A first-generation wealth builder is someone without a financial inheritance as their foundation, who starts their fiscal journey at $0, or sometimes even less. Does this sound like you? While you may not have history on your side as a first-generation wealth builder, utilizing the right financial strategies can lead to a bright future.
Of course, it can feel overwhelming to figure out how to navigate the wealth-building waters. When your goal is to support yourself, your family, and even future generations, it can take a lot of time, energy, and effort to crack the code and get on the right path. It’s critical to have the information you need to proceed carefully and confidently.
Below, you’ll find four strategies you can use to help you chart the course for years to come.
1. Investigate Insurance Options
A big part of protecting first-generation wealth isn’t only for the here and now—it’s for what happens to your family and loved ones after you pass. Life insurance is a powerful way to leave an inheritance that doesn’t come out of your pocket all at once.
The two main types of life insurance—term life insurance and permanent/whole life insurance—both have their benefits and drawbacks:
- Permanent/whole life insurance covers you for your entire life. It does not expire, and its savings can grow over time at a given rate.
- Term life insurance is much more affordable than permanent life insurance but only pays out if the policyholder dies during a specified time frame.
If you’re just starting out building your wealth, term life insurance might make the most sense. It’s generally geared toward young, healthy people, and term-life insurance can provide enough coverage to make sure your loved ones are taken care of if anything unexpected happens.
Once you build up enough wealth, however, permanent life insurance might be a better option. At that point in life, minimizing tax liabilities will be top of mind, and since insurance payouts generally aren’t taxable, it can be a smart way to transfer wealth without taking a hit during tax season.
SEE ALSO: 7 Tips to Build Wealth in Your 40s
2. Don’t Give Debt a Bad Wrap
Not all debt is bad, especially for first-generation wealth builders. Consider the type of debt. In a simplistic sense, taking on debt only means you have to borrow money to pay for something. The value ascribed to the debt depends entirely on what you’re financing and your loan terms.
Consumer debt, for example, should be avoided whenever possible. That includes credit cards, car loans, payday loans, and essentially any other debt you use to buy “stuff,” rather than to build wealth.
If you use debt smartly to fuel investment, that debt can pay you back in the future. Growth-focused debt could include:
- Getting your degree
- Investing in property
- Starting a business
- Buying a house
- Investing in the stock market
Of course, taking on debt isn’t by any means a guarantee that things will work out. However, the risk might be worth it if it helps you grow and accelerate your wealth-building strategy.
3. Work Smarter and Harder
First-generation wealth builders have to stay ahead of the game. Working harder and smarter than most people can often get you where you want to go. Whether it’s a side hustle or a second job, putting in more time and effort can not only help you earn more—it can help your career progress much faster, too.
At the end of the day, diversifying your income is just as important as diversifying your investments. Speaking of investments, it’s savvy to take the money you earn from your auxiliary sources and invest it straight away. That way, as your business or income grows, your wealth will grow right along with it.
4. Invest In Yourself and Your Loved Ones
Finances aren’t always about money—sometimes they’re about the opportunities you can give yourself and your family. From college funds to purchasing items that enrich your loved ones’ lives—like a house for a stable living situation, or a car so they’re able to get where they need to go—when you invest in your family, it pays big dividends.
It can also be a practical way to promote growth. Say, for example, you invest the time and a small amount of funds to teach your child how to manage and value money. Just think of the return you’ll get on that choice alone!
Helping the next generation continue to build on your legacy can ensure that all your hard work doesn’t go to waste. It’s one of the most important things you can do as a first-generation wealth builder: pass along the lessons, principles, and values of money management.
First Generation Wealth: What’s Next
Becoming a first-generation wealth builder is all about being intentional. Whatever your goal is—a specific dollar amount, a way of life, or a vision you have for your family’s extended future—taking it step by step is the best way forward. If you’re ready to take the next step in your financial journey, make sure you have the help and information you need to succeed.
Would you like to work alongside a professional financial team on your wealth-building journey? At Resolute, we pride ourselves on being a trusted advisor to each client. Contact us today to schedule an introductory conversation where we’ll share more about our services, get to know your goals and needs, and help you determine whether we’re the right fit. We look forward to hearing from you!