Pass on generational wealth and not generational debt in order to build your legacy. It is your duty and responsibility to leave your future children and grandchildren something positive behind. Even if you do not have children then you can be a great-aunt, uncle or God parent and leave something of true value behind.
If you want a better definition of what generational wealth look at this link.
Generational Wealth
Pass On Generational Wealth and Not Generational Debt: Fund A Higher Education Fund
I started the path to pass on generational wealth not generational debt when my daughter was a child. My first step was to request that instead of toys and clothes, people gift contributions into her college account. Unfortunately no one listened to me. As a single mother, I wanted to give my daughter the gift of an education. I knew that all the money spent on clothes and toys would be a waste. Plus, I was good about shopping for her toys and clothes. I found a lot of items on clearance.
One Christmas my daughter opened up all her toys and only played with a select few. I took one particular toy and put it back in the closet. I re-gifted it to her the following year.
As a single mother and law graduate, I had a ton of debt from pursuing my law degree. I had to make some drastic steps to ensure I was not still paying on my student loans when she began college. The steps I took included taking out a home equity loan to pay off some of the debt. I also sold three homes and used the proceeds of all the homes to pay off my debt. While others were out buying fancy cars, I was paying off debt in order to free up money.
Also, I do not believe that every child HAS to go to college but if that child wants to go to a trade school, it would be nice to have some money set aside. There are TONS of ways to teach a child about being an adult but purposely saddling that child with student loan debt is not one of them.
Pass on Generational Wealth Not Generational Debt: Teach About Saving Instead of Spending
Pass on generational wealth not generational debt by teaching your children and grandchildren the importance of saving money. TALK to them about this. Most of us had no clue what was going on in the house. Everything was considered “grown folk business.” I can tell you that talking to your children about the household finances is something that may be a healthy thing. Do you HAVE to tell them how much is in your bank account? No! But if you EXPLAIN about the bills (electricity, heat, water, food) and what it takes to run a household, that may put them on a path of thinking about generational wealth.
I saw how at times it was hard for my mother as a single mother. Sometimes there is nothing you can do. But for me, I wanted to do as much as I could to ensure that I didn’t feel the stress of finances. However, I was recently told my financial adviser that I suffer from Bag Lady Syndrome so I don’t think that fear will be going away from me anytime soon.
Pass on Generational Wealth Not Generational Debt: Teach that All Credit is Bad Credit
This is going to come as a surprise for some people. We have all been taught that student loans and mortgages are good credit. But I think that we should teach our children, and start thinking for ourselves, that credit is bad. Unfortunately, most of us do not have the cash outright to pay for a house, or a car, or college tuition. We will need to have credit to borrow money. But when I say to teach that all credit is bad I mean to get to a point that WE are not COMFORTABLE with debt.
It is o.k. to have a mortgage, but don’t spend your entire adult life jumping from house to house and paying on a house for 30 or 40 years. If I would have stayed in my first house I would have had it paid off probably about now. No later than the age of 57 on a 30 year mortgage. But I know I would have added payments on it to decrease the time I had to pay on it.
Another thing that is not cute is constantly being in-car loan debt. Anyone who knows me knows I HATE having a car loan. I have been paying an extra $90 on my car loan to get it paid up and I am thinking of increasing that amount in order to get this paid off as soon as possible. I also tend to keep my cars for over 10 years. If you have a $400 car monthly car note on a 60 month term, you will save almost $5,000 by paying the car off one year early. In that scenario, I would take half of my savings and take a vacation. I would then leave the other half in an account AND take half of my monthly car note to save for my next car. Save for about seven years. You would have $19,300 to put towards your next car.
Pass on Generational Wealth not Generational Debt: Buy a Home and Not a House
The difference between a home and a house is that a home is somewhere you plan on making permanent. A house is somewhere you just plan to stay for the time being. I bought a lot of houses in my day. And fortunately, my house buying helped to accelerate my debt repayment. But looking back, I had a good deal of apartments that were pretty inexpensive. If I had thought about it, I could have taken the difference between what my mortgage was and what my rent was and applied the money to my debt. I finally have a HOME that I am going to keep even in my retirement. I am no longer HOUSE HOPPING!
One of the things that happened to me and my twin is that we were able to buy our parents’ home. My twin bought our childhood home from our parents and I bought it from her. We were able to save money on rent and I got the biggest bang because the real estate market went crazy (in a GREAT way) and I could pay off a lot of my debt. I talked about this in a blog post.
Pass On Generational Wealth Not Generational Debt: THINK About Real Estate Investing
I say think about it because I am not saying to haphazardly start flipping. When I left Boston back in 2004 I owned two homes. Both those homes have about a combined $300,000 in equity today. I also could have rented them out and would be able to get about $3,000 after expenses for both homes. I could REALLY be independently wealthy and I probably wouldn’t work because I would have invested that extra money and been in a REALLY good place. Oh well. Lesson learned.
Pass On Generational Wealth Not Generational Debt: Teach Yourself About Finances
The best way to pass on generational wealth and not generational debt is to teach yourself about finances. Become financially literate. Once you know better you will do better and you can become a financial mentor to your family and your friends.