4 Time-Tested Steps to Build Generational Wealth

When it comes to building generational wealth, most people know the mainstream idea of working hard, saving as much as possible and then buy assets to leave something behind for our next generation, but a select group of people will follow a set of tried-and-true strategies that go beyond mere accumulation of assets. In order to create a sustainable financial ecosystem that can support our families for generations, there are actually only 4 main steps that have withstood the test of time:

I have debated countless times with peers and pundits on what constitutes an asset in our current modern times with the prevalence of get-rich-quick schemes, meme stocks, the AI narrative, Bitcoin and the FOMO mindset. By definition, an asset is a resource with economic value that an individual, company, or country owns or controls with the expectation that it will provide future benefits.

An asset should have an underlying characteristic of being able to generate cash flows. An asset could also be a valuable commodity that the world actually needs like Gold or Crude Oil. A business with a balance sheet that can generate future cash flows can actually help us determine its intrinsic value and allow us to gauge whether the asset is currently undervalued or overvalued.

The first step of building generational wealth is the most important one because it sets the tone for the rest of your journey. Being deliberate in how we proceed with calculated risks and how cash flows are allocated will determine how we perceive the wealth that we want to create in the future.

Instead of acquiring random assets here and there or over-diversifying, making our portfolios overwhelmingly complicated and unmanageable, we should focus on 2 main portfolio setups, a growth and a distribution portfolio as seen in the follow diagram: