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If building generational wealth were easy, everyone would do it. In truth, it takes focus, discipline, and proper guidance each step along the way. Perhaps most importantly, your mindset will determine your fate. For those in their mid-to-late 40s, and perhaps early 50s, there are still steps you can take to create lasting prosperity for yourself and your family, provided you’re prepared for the challenges ahead. Moving forward, we’ll consider five tasks a formidable wealth-builder should undertake immediately.
Maintain Your Health
Perhaps nothing is more important than staying on top of your physical and mental health. I don’t separate the two aspects because each one affects the other; thus, it’s vital to maintain both facets of your overall well-being. It’s nearly impossible to make money when you’re sick.
In fact, the opposite is true. Poor health, and the accompanying medical bills, will rapidly erode your savings. Health insurance can protect you to a certain extent, but it’s not a panacea.
Your main priority should be to only see doctors (and your dentist) for routine check-ups. If anything abnormal appears, tend to it immediately before it becomes a more serious issue. Ideally, your focus remains on daily maintenance, ensuring proper nutrition, adhering to an exercise regimen that elevates both your heart and your mood, and feeding your brain a steady diet of helpful information rather than fruitless headlines about politics that are beyond your control.
Wealth-builders acquire new skill sets while everyone else remains glued to television and social media. Later on, your increased know-how will pay enormous dividends.
Know Your Cost of Living
Your next order of business is to find out how much your life costs so that you can effectively manage your income. Tally up your monthly necessities, everything including housing, car payment, gas, insurance, utilities, groceries, and your gym membership if you use it. Consider these as non-negotiables since you have to pay them no matter what. After these bills are paid, any money that remains is where all your power resides — it’s your discretionary income, what you can control.
As an aspiring wealth-builder, you want to develop a limitless appetite for investments and a relentless habit of cutting expenses. If you don’t need it, trim it from your budget.
Anticipate eating out a lot less. In doing so, you’ll not only retain a significant portion of your earnings, but your health will likely improve since you’ll have complete control over every ingredient you ingest. Also, keep tabs on your alcohol consumption, understanding that it’s an expensive habit with a list of potential detriments to both your physical and mental well-being.
Since our first priority is our health, and our second priority is saving, it only makes sense to ensure that we’re not overindulging. An occasional drink with clients or fellow business associates is likely harmless. However, keep in mind that you can almost always order something nonalcoholic without offending anyone in the process.
Save & Invest
Now that you’ve established a framework for increased savings, it’s time to ramp up investments. If you don’t already have a sufficient emergency fund (three to six months’ worth of living expenses) set aside in a high yield savings account, focus on building up those reserves first. Relying on credit cards in an emergency is a recipe for disaster. Even debt as little as $4,000 financed at 24% APR can spiral out of control if all you do is pay the minimum, particularly when more emergencies creep up and force you to add to the growing balance.
Once you’ve got adequate liquid savings, your job is to then start filling your retirement account buckets, focusing on any employer-matched 401(k) first to reap the maximum risk-free gains inherent in the company match. If you haven’t already done so, the other buckets you’ll want to begin filling will include a Roth IRA and a Health Savings Account. The yearly maximum contributions for those accounts are $7,000 and $4,150, respectively, but if you’re 50 or older, you can include an additional $1,000 annually in catch-up contributions to your Roth IRA. (When you turn 55, the same goes for your Health Savings Account.)
A Roth IRA is especially critical for generational wealth because proper withdrawals from it during retirement will be tax-exempt. As for the Health Savings Account, its tax benefits are even more significant, being the only type of savings vehicle to offer the elusive triple-tax advantage, meaning that contributions are tax deductible, growth is tax deferred, and usage is tax exempt.
Select Your Advisor
Hopefully at this point, you’ve established a rhythm with regard to your earning and saving. Assuming that you’re bringing in enough to adequately save and invest, it’s time to seek professional guidance. Wealth-building is a full-time job in and of itself independent from your employment. The vast majority of those intent on generating massive wealth will need the expertise of a fiduciary — an advisor who is beholden to your interests above their own.
In most cases, you’ll want to rely on them for much of your investment portfolio. In addition to your monetary investments, a good advisor will lend you their expert opinion on a variety of subjects related to your wealth, whether it be pointing you in the direction of a suitable accountant, an attorney, or even classes for your professional development. In many instances, they’ll even assist you in forming effective strategies to get a business off the ground. In short, there’s no reason to go it alone.
As humans, we need proper guidance, specifically from those who have a broader scope of the financial world and its myriad complexities. Even if you have an MBA, it would be foolhardy to close yourself off from an outside perspective. No matter how brilliant you are, you can only know so much. Give yourself the benefit of listening to an expert who undoubtedly sees things you can’t. The cost of a great advisor is miniscule in comparison to the value they bring.
Increase Your Income
The last step might be the most daunting, but it’s what separates the well-to-do from the truly wealthy, those who have amassed a fortune to last generations. You ultimately need to ramp up your income, and the sooner you do it, the more lasting the impact, provided you invest what you earn. Initially, you’ll need to determine whether you aim to generate a high income within the confines of an existing organization or if you want to build a company of your own. One path is not inherently better than the other.
If you want to climb the corporate ladder, be prepared to take the leadership positions nobody else wants, often working the hours nobody else wants. It’s the simplest, most logical way to differentiate yourself from a pool of applicants — go through the door that nobody else has even thought to open rather than try to cram through a tiny opening that only has room for a trickle of lucky candidates. You might have to consider a job transfer out of state or possibly leaving an employer altogether for a ripe opportunity. Again, a qualified advisor will often have critical insight for you to consider before you make a risky leap of faith.
The other path is less common, but might be more rewarding for you, which is to start a venture of your own. If you’ve amassed a series of lucrative skill sets throughout your career, if you now understand the ins and outs of a specific industry relative to your profession, you might be sitting on a gold mine of knowledge, provided you have the wherewithal to fit the pieces together.
Independent consultants typically make significantly more than hired employees. Product developers can go on to make tens or even hundreds of millions of dollars if what they produce is marketable. However, becoming a business owner can be as frightening as it is exciting. You don’t blindly jump into being an entrepreneur. You gain some confidence, then you dip your toe in the water, you find your footing, and then your faith in yourself grows, which in turn allows you to go out a little further, and then a little further still. In fact, if you choose this route for yourself, you might retain your day-to-day employment for a time, at least until you’re ready to let go completely.
The key is in your footing, regardless of where you’re headed. How do you become sure-footed? By strictly adhering to the aforementioned guidelines. When you’re healthy of body and mind, when you have control over your spending, when you have sufficient savings and investments, when you’ve honed the requisite skills, when you have the right advisors leading you along the way, then you’re perfectly suited for the adventure that awaits you on your quest to create untold wealth.
Mark B. Murphy is a registered representative and financial advisor of Park Avenue Securities LLC (PAS). In addition, he is the CEO of Northeast Private Client Group.
Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). OSJ: 200 BROADHOLLOW ROAD, SUITE 405, MELVILLE NY, 11747, 631-5895400. Securities products and advisory services offered through PAS, member FINRA, SIPC. Financial Representative of The Guardian Life Insurance Company of America® (Guardian), New York, NY. PAS is a wholly owned subsidiary of Guardian. NORTHEAST PRIVATE CLIENT GROUP is not an affiliate or subsidiary of PAS or Guardian. CA Insurance License Number – 0B36048, AR Insurance License Number – 741545. The opinions expressed are those of the author and not necessarily those of Guardian or its subsidiaries. 2024-167757 Exp 1/26
Northeast Private Client Group
Editor’s note: This article appeared in the April 2024 print edition of VettaFi Advisor Perspectives magazine: https://www.advisorperspectives.com/articles/2024/04/26/building-generational-wealth-mark-murphy.
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Mark B. Murphy, CEO of Northeast Private Client Group, is an accomplished author, speaker, and motivator who’s revolutionizing the financial planning and wealth management industry. He helps entrepreneurs achieve multigenerational wealth through personalized strategies, leveraging his strategic planning and financial engineering expertise. Forbes has ranked him as the number one financial security professional in New Jersey and number 15 nationwide. Additionally, his book, The Ultimate Investment, is a number one bestseller and new release on Amazon.