Rachel Cruze: Easy Ways To Build Generational Wealth
What does generational wealth mean? The technical definition is that it’s financial wealth and assets that can be passed down from one generation to the next. It can help your family get a financial head start and set them up for long-term financial success with money and assets after you pass.
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“Changing your family tree is something that you can and should prioritize,” says personal finance expert Rachel Cruze in a recent video. And yes, you can turn your salary into generational wealth.
What’s included in generational wealth? It could be financial assets which include money in the bank, investments, cash, any savings as well as assets which include homes, real estate, jewelry, and collectibles.
Here are Cruze’s tips for setting your family and loved ones up for financial success:
1. Eliminate debt and build an emergency fund.
Yes, she’s the daughter of debt-busting financial guru Dave Ramsey, so you knew one of the tips was going to be to eliminate debt. By getting yourself out of debt, you’ll ensure that the money and assets you leave behind don’t have to be paid by your estate.
After you have one thousand dollars saved and have paid off all your debts, ramp up your emergency fund to three to six months of expenses.
2. Invest and put money in retirement accounts.
Once you have that money set aside, invest 15% of your income into retirement and start building some wealth that you can live off of when you retire but also hopefully can pass on to your family.
3. Save for your kids’ college.
This is part of the Dave Ramsey baby steps because having your kids graduate without student loan debts helps them start financially on a solid foundation. When they graduate without debt, they’ll be able to start investing soon and building their own wealthy life.
4. Pay your house off.
If you’re following the Ramsey plan you’ll be on a 15-year fixed-rate mortgage. The faster you can pay this off, the less the total cost of the loan. According to Ramsey data, the average millionaire pays off their home in little over 10 years.
Most importantly in this process, make sure you have a will. If you have a net worth of more than a million dollars, consult with an estate planner as well, Cruze advises.
Let your family know where all of your important documents are so they can easily find them when you pass. Cruze suggests a “legacy drawer,” that the family knows about and includes all personal finance data they might need.
Learn More: 7 Ways To Start Building Wealth Like the Rich in 2024
“Generational wealth doesn’t stop with your decisions in your lifetime; it’s about setting your loved ones up to benefit from your financial legacy,” says Cruze in the video.
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This article originally appeared on GOBankingRates.com: Rachel Cruze: Easy Ways To Build Generational Wealth
