So you read yesterday's blog and you're thinking to yourself, "there's gotta be another way to build generational wealth without the radical sacrifice!" You're right, there are other alternative methods to building wealth but they all require radical sacrifice. You may not have to scale back your entire life to the bare bones minimum but you're going to have to give up something. It's a universal law of sowing and reaping. If you want to reap a harvest of wealth you have to sow the seeds that will produce such a harvest.
Setting the Atmosphere for Breakthrough
At the core of the Generational Wealth Blueprint is the "Catalyst." Everyone has to start somewhere and the fact that almost 80% of Americans are living paycheck to paycheck, the catalyst is the only logical place to start. "What is a catalyst?" you may be wondering. It's that one "small" thing that creates something massive. Think about a tiny acorn that produces one massive Oak tree, that produces millions of acorns that will become thousands of Oak trees. Or think about the tiny snow ball that tumbles into a massive avalanche. How about that single spark that ignites a wildfire. You my friend will need a catalyst to start the ball rolling to generational wealth. Lucky for your, if you don't want to live like a hermit for the next 10 years there are other strategies available to you.
In the examples previously describe the "Catalyst" is the one single thing that we can point to that to catastrophic events. We know however, that the "Catalyst" was just the right stimulus at the right time, the culmination of a sequence of events that was merely topped off by the catalyst. I mention that because working class people in America are in prime position for a financial catalyst to spark catastrophic change in their lives. The right catalyst can spark a positive change, but the wrong catalyst can send a person on a downward spiral into depression, despair and even death. The conditions are ripe, the stage is set for either one to happen. A lifetime of financial struggles and economic injustice. We're working harder and harder to live of less and less. Yes the stage is set, the question is..."are you ready?"
Build an Asset to Buy an Asset
So we've come to the conclusion that you scaling your lifestyle back to the bare minimums is out of the question. Not that you're not passionate about building generational wealth, or like Dame Dash says "Hustling for your last name." You're just looking to sacrifice in other areas because we've also established there is no way around sacrifice. If a financial catalyst is what we need you really only have three options, spend less, earn more or a combination of the two. Since you don't want to spend less let's focus on earning more.
Everyone on this planet is an expert at something, but few are experts and turning that expertise into profits. I've been saying for years that 2 people will always be able to eat on this planet, the person that can work with their hands and the person that can sell. In this digital age we have to add a 3rd person to the list and that's the person that can teach what they know to others. With that being the case and you needing a financial catalyst ask yourself, "What can I do that others would pay me for?" Yep, you heard me right, if you need a financial catalyst, you may just need to start your own small business. Wait, don't pass out on me, I'm talking about making a couple hundred dollars per month in addition to your primary income. Hell, you can collect beer cans if you wanted to and make that every month. The question is, "are you sick and tired of your situation?"
Why is starting a small business in your home such a great way to get the financial catalyst you need to start your generational wealth building game plan? It's simple, as a business owner you get to play by a different set of rules. Remember those 4 challenges that we talked about in part 1 of this series, with taxes being one of them? What if I told you that you could likely get a $200 monthly increase in your household cash flow just by registering and starting your business from home regardless of whether or not that business makes a profit the first couple of years? Well this certainly isn't tax advise because I'm not licensed to do that, but that's exactly what I'm telling you. Every working class person in America should have a home based business in their wealth building portfolio, and here's why!
Uncle Sam...Friend or Foe?
The U.S. tax code was written for business people, by business people therefore it benefits business people. Because of this truth, everyone looking to build wealth in any capacity should have a business in their portfolio. The average person that starts a small business from home will save $12k-$15k per year in taxes. Is it starting to click yet? What could you do with that tax savings or that financial catalyst? You guessed it, build an emergency fund, pay off debt or invest. So whether you're good at baking, fixing small engines, babysitting or tutoring kids on the weekend, turn it into a legit business and start saving money on your taxes. If you should happen to be good enough to make a profit, that's even better.
Let's just play around with some numbers for a second. Say you started your business from home, you're able to adjust your W4 form on your job to reflect that you're an entrepreneur which means fewer taxes will be withheld or in other words you'd give yourself a monthly pay raise of a modest $300 per month. Your business brings in an additional $200 worth of profit. Again, you can likely collect $200 worth of aluminum cans on a single weekend if you wanted to. Just like that you have a $500 monthly catalyst. If you were smart you'd take the extra $500 and start paying off debt to free up even more monthly cash flow or work on your mini emergency fund. Instead however, you keep paying your debts as you normally do and you take the $500 per month and prepare for investing right away. What could $500 per month actually become at a descent rate of return (believe it or not double digit returns are normal if you know where to look).
In the 3 images above you see what it looks like to build generational wealth $500, $1,000 & $1,500 at a time. Do you think it would be worth it to find a way to turn at least one of your gifts, talents or passions into a business for the purpose of multi-generational wealth creation. i believe without a shadow of doubt there, something that you can start doing right now and build a profitable business from home to the tune of $300-$500 per month. Now that you can see what will happen if you put a little more effort into it, you can likely build far more that $500 per month in additional cash flow. The key becomes, finding a way to generate the extra income passively. That's next level wealth building because you can have the best of both worlds. You have the extra cash flow to pay off debt and invest but you wouldn't have to give up all your time to get it.
There are literally millions of ways to generate passive and residual income so I won't bore you with a pitch here. I will say that sticking to things that directly involve or are closely related to something you're passionate about is the best place to start. As you can see, no matter how you slice it, building generational wealth will take sacrifice, but I think it's worth it.
Building generational wealth should be at the top of mind for every adult on the planet, in my humble opinion. Who doesn't want a better life for their children and grandchildren. Well according to the latest statistics, not many. Generation wealth is achievable for everyone on the planet but you know what stops the majority from getting it? Sacrifice!
If I told you that I could guarantee that your future descendants can live the most amazing life ever but there's just one catch, would you be intrigued? Most would be intrigued by such a proposition but of course their willingness to take the offer or walk away depends on that proverbial "catch." Here's the catch. In order for your grandchildren and all future descendants of yours to live the most amazing life ever, YOU have to live like crap for 10 year.
I chose live like crap so they'll never have to
I know you're probably thinking, "what exactly do you mean...live like crap?" Almost anything on earth no matter how hard can be accomplished with intense focus for 10 years. When I say live like "crap" I mean a stripped down, bare bones minimum existence. Absolutely no extras, nothing above basic necessities. Things that you can actually live without, you go without them. No cable TV, no $5 lattes, no ball games, nothing but basic necessities for 10 years.
Most stand up guys are thinking, I can do that in a heart beat. Women for the most part have become accustomed to sacrificing for everyone else and are probably thinking this is nothing . Keep in mind though ladies, if you don't need it to live, you can't have it. No make up, no hair dresser, no perfumes and expensive body washes...just the bare necessities for 10 years. Men and women alike with any love for their children and future descendants will still likely agree that this is a fair exchange. You'll build generational wealth and your grandchildren and future descendants will live amazing lives because of your sacrifice and willingness to live like crap for the next 10 years.
Here's where it gets interesting though. If at the time of this reading you don't have any children, you are truly in the best position to build generational wealth and leave a solid legacy using the plan that I'll outline below. However, if you already have children, this challenge just intensified 100X. If you're looking to build generational wealth and you already have children, then guess what. You have to convince them of the bare bones minimum lifestyle for 10 years too. No birthday parties, extra curricular activities at school, proms and homecomings don't exist, no Christmas, yep no Christmas at least not in the hyper commercialized way. Remember, this is a guarantee that their children will never know struggle and all of their descendants going forward will live the most amazing lives ever if they are willing to sacrifice for 10 years. Thing you can get the kiddos on board? Or is this the place where you check out and say things like, "money ain't everything," or "money can't buy happiness" or "the best things in life are free." Funny how we're quick to rationalize our current state when things get just a tab bit challenging.
10 Year Generational Wealth BluePrint
So...if you're still reading at this point you either don't have kids or you're intrigued enough to at least want to know what the plan is that you'll be convincing the children to buy into, right? Either way I'm glad you've decided to stick around. Just remember this blueprint is designed for an intense 10 year plan that will ensure that your grandchildren are wealthy, not You, not your children. However, I'll roll out an abbreviated plan that can get you there as well, cool?
"Why a bare bones minimum for 10 years?" you ask. It's simple, you have to understand the time interest on money. See, inflation cause money to lose value every single day. Therefore, in order to use money most effectively you have to exchange as much of it as possible and as often as possible for something that's going to at least retain it's value at the rate of inflation or grow in value at a pace faster than inflation. If inflation, historically, has increased at a rate of 2% annually and you're not getting a 2% increase on your job and your interest on your savings account is less than that, are you beginning to see why you're losing financially. Is it making sense to you why you have to do something as radical as a bare bones minimum lifestyle for 10 years. You need to take every single dollar you get above what it takes to live a bare bones minimum lifestyle and put it towards building generational wealth for the next 10 years. This will ensure that your grandchildren will inherit wealth and never have to worry about money.
The 10 year generational wealth blueprint is simple, however we never confuse simple with easy. You're going to take every dime you get for the next 10 years and aim at 1 or 2 things, paying down debt or investing for double digit returns (see video below, most don't believe in getting double digit returns). That's it, that's the blueprint. If you do that for 10 straight years, no parties, no expensive dinners, no name brands, packed lunches for work, no upgrades in lifestyle whatsoever. A span of 10 year with this type of intense focus will change your life and your financial family tree forever.
Numbers Never Lie
Disclaimer: This is NOT financial advise as I am not a licensed planner or advisor and NOT authorize to give financial advise. These examples are hypothetical and for information purposes only.
Now that we got that out the way let's look at some numbers. Say at the beginning of year 1 you literally cut all the fluff out of your life. No paid TV, gym membership gone, movie night cancelled, kids activities come to an end unless the can get sponsored, no more ripping and running burning valuable gas, all the things that we're "train" to do in a capitalistic society come to an end. For the average American household that would save a minimum of $500 per month. You save every single dime of the $500 for the first 6 months, now you have a $3,000 mini emergency fund established.
Now that the mini emergency fund is established you spend the next 18 months attacking your debt with vengeance. You apply the $500 plus the original payment to the smallest balance owed and you do that until the balance is wiped out. The funny thing is, some of us have debts and the balance is less than $500 but instead of paying it off we pay the minimum and let the interest continue to compound. If the smallest balance had a $100 minimum payment, when you pay it off you've increased your monthly cash flow by $100. Now you have $600 to apply to the next lowest debt balance and you repeat the process until all of your debts are wiped out with the exception of your mortgage. Car notes, furniture, student loans, credit cards, cell phone leases, get rid of all of them. For the sake of time we're going to say you've done that and it took all of 3 years. Assuming that you have lost your job or lost any significant income, chances are you're $1500 - $2500 or more cash flow positive. Meaning the debt is gone but after you pay your mortgage and other residual bills, light, gas, water etc. you have money left over, that amount is your monthly cash flow.
Save Your Money and Your Money Will Save You
Let's be clear about one thing here. When I say "save your money" I'm not talking about putting it into a savings account. I'm talking about safe guarding it with your decisions and not letting it get away from you in a senseless fashion. If you make a habit of treating your money this way, it will in turn safe guard you as well. Now let's talk about what you can do with an extra $1500 per month for 7 years that will build generational wealth for you and your family.
The image above is a financial calculator called the CashFlow Manager in it I've plugged in your monthly cash flow of $1500 per month at 14% rate of return for 7 years, as it took 3 years to pay off debt and build the $1500 monthly cash flow. As you can see at a generous 14% your money would grow to $212,063.74. Now, let me reiterate, this plan is for generational wealth building, it's not for "YOU" to become wealthy it's for your grandchildren to inherit wealth. I can see you thinking that $212k is not a lot of wealth. Hang with me, let me show you how the grandbabies will inherit wealth then we'll talk about an accelerated plan for you to enjoy a little wealth.
Lookie, lookie, lookie what 10 short years of sacrifice has produced. You basically lived like a hermit for 10 years so that your grandchildren can inherit $3,431,236.61. Do you think it'd be worth it. Can you do something this radical to end poverty in your bloodline forever? Because naturally you're going to be required to learn how this stuff works. This is just a silly example but as you're cutting back on your lifestyle, not going out as much, there's no cable TV so chances are you have a ton of free time. Might as well learn to invest, learn the real rules of capitalism. See I can say that you can end poverty in your bloodline forever because when you learn this stuff, you teach it to your children. When they inherit this wealth they have the financial I.Q. to manage it and make it grow.
Is it going to be easy, not at all. To pull something like this off, you have to fight like hell. Fight against those that don't understand and those that are satisfied with the status quo. You might have to fight with your mate as they might not be able to see the bigger picture. You're definitely going to have to fight with your children, at least early one, because they won't understand how saving $20 bucks on a movie ticket will radically change their future. But most of all you're going to have to fight with yourself. You have to fight to rise above average, you'll have to fight to stay disciplined and remain or course. It takes courage to build wealth. In the words of Damon Dash, "I hustle for my last name!" I encourage you to do the same. It's worth it and building generation is not only an option, it's our obligation!
Wondering Where You Get Double Digit Returns? Check out this video and you'll see. This is how
H Cortez aka Financial Health Mentor to the Working Class
Dave Ramsay Course