Never Touch the Principal

Building multi-generational wealth means keeping what you save and investing it well.  Doing this means minimizing how much of the principal you withdraw to fund your lifestyle, at least once you’re living off of your investments.  In an ideal world, not only do you have enough capital saved to only use the income and never use the principal for living expenses, but you have enough left over to continually reinvest and grow your portfolio as well.  Once you have reached that point, and assuming your family doesn’t screw it up down the road, then your family will be well setup for the future.  Your principal is the beginning of your orchard or your garden.  From it, all else grows.

Follow your Passion- on the Side

Follow your passion and the money will follow.  So goes the advice anyway.  It’s also not very likely.  Not only not likely, but given how happiness and life satisfaction work, there’s a good chance that you’re following the wrong path.  Following your passion is great advice; just not when determining a career path.  The University of Montreal did a study on their students’ “passion” years ago, as related through the website 80000hours.org.  90% of college students were passionate about sports, arts and music.  Unfortunately, only 3% of jobs are found in sports, art, and music.  Or, as 80000hours.org put it in a nice succinct chart:

Paying for College… or Not?

From nearly the moment your children are born, the question of whether or not to pay for college begins forming in your mind or being asked by “concerned” friends and family.  Can we have a few years to make sure this little one doesn’t stick a nail in an outlet or take a flying leap off of the top stair before having to worry about a major financial decision?  Paying for college to many is a given – if you can afford to do so, of course you will.  But I’m less certain.  Are our kids really better off if we continue adolescence beyond its natural stopping point?  Will they have better outcomes if we don’t pay versus if we do pay?

You Get Paid Based on Value, Not Time

Face time, putting in hours, burning the midnight oil.  Do any of these matter when trying to achieve a top quartile paycheck?  To some extent, putting in face time, especially early in your career, is important.  But as you move up the food chain, your job becomes less and less about the hours spent and more and more about the results you achieve.  In order to be a top performer, you must do more than just show up.  Instead, you must start to find new and creative ways for your firm to add value for its customers.  Improving the bottom line will be what advances your career.  As you move higher on the corporate ladder, you get paid based on the value you create and not the time you spend in the office.

Start Your “Get Rich” Account

Great Families often have great fortunes attached to them.  Rockefeller, Vanderbilt, and Rothschild are all family names that are well-known to most.  However, great fortunes can also be much more stealthy and still be substantial.  We don’t need to compare ourselves to the .00001%.  Imagine the good that you can do for generations of your family, your community, and causes you care about with a net worth of $10 million or more.  I’m a working stiff, so I know that I’ll never be in the same category of the Rockefellers, or even more modern day, the Zuckerbergs or Gates.  However, do I think it’s possible to have a net worth of $10 million, $20 million, or more by the time I reach my late 60s or 70s?  Absolutely!  In fact, I’m planning on it.

Hit Your F-You Number in Your 40s or 50s

As you’ve probably noticed, I’ve been doing a series about the different steps to take at different points in your life to ensure that your family becomes a Great Family.  As you move into your 40s and 50s, your life settles down and you begin earning the largest paychecks of your career.  However, your obligations, both financial and personal, increase as well.  Living your life from a position of strength in your 40s and 50s means building up your F-You fund and hitting your F-You number.  Your 20s and 30s were a time to increase your career prospects and get the financial basics taken care of.  Now is the time to convert your career earnings into real investment capital and build your fortress on top of that financial foundation.

Choose Roth over Traditional – But Only When You’re Young

Roth accounts (IRAs and 401ks) and traditional accounts both have their time and place.  For young professionals, choosing a Roth over a traditional account makes sense.  However, as you advance along your career path, earn more money, and build capital, the value of a traditional account over a Roth becomes clearer.  My advice is to use the Roth when you’re in your 20s, but then make the switch to a traditional when the tax benefits of a current deduction outweigh the Roth’s benefits.  Let’s take a look at why that makes the most sense.

Pour the Foundation of Your Financial Fortress in Your 20s

Much like how the foundation of your home is what holds up the roof and walls, your financial foundation holds the walls and towers of your financial fortress together.  From a financial perspective, the goal of your 20s is to build the skills and knowledge necessary to construct your fortress in your 30s and expand your financial kingdom in your 40s and 50s.  Without this solid foundation, none of what you hope to accomplish financially will be possible.