A major reason for building wealth is to provide security, not only for yourself, but also your children, their children, and on down the line (if that is possible). Parents who grow up in poverty want a better life for their children than they had. Some even make great sacrifices so that their children will start in a better place and not need to struggle like they did. One of the great things you can do besides retiring early if you follow the lifestyle presented in FIREd by Fifty: How to Create the Cash Flow You Need to Retire Early and continue to hold onto your wealth and grow it through your retirement period is create a fund to do things like pay for college for your descendants or pay for a life-changing trip when they reach adulthood.
For many years, providing a better life for your children was seen as noble. And provide people did, going from just getting by in the 1920s to 1950s to middleclass jobs in the 1980s and finally upper middleclass to upper-class lifestyles in the 2000’s. But there is something odd that happens to many of the children when they find themselves basically set for life without a struggle because of the actions of their parents: They may act in destructive ways that threaten their security. Other times they may accept the help, but feel guilty for it. Indeed, the whole “white privilege” movement has been built around this feeling of guilt, and there are many people ready to take advantage of that guilt.
But realize that while maybe you’re using wealth that you didn’t earn, it wasn’t just a fluke. It also isn’t because of the color of your skin. Someone among your ancestors, most likely your parents or grandparents, worked really hard and made many sacrifices to put you in the financial condition at which you started. The fact that you don’t need to struggle to find food, that you live in a warm, safe house, and that you’ll be able to go to college and maybe have some financial support to help you get started in life is something your parents or grandparents earned through their hard work. Instead of feeling guilty, just say “thank you.”
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Building generational wealth
Wealth is built up over generations. It usually starts with someone who grows up poor who decides that they don’t want to live that way. They then start making choices that change their financial situation. This includes things like finishing high school, not having a baby before marriage and before getting well established in the workplace, and being a great employee and using experience gained through jobs to work their way up to higher paid positions. It might be that this first person is not able to go to college because they need to work early to support themselves, but by avoiding many of the pitfalls that keep people in poverty, they are able to establish a solid income that can support themselves and their children, plus save up so that their kids can afford to go to college.
The second generation goes to college and is able to get a higher paying job than they could otherwise. They make more than their parents were ever able to, so they are easily able to afford to support their kids in college (especially since their kids will still probably get some scholarships or at least loans to make it easier to afford to go). Sometimes this generation is able to get an upper-middle class paying job and/or also starts investing and so is able to give their children nice clothes, vacations, and other luxuries growing up.
If rather than buying a lot of stuff on credit and spending this higher income, this generation starts living the FIREd by Fifty lifestyle, they can build up substantial wealth and become a deca-millionaire or even a hecto-millionaire. Other parents are able to start a successful business (including being a lawyer or a doctor and having a private firm/practice) and thereby create a very large income. They are then able to easily cover anything that comes up and can be quick to cover any expenses that their children have. They are able to just pay cash for college, maybe buy a house for their kids, and maybe continue to pay for their children after they are no longer in college. It can be either the children of the high earners or the FIREd by Fifty investors who feel guilt.
At this point, it can go different ways. The children of the multi-millionaires can use the springboard their parents provided and grow it again, becoming billionaires, they can simply get a good enough career to hold onto the wealth and then preserve it through their lifetimes, or they can start to live a financially reckless life and end up poor. Preserving and growing wealth is based on your lifestyle and choices, whether you are starting poor or starting wealthy. While it is true that the person starting poor won’t get as far as the person starting wealthy if they both make the same choices, the direction of wealth creation or wealth destruction will depend on the person’s choices. Sometimes the person starting poor will end up better off than the one starting wealthy because the former is motivated.
Before you can start investing, you need money to invest. Please check out FIREd by Fifty: How to Create the Cash Flow You Need to Retire Early. You’ll learn how to control your cash flow so that you’ll have money to invest and grow wealth.
“White” does not equal “Privilege”
The idea of “white privilege” has been created in colleges and accepted by many young adults who are feeling guilty because of their advanced start in life. Sometimes they themselves were actually not that wealthy, but they saw friends who were always getting nice clothes, taking nice vacations, and getting luxuries like a car provided by their parents and are jealous. They decide that there is a secret system by which someone who has light skin color gets handed jobs, access, and other advantages. While it is true that there are some children who are able to get jobs or into certain colleges because of their parent’s names or connections, and it is true that many of the parents who have that ability would be considered white, it has a lot more to do with what the parents have done in their lives and their personal culture/behaviors than the skin color of the children. Indeed, there are many light-skinned children living in poverty or the middle class that have no connections. There is no secret network.
So, if you are fortunate enough to have parents who have made good financial choices, there is no reason to feel guilty for the advanced financial position in which you start. Realize that your ability to start from an advanced position is because the hard work and choices (often sacrifices) that your parents made. Also realize that you are free to accept or reject the aid, but rather than just throwing away everything that they’ve done for you, maybe use your advanced starting position to get way farther than you could if you were starting in poverty. This pays homage to the gift your parents have given you and is equal in difficulty to starting in poverty and making it to the middle class.
Starting from an advanced positions also enables you to get into a position where you can give generously to others. Someone who is just making it really doesn’t have a lot to spare to help others out. Someone who starts in good shape and then moves on into true wealth can do large things.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.