Trending Now :

Re-Drafting the 2023 IPO Class The Interest-Free Installments Economy FICO Scoring Models: Explained Fed Holds Off on Rate Hike Rise of the Global Middle Class: Opportunities and Challenges Protect Yourself from Financial Scams Money Motivators Mortgage Rate Buydown What Does the Hot Inflation Report Mean for the Housing Market How Do You Build Wealth: Invest in Yourself Times Up for Programmed Money Biggest Financial Crimes: Countrywide Quantitative Tightening, Inflation, & More The Stock Market Is On Sale Investors Need to Netflix and Chill Credit Card Fixed-Interest Loans: Explained Are You Money Smart? Build Your Credit for Free Filing Your Taxes in 2022 Credit Cards that Offer 2% Cashback on All Purchases Navient Ordered to Cancel Student Loans U.S. Mortgage Interest Rates Soaring Two Big Banks Cut Overdraft Fees 2022 IPO DRAFT CLASS: Ranking the Top 10 Prospects Re-Drafting the 2021 IPO Draft All You Need to Know about Buy Now Pay Later companies Credit Card Sign-Up Bonus or SUB The Best Credit Card for the Middle-Class Make An All-cash Offer with No Cash Capitalism Always Ignores Politics All You Need to Know about the Financial crisis of 2007-2008 American Families Face Serious Rent Burden Savings Is An Expense You Can’t Build Generational Wealth If You Are Broke IT’S OFFICIAL: Robinhood is a Meme Stock All You Need to Know About Biden Mortgage Modifications & Payment Reductions Apple Card 2nd Year Anniversary: Should You Get It Now Wells Fargo to Pull Customers Personal Lines of Credit The Rise of Individual Investors The US Housing Market Is Booming. Is a Crash Ahead? Financial Literacy: How to Be Smart with Your Money Non-Fungible Token (NFT):EXPLAINED SKYROCKETED CEO PAY & LONG LINES AT FOOD BANKS Amazon Workers Want to Unionize Another Major City Piloted Universal Basic Income The New Bubble: SPACs SUBMIT YOUR PPP ROUND 2 APPLICATION BEFORE MARCH 31ST Robinhood-GameStop Hearing & Payment for Order Flow Guess Who’s Coming to Main Street Democratic Senators Say No to $15 Minimum Wage BEZOS OUT! President Biden Most Impressive Act Went Unnoticed: CFPB Biden $1.9 Trillion Stimulus Package 2021 IPO DRAFT CLASS: Ranking the Top 10 Prospects $25 Billion Emergency Rental Assistance NO, TESLA IS NOT WORTH MORE THAN TOYOTA, VOLKSWAGEN, HYUNDAI, GM, AND FORD PUT TOGETHER AMAZON TO HAND OUT ITS WORKERS $300 HOLIDAY BONUS Where Does the American Middle-class stand on Student Debt Relief? Joe Biden’s Economic Plan Explained 4 TYPES OF BAD CREDIT REPORTS AND HOW TO FIX THEM What Is the Proper Approach to Not Buy Too Much House? FISCAL STIMULUS PLANS STILL IN ACTION How to Pick Investments for Your 401(k) 10 Simple Ways to Manage Your Money Better All You Need to Know about Reverse Mortgage All You Need to Know about Wholesale Real Estate Credit card Teaser Rates AVERAGE CREDIT CARD INTEREST RATE SURGES TO 20.5 Percent Trump Signs 4 Executive Orders for Coronavirus Economic Relief The Worst American Economy in History WHY CREDIT CARDS MINIMUM PAYMENTS ARE SO LOW? 10 BIGGEST COMPANIES IN AMERICA AND WHO OWNS THEM White House Wants to End the Extra $600-A-Week Unemployment  10 Countries That Penalize Savers FEWER CREDIT CARD BALANCE-TRANSFER OFFERS ARE IN YOUR MAILBOX Private Payrolls and the Unemployment Rate SHOULD YOU BUY INTO THE HOUSING MARKET RESILIENCY? WILL WE GET A SECOND STIMULUS CHECK The Child Tax Credit and Earned Income Tax Credit THE RETURN OF BUSINESS CYCLES Should You Request a Participant Loan or an Early 401(k) Withdrawal? Homebuyers Should Not Worry about Strict Mortgage Borrowing Standards The Potential Unintended Consequences of Mortgage Forbearance All Business Owners Need to Know about the Paycheck Protection Program 10 MILLION UNEMPLOYMENT CLAIMS IN TWO WEEKS HOW WILL THE GLOBAL MIDDLE-CLASS RECOVER FROM A SECOND ECONOMIC RECESSION IN A DECADE? WILL U.S. CONSUMERS CONTINUE TO SPEND? HOW’S YOUR 401(k) PRESIDENT TRUMP SIGNS $2.2 TRILLION CORONAVIRUS STIMULUS BILL MIDDLE-CLASS NIGHTMARE: MORE THAN 3.3 AMERICAN FILED FOR UNEMPLOYMENT CLAIMS IN THE US LAST WEEK. LAWMAKERS AGREED ON $2 TRILLION CORONAVIRUS STIMULUS DEAL CORONAVIRUS STIMULUS PACKAGE FAILED AGAIN IN THE SENATE APRIL 15 (TAX DAY) DELAYED DEMOCRATS AND REPUBLICANS DIFFER ON HOW $2 TRILLION OF YOUR TAX MONEY SHOULD BE SPENT YOU CAN DELAY MORTGAGE PAYMENTS UP TO 1 YEAR, BUT SHOULD YOU? 110 Million American Consumers Could See Their Credit Scores Change The Middle-Class Needs to Support Elizabeth Warren’s Bankruptcy Plan The SECURE Act & Stretch IRA: 5 Key Retirement Changes 5 Best Blue-chip Dividend Stocks for 2020 9 Common Bankruptcy Myths 401(K) BLUNDERS TO AVOID Government Policies Built and Destroyed America’s Middle-Class & JCPenney Elijah E. Cummings, Esteemed Democrat Who Led the Impeachment Inquiry into Trump, Dies at 68 12 Candidates One-stage: Who Championed Middle-Class Policies the Most WeWork: From Roadshow to Bankruptcy Stand with the United Auto Workers Formal impeachment Inquiry into President Donald Trump America Is Still a Middle-Class Country SAUDI OIL ATTACKS: All YOU NEED TO KNOW THE FEDERAL RESERVE ABOLISHED BUSINESS CYCLES AUTO WORKERS GO ON STRIKE Saudi Attacks Send Oil Prices Spiraling REMEMBERING 9/11 What to Expect from the 116th Congress after Their August Recess Should You Accept the Pain of Trump’s Trade War? 45th G7 Summit-President Macron Leads Summit No More Upper-Class Tax Cuts Mr. President! APPLE CARD IS HERE-SHOULD YOU APPLY? THE GIG ECONOMY CREATES A PERMANENT UNDERCLASS 5 REASONS IT’S SO HARD FOR LOW-INCOME INDIVIDUALS TO MOVE UP TO THE MIDDLE CLASS ARE YOU PART OF THE MIDDLE CLASS? USE THIS CALCULATOR TO FIND OUT? WELLS FARGO IS A DANGER TO THE MIDDLE CLASS The Financialization of Everything Is Killing the Middle Class
Build Generational Wealth
American Middle Class

You Can’t Build Generational Wealth If You Are Broke

The estimated reading time for this post is 446 seconds

You can’t build generational wealth if you are broke.   It’s great that people from all socio-economic classes are talking about building generational wealth.  However, the term “generational wealth” has been overused, and too few individuals understand what it takes to build it. 

What Is Wealth and How to Build It?

For wealth to be generational, you need to have it first. Frankly, too many of you don’t have it.  The average American is saddled with both mortgage and consumer debts and has no emergency fund.

The average household’s cash outflows exceed its cash inflow in most months, not including savings and investing. A regular paycheck, royalties, or any other cash inflow should go towards spending, investing, and savings.

Wealth is built when at least 5 to 10 percent of income goes towards investing and savings, preferably more.  Unfortunately, most households are in the red zone every month.  

According to a new survey from Bankrate,  61% of Americans could not pay for a $1,000 emergency expense.  The average credit card is nearly $8,000, and a vast majority of people are paying more than 28% of their gross income in monthly mortgage payments.  When debt is normalized, wealth cannot be built.  Your journey to building wealth starts with paying off debts and reducing financing costs.

Building wealth needs to be the buzzword. Once you accumulate significant income-producing assets and build sizable wealth to pass to your family, you can start talking about generational wealth–the chicken before the egg type of thing.

Build Wealth

Whether you are a W-2 employee, a retiree, or self-employed, you can start building wealth today.  The first step is to categorize investing or savings or both as expenditures.  

In his excellent book, the Automatic Millionaire, David Bach talks about paying yourself first.  Suppose you are a w-2 employee and your employer has a qualified retirement plan with a matching contribution. In that case, you have to pay yourself first because your employer might match 100% of your contributions up to a certain percentage of your income.

Building wealth is about paying yourself first and seeing savings and investing as regular expenses like your mortgage, credit card payments, and others.

Usually, people work on their budget by analyzing cash inflows and expenditures, then save or invest the residual income.  Your mindset needs to be different to build wealth.

Your Cash Flow Statement should look like this:  Cash inflows minus spending minus investing minus savings=$0.  

Investing and savings have to be part of your budgeting.  You need to figure out ways to cut on spending if you have minimal or no money left to invest or save after paying all your bills.

Don’t buy into the belief that you won’t become rich working for somebody else, or a job stands for “ just over broke.” You can start building wealth wherever you are in life by allocating a more significant percentage of your cash inflows to investing and savings.

Income-producing Assets:

  • Entrepreneurship

Too many times, I hear aspiring entrepreneurs said that they want to start a business because they want to build generational wealth.  Entrepreneurship is one sure way to become rich. 

However, if you put the chicken before the egg, you will never be successful in business.  When you start a business, the goal needs to be creating a product or providing a service that solves a problem and has tremendous growth potential.

If you meet the criteria mentioned above, you can yield significant profits, which you can invest in more income-producing assets that you can pass to your family.

Startups often have a hard time raising capital, predominantly African-American startups. Categorizing your investment and savings as expenditures will free up cash from your 9-to-5 earnings for you to invest in your new business.

Here’s How You Get Started with Your Business

Don’t waste your time telling your grandpa and grandma how great your idea is. Execute fast and bring the product or service to the consumers and let them tell you how great your product or service is.

Before you go and get a limited liability company (LLC) registered, run your idea through the grinder. There are too many LLCs buried in the LLC gravesite.  

Draft a lean business plan and conduct a quick SWOT analysis.  A lean business is the best way to get familiarized with your business idea. It answers the main questions for you. Who are your targeted customers and main competitors?  Does the product solve a problem, and does the business have growth potential?

The quick SWOT, less meticulous because you don’t want to paralyze by the analysis, lets you identify the strength, the weaknesses, opportunity, and the threat in the industry.

Between the SWOT and the lean business plan, you should have a good idea of whether or not you want to move forward to the execution phase:

    • register & structure your business in YOUR state (LLC)
    • Get an employer identification number (EIN) from the IRS
    • Open a business bank account under the LLC & EIN#
    • Get a DUNS number from Dun & Bradstreet
    • buy a domain name for your website
    • hire a freelancer on Fiverr to design your logo and develop your website
  • Equities and financial assets

Equities and other financial assets are great ways to build wealth, but you must stay away from meme stocks, cryptocurrencies, and other hot alternative investments.  You can open a speculative brokerage account specifically to gamble on those assets, but you need to keep in mind that it’s more than likely that you will not build wealth this way.

Paying yourself first allows you to allocate up to 10% of your earnings to a qualified retirement plan. If your employer matches at least 100% of your contributions up to 5% of your income, you will end up saving 15% of your income yearly. Dividends and portfolio appreciation can also add a few percentage points.  More importantly, both taxes on your contributions and investment gains are deferred until distributed. 

401(k) and 403(b) are the two most popular qualified retirement plans employers offer to their employees. Stocks, exchange-traded funds, and mutual funds are financial assets you can hold inside your qualified retirement plans. 

If you are a business owner, you set up a Simplified Employee Pension or Sep-IRA to take advantage of the same benefits that W-2 employees get from their employer-sponsored qualified retirement plans.

Of course, most people are eligible to contribute to a Roth IRA, which lets you contribute part of your take-home pay and provides tax-free growth and withdrawals.

  • Real Estates

Your primary home needs to be your first real estate purchase.  Your primary home is not an investment; it’s a shelter.  Don’t get caught up in the “should I rent or buy” debate.  It’s pointless because it does not factor in the intrinsic value of homeownership.

You need to figure out the area you want to live in and how much home you can afford.  Once you have 20% or more to put down, go ahead and buy your shelter.

You should postpone buying a home if you cannot afford to put down 20% or more. Otherwise, it’s just too expensive to get into homeownership.

Your primary home is not your ATM.  It doesn’t matter how much it appreciates. You don’t take money out of it in the form of cash refinancing or home equity line of credit (HELOCs) to put in a pool or renovate the kitchen.  Again, it’s your shelter and part of your basic physiological needs, so you have to protect it.

Real estate investment trust (REITs), rental properties, and flipping properties are ways you can invest part of your 9-to-5 earnings into the real estate market to start building serious wealth.

What is Generational Wealth Anyway

New research from  Italian economists Guglielmo Barone and Sauro Mocetti shows that today’s wealthy in Florence, Italy was the same families 700 years ago; that fact is the quintessential definition of generational wealth. 

According to the Federal Reserve data, the median net worth of an American family is $121,700.

The median net worth of an American family is a fraction of what the Uber rich pay financial advisors and attorneys to set up complicated estate planning documents such as GRITs, GRATs, and GRUTs, section 2503(b), and section 2503(c) trusts.

Those sophisticated estate planning documents allow them to facilitate intergenerational mobility for seven centuries.

The bottom Line

It would be best if you focused on cleaning your credit profile, paying off debts, and categorizing investing and savings as expenses, and obtaining enough insurance to safeguard you from financial disaster.

Every month, you can save and invest part of your 9-to-5 cash inflow in income-producing assets, which allow you to build wealth. 

Hopefully, your financial discipline rubs off your family and kids. They choose to invest the wealth you pass to them in more income-producing assets.

You can’t build generational wealth if you are broke, but your heirs can.


Senior Accounting & Finance Professional|Lifehacker|Amateur Oenophile

Continue Reading


  1. Pingback: Money Motivators - Personal Finance

Leave Comment

Stock News / Jan 02, 2024

Re-Drafting the 2023 IPO Class

The estimated reading time for this post is 147 seconds The Initial Public Offering (IPO)...

Stock News / Dec 29, 2023

2024 IPO Draft Class

The estimated reading time for this post is 151 seconds 2024 IPO Draft Class: Ranking...

Stock News / Dec 22, 2023

Build Wealth with Boring Investments

The estimated reading time for this post is 314 seconds Due to their boredom, long-term,...