against your policy.
- Funds in your policy can be used as your emergency savings. The policy is liquid, penalty-free, and protected from market volatility.
- In addition to tax-free loans, your policy also pays out a tax-free death benefit and can be used to lower estate-taxes.
- Your policy is a private contract between you and your insurance company, it can’t be called on in the event of a legal settlement, bankruptcy, or if you default on a loan outside of a policy loan, thereby protecting your assets.
Read More: 14 Ways to Grow Generational Wealth
Because your private family bank is made up of whole life insurance policies, the death benefit automatically passes to your beneficiaries when you pass away. What’s more, it can be structured in an Irrevocable Life Insurance Trust (ILIT), which further extends tax advantages and structures how your estate should be handled, ensuring wealth will be passed down for generations.
You can own policies on yourself, your spouse, your children—even your parents. Anyone who owns a policy may access its cash value, further increasing the spending power of your private family bank. It can even be used to fund your retirement.
The Wealth Maximization Account™
Mutually funded whole life insurance is used as a foundational wealth vehicle by dynasties, executives, banks, and corporations. In fact, banks and corporations hold billions of dollars in cash value life insurance. It’s not where they put all their money, it’s their foundation—something the middle class simply aren’t doing.
But before you go buying just any whole life insurance policy, it’s important to know that not all are structured for maximum growth. Most build slowly over time with marginal returns, and the primary focus is the death benefit.
A Wealth Maximization Account, on the other hand, purchases the lowest allowable coverage while allowing for the highest possible contribution amount. This “overfunding” supercharges your cash value to grow quickly and exponentially over time. And the more cash value a policy has, the more you can borrow against yourself to fund personal growth, investment opportunities like real estate, and business opportunities, all of which build generational wealth.
BUILD GENERATIONAL WEALTH WITH PARADIGM LIFE
Want to learn more about setting up your own Wealth Maximization Account? We’re the experts.
We work with your current financial team, such as your financial advisor, accountant, or attorney, to make sure your goals are met. We can help you set up a Wealth Maximization Account the right way so you can start building generation wealth, leaving a lasting financial legacy for your family.