Generational Wealth

A Family Empire of Assets and Perpetual Income.

generational wealth
Photo by Gary Butterfield on Unsplash

What is generational wealth?

An investment portfolio that provides income and assets for successive generations. 

Generational wealth requires a large investment portfolio. The portfolio must sustain spending for you and your family. It also needs to sustain spending for your children, your grandchildren, and beyond. If financial freedom is for one household, generational wealth is for 10 households. This requires a massive net worth. If you’re an ultra-high-worth individual you might be thinking about building a legacy. 

To make your money last for generations you’ll need to create a good plan. A withdrawal and distribution strategy with trusts and legal entities. Managing cash flows across families and decades is no small task. 

Growing, managing, and distributing assets from the family portfolio is like running a small business. Wealthy families often call this process running a home office. That’s code for I have so much money it’s a full-time job. 

Old money vs New money

New money or first-generation wealth is often not enough to create generational wealth. However, if your net worth is in the tens of millions generational is plausible. 

New money turns to old money with intelligent and thoughtful planning. Rule #1, don’t buy a private plan. Rule #2, don’t buy a yacht. Check out this article, old money vs new money, for a full breakdown. Here’s the short version. 

Old money is the successful execution of generational wealth. 

How to Build Generational Wealth

Achieve Financial Freedom For Yourself

The first step to building generational wealth is to grow your net worth to significant value. If you have more than $10 million dollars, start the planning process. If you think you’ll need all that money for yourself, stop it. Go take a shower and take a long hard look at yourself. You do not need more than ten million dollars. Don’t be an asshole. You survived with far less, I’m sure of it.  

So the first step is to achieve financial independence for yourself.

Permanent Withdrawal Rates

The next step is to establish a conservative withdrawal rate. You may be familiar with the 4% rule or safe withdrawal rates. Beyond safe, are permanent withdrawal rates. You want your portfolio to be larger at the end of your life. A withdrawal rate of 3.0% or less is in the neighborhood of permanent. 


The next step is to make the decision to pursue creating generational wealth. If you reach financial independence and decide to spend all your money. That’s totally fine! It’s your life, you must choose the path that makes you happy. 

I reached financial independence very young in life. I’m still interested in working and plan to work for several more years. If I decide to start a family business and earn more income, my portfolio will continue to grow. If I continue to add to my investment portfolio the snowball will really pick up speed. 

If the business I start is successful, I’ll have an asset that generates cash flow. If the business is sound and stable I could pass it down to my children. I can also sell the business and invest the proceeds back into the family portfolio. 

Small business

If I decided not to start a small business, I could invest in one. Investing in small businesses is risky and more complex than buying index funds. However, the potential for higher returns makes this an interesting strategy. 

A clever and wise investor could buy positions in many small businesses. Warren Buffett did this early in his career but at a much larger scale. Pursing small business investments is not for most people. It requires incredible discipline, effort, and a little bit of luck. If you’re able to add value to the business, the returns could be significant. 

Real estate

Investing in real estate is a popular strategy to achieve financial independence. If you enjoy the sport of investing in real estate, this could be a lifetime sport. Continuing to add properties to your portfolio could create lasting wealth. 

Diversification. Sage advice. Generational advice. Equity ownership is public stocks, bonds, real estate, and small business is diverse. Owning a lot of income-generating assets is the foundation of generational wealth. 

Should you pursue generational wealth?

Very few people are planning for generational wealth. It’s a decision that requires you to continue to work. The dream of financial independence is about not working! You have to be a special type of high achiever to keep going. All this additional work is not for you. It’s for your kids. It’s for your grandkids. 

Keep working if you find meaningful and purposeful work. There is a lot of important work to do in this work. Work to improve our country, our environment, and our local communities. Choose work that matters. If you do this and continue to earn an income, you’re choosing to create generational wealth. Let your portfolio grow while you make an impact each day. 

This is the true gift of generational wealth. The gift to choose fulfillment and meaningful work. Work that challenges us and gives us purpose. 

Inheriting Wealth

You need a plan to give money to your kids. You need a good plan. A plan that helps them. A plan that doesn’t turn them into assholes.  

Think of passing down wealth as a universal basic income for your family. Give your family the kids of Lean FIRE. Enough monthly income to live a simple and frugal lifestyle. A simple life with excessive frills or luxury. Give them a platform to take risks with their careers. Calculated risks, but this safety net can make all the difference. 

You must also teach your family the value of money. The purpose of money and how to spend it wisely. The system fails if this monthly income is not used for necessary spending. Make sure they know the rules. Design a system that encourages good decision-making. 

My personal plan

I’m thinking a lot about creating a family empire a mini-empire but an empire all the same. I’m thinking about this because my family is growing and I am growing older. I am thinking about this because my wife and I are financially independent. We’re still in our early thirties. 

If we continue to work at our current jobs for the next 5 years our net worth is likely to double. 5 years more after that and it could double again. At that point, we will have 125 years of expenses saved. We will need to decide what to do with all that money. We will need to decide what to do with the rest of our lives. 

Should the universe be kind to us we will have a lot of time ahead of us. 50 years is too long to do purposeful work. My wife and I find joy and pride in a good day’s work. I want to experience that feeling of pride on a weekly basis. 

I want that for my kids and everyone in my family. Being able to provide that and a financial safety net is interesting to me. That’s worth pursuing.