I wasn’t taught much about money growing up. All I knew is that the bills were paid and the food was placed on the table but not much else. When I became an adult, all I did was pay the bills and put food on the table. I didn’t know about savings, credit, debit, or the importance of planning for the future. As time went on I educated myself and realized there was so much more to it than paying bills and buying food. Now that I have a baby, it has become more important to understand the power of generational wealth.
I want to give my baby boy more than a good life, I want to give him a legacy that he can pass on to his children and grandchildren. To accomplish this, I want to establish a business that I can operate and grow to ensure a solid financial foundation. To make this move, I’ve learned the difference of having a steady income and building wealth. In the next two weeks, we’re going to explore how to start building wealth in 2019.
The only way to start building wealth is to get on a budget. While many think budgeting is a dirty word, budgeting helps you find freedom. Your budget tells your money where to go, not the other way around. So many people want financial freedom but can’t get the basics of budgeting down. Once you conquer this, other money habits will begin to make more sense.
Build a solid cash cushion.
An article published indicated 34% of American Households experienced a major unexpected expense over the past year and only a few of those could have $1000 to cover these emergencies. I cannot stress the importance of having a hefty savings cushion enough. By setting aside a certain percentage of your income each month, you are planning to succeed. Developing a habit of savings is the starting point of building generational wealth. While some use the excuse, they cannot afford to save, you cannot not afford to save. Even if you start by putting $20 per month aside, it will eventually add up. Start by setting a small goal of $500. Working toward a goal will generate better results. Once you meet one goal, add another and another until you’ve reached at least 6-12 months of savings. Your savings goals should also include accounts for home purchase, vacations, big ticket items, and so on.
Remember to prioritize retirement.
Start investing in your company’s 401K immediately. If your company requires a minimum to match, invest the minimum you need to get the company match. If you don’t, you’re losing out on a ton money. If you have the funds, consider investing in an Roth IRA.
Track your numbers.
Know the amount of debt, track your net worth, credit score, etc. It’s important to always know where you stand and what areas of your finances need improvement.
Involve the kids.
Begin teaching your children the importance of financial responsibility. Start teaching them around the ages of 6 or 7 and teach them to save, spend, and give a part of their allowance. Teaching them good money habits as children will help them become financially responsible adults.
Obtain adequate insurance coverage.
Insurance is one of the most important aspects of building generational wealth. My background life insurance has taught me that you can never prepare too early. It’s also a great way to build generational wealth.
Transfer wealth by obtaining life insurance.
Not only will life insurance pay for burial and final expenses, but it also provides living expenses for spouses and your children. It can also be used as a tool for investing. If you have the means to invest what is left, it can create income for years to come.
Remember long-term care insurance.
According to the U.S. Department of Health and Human Services, the average cost of a semiprivate room in a nursing home is almost $7,000.00 per month! Keep your money in the bank by purchasing a long-term care insurance policy to help pay for any nursing home costs that may arise in the future.
Prepare for disability.
Of course, no one expects to become disabled, but if something happens and you aren’t able to work, you could be one paycheck away from a financial disaster. Disability insurance will provide a portion of your monthly income if you become sick or unable to work for a period of time. Research your options through your employer or a private insurance company.
Invest in the property.
Home ownership is another great way to build generational wealth. Home ownership can influence the habits of your children, giving them the confidence to invest in home ownership themselves. Build wealth through equity. Remember not to stop at your first home. Continue to purchase property and leverage rental income to invest in stocks and opportunities that will help build more wealth.
Improve your credit.
Good credit means lower interest rates, better car insurance rates, and more. Meaning the less you pay, the more money you’ll have to invest in other wealth building assets. To increase your credit score, pay your bills on time, keep your credit utilization below 30% and decrease your debt and keep open the credit accounts needed.
Consider down payment assistance.
One of the daunting tasks people face is coming up with a large down payment. What many don’t realize is you can purchase a home without scrimping up your down payment. There are hundreds of down payment assistance programs throughout the country that can help with your home ownership dreams. Just do your research and you can be on your way to the American Dream.
Stay tuned next week when we discuss how entrepreneurship, side hustling, and estate planning helps you build a better financial future.