What comes to mind when you hear the words generational wealth? Are you thinking of the Kennedys, the Rockefellers, or maybe the Hiltons? Aren’t these families that we would love to be a part of? However, it seems more likely that we will win the biggest jackpot of a mega million. We think, “I wish I had that amount of money, but that amount you are born into.” If you were thinking along these lines, you would be right!
Generational wealth is a financial planning system that is structured to remain stable and flow over multiple generations, often increasing as it continues to decline (that sounds strange). It begins with the first generation (usually not rich) creating the wealth, which in turn is placed in a system (investments) where wealth accumulates on itself, increasing as time passes, also known as compound interest ( wow, that’s a lot to process).
Okay, you probably weren’t born on this stage, and your thinking, what does this have to do with me? The reason for understanding the concept of generational wealth is to see that it is designed to intentionally shape future generations. With that I pose, why can’t we treat our financial education in a similar way? The more we know, the more we can teach and the more our future will benefit. Of course, this sounds simple in theory, but it is rarely implemented. Purpose and commitment are words we often struggle with. Think about it, on average, how many ideas or thoughts that require action pop into your head every day? Now think about how many you actually did on purpose.
Once upon a time, saving was important. Be it food, money, materials, or other resources, the mindset was trained to save, “just in case.” There was less focus on consuming and more emphasis on working with what I had. Fast forward to 2012, there is an overindulgence in consumption and a dramatic decrease in savings. The desire for instant gratification is perpetuated through advertisements, media, music, and the classic “keeping up with the neighbors.” If we can’t pay for it instantly, there are options waiting to “help”, after all, we have to have it now, right? Our options range from the “Buy Now Pay Later” online purchase option, you can even save a whopping 10% if you sign up for a store credit card today (exciting), and last but not least There are more than a few financial institutions that can “help”, also known as, the loan and the credit card. Well, these options are not convenient.
I read once that the second half of a man’s life consists solely of the habits that he has acquired during the first half. By today’s society standards, I think we are raising individuals born into what I call the generational financial curse. The concept of having a generational damn is characterized by inheriting something negative as a result of the actions or inactions of the previous generation. Our lack of financial literacy is producing a generation of individuals uniformed on concepts like credit, credit scores, and interest rates. Banking terms like money market savings, CDs (certificate of deposit), and lines of credit all sound foreign. The financial habits we have today are crucial to the habits that our children and the people around us will have. As important as money is in our daily lives, it’s shocking how many people put their financial education on the list of “things to do when I get rich” (oh that word). What we have to understand is that what we do with a little, we will do with more. That is, if you cannot save in your current financial situation, you are not going to save in a better one. Purposeless actions are useless; it will always lead to complacency. What has to change to facilitate the purpose of actions is our mentality; how we interpret the things we do. Many financial struggles are self-inflicted (not all, but many) and can only be corrected when we stop being ignorant and push ourselves.
Let’s reflect: Where did you get your first thoughts about money, savings, and credit? What thoughts are you currently subscribing to? Are they accurate? How do you know? My favorite question is, “Is your current financial situation working for you?” I love this question because it is the answer that many will give, that is the reason why we deceive ourselves with our financial events. I say this because I have been there before too. It is interesting to see how many of the ideas and attitudes we have about finances can come from people who have never built a healthy financial lifestyle. We listen to almost everything we read that sounds good (even my article). We as a society have gotten lazy, and researching things beyond Google and Facebook is out of the question. Will many people accept someone’s beliefs and words without even verifying if they have the right to teach us? Yes, even your parents!
If you were to survey the things people want their parents to tell them about, the best results would probably be sex and credit. For some, we can remember a detailed conversation about these topics, for others maybe nothing at all, but for most we can remember some abstract mentions that our parents positioned as a “conversation.” These “conversations” often sound like a horrible version of a PSA (public service announcement): “don’t have sex until you’re married,” “credit cards are bad,” and “don’t get into debt.” While the intentions of the “no” are positive, the lack of details embedded in these demands are just pure directions to a dead end. I like to call this concept “do what I say and not what I do”, and as we all know and learned, it doesn’t work! While this is not true for all households, it is true for many.
We pay attention to the lessons or lack thereof that our parents instilled in us. Whether right or wrong, it is often not until we have some experience that we verify the reality of those lessons. People always say “eventually they will learn, we all have to make mistakes”, I say no. That same way of thinking brings us to where we are now, a country with excessive debt, with a small percentage of people living in financial freedom (please understand that I am not talking about having a certain amount of money, I mean having whatever amount you have and using it properly so that you can have freedom). We must learn from the life lessons of others. Famous author Rick Warren wrote, “While it is wise to learn from experience, it is wiser to learn from the experiences of others.” Imagine if we were to mold our mindset around this very statement, how “flashbacks” could be avoided. Bad habits are educated in us and bad habits can be educated! Stay tuned for my next article to discuss the steps to break the generational curse by understanding the myths that carry you and keep you there.
Anyone can be normal, few will be exceptional, you decide.