Why Generational Wealth Is the Real Key to Financial Freedom

Old people are going to die and young people are going to inherit stuff. Put the fog horns down or whatever, you know, they do a basketball game. You're probably thinking, yeah, that's cool, but generational wealth has nothing to do with me. I'm still trying to figure out how to max out my retirement account. I'm not worried about other people. Whether it's about making sure that more women are given the keys to financial independence and freedom, laying a foundation so the generation after you can struggle a little less, or even just making sure that you have the final say around the money you earned, generational wealth is important. These things aren't just going to happen to you one day. You have to go and make them happen. What's up, rich friends? And welcome back to another episode of Net Worth and Chill. I'm your host, Vivian Tu, aka Your Rich BFF, and your favorite Wall Street girly. Can I say something really quick? Can we get honest? Part of the reason why I wanted to start this platform of sharing personal finance tips and knowledge was just that. I saw the kinds of advice that people were giving my friends, and I just couldn't deal with it. There is so, so, so much bad financial guidance out there. I mean, from older generations, you have the traditional kinds of finance advice that just don't make sense anymore. That whole get married and buy a house and climb the ladder at your job for 40 years spiel, which is totally irrelevant to our current reality. And then you have this weird new age advice of fake loopholes and get rich quick schemes like that awful advice to just buy whole life insurance or pour all of your money into Dogecoin. I wanted to start this platform to give people real, tangible, sensible guidance about how to secure a better financial future in the world we live in right now. Often that guidance looks a lot like tips on budgeting, saving and investing. But today I'm going to talk about what happens after you start to master all those marks. Not just making money today, but making sure that money lasts. Yes, today we are talking all about generational wealth. Do-do-do-do, put the foghorns down or whatever, you know, they do at basketball games. We are going to talk about what generational wealth is, how to build it, and why it matters. We're going to talk about how to calculate your net worth, answer some of your burning questions, and unlock the next step of your financial future. I got in the water in the very early morning before the sun had risen and the water was pitch black. I started swimming and I felt the water hollowing out around me and felt like something really big was swimming below. I'm Phoebe Judge and this is Love, a show about the surprising things that love can make us do. More than 100 episodes available now on This Is Love. Also quick aside before we get started if you really want the step-by-step guide on how to create generational wealth my second book well endowed it's going to help you walk through topics like trusts wills tax loopholes and how to set your kids up for financial success even if you weren't necessarily born rich you can order it now at richbffbook.com and best part if you order now you can still get access to the pre-order freebies that I offered people but I'm still going to let you guys have access to them for a little while longer. Things like an estate planning checklist, strategies to teach your children about money, a rent split calculator, and more. So make sure to check it out. Get a copy, richbffbook.com, or you can grab a copy of Well Endowed wherever you get your books. Now let's jump into an overview of what generational wealth actually is. By definition, generational wealth refers to financial assets passed from one generation of a family to another. And those assets can be anything from cash and stocks to real estate and family businesses. Generational wealth is about making sure you don't lose it. It's about protecting your assets for the long haul after you've gone and making sure that the person inheriting your hard-earned portfolio knows how to manage it. So the big question is, how can I build it? I hope my legacy beyond being a good daughter, friend, partner, positive human, being blah, blah, blah, also has a lot of zeros at the end. I'm trying to get rich and stay rich. Surely you want this too, which is why you're listening in. So how do you build up your wealth? It all begins with the basics. I'm talking about leveling up your income, investing your money in retirement accounts so you can avoid taxes, beefing up your savings and high yield savings accounts, leveraging tax advantaged health accounts, and tapping into the stock market, real estate, or anything else that'll passively make you more money in the long run. When we talk about strategically investing, people can often get caught in the weeds of how much to save and how much to invest. But the bottom line is that you should be saving something and ideally investing in something else, too. But to be super honest with you, the easiest way to make sure you're maxing out your contributions and have enough money to throw into index funds or ETFs on top of it is just to make more money. Negotiating for higher pay at your W-2 job is probably the most painless way to earn more without taking on a bunch of extra work. And especially if you've survived a round of layoffs at your company, it may be a good time to ask for a promotion or a raise, given that you're probably doing multiple people's jobs. You'll have the leverage of telling your boss that you're taking on more work with less headcount available. And even if they only give you a little bump, that's something you can store away into your savings and start investing. As we're already a month into the new year, it may be time to start brushing up on negotiation tactics and getting that bread because it's new year, new me. And I wanna make sure that you are keeping that energy of making sure you are making the right career decisions that benefit you and not giving up just because February started. Still, the market is tough, I don't deny it. It might be time for you to also get a little creative. Side hustles and freelance gigs that your full-time contract will allow. After all, Your Rich BFF was actually just a fun hobby for me until it really started to take off, and now, look at me. I never have to worry about someone pulling the rug out from beneath me anymore because I run my own business, So I certainly encourage people to pursue something that is a side hustle and allow it to be a side hustle. Just something you're doing on the side until it's not could really, really change your life. Aside from learning to save and invest regularly throughout your life, though, there are a few big moments that can make huge dents in your generational wealth building. I'm talking about strategically investing. So navigating really big purchases like buying a car a house paying for a wedding If you want to get a written cheat sheet with specific tips on how to save money on these big ticket items as well as how to protect your assets in your relationships like how to navigate prenups dealing with in-laws, and the best way to drop a will, you can order my book, Well Endowed. I go way more in-depth there. Just check it out, richbffbook.com. Okay, so now that begs a question, though. if everybody's talking about it why is generational wealth important you're probably thinking yeah that's cool but generational wealth has nothing to do with me i'm still trying to figure out how to max out my retirement account i'm not worried about other people but if you are like me and you don't come from a ton of money generational wealth is super important to think about once you get your own financial plan and check let me explain it's no secret that we have a huge wealth disparity in the U.S. And according to reporting from CNBC, the top 1% are currently holding onto nearly a third of the nation's entire wealth, which, by the way, is the same amount of wealth that the bottom 90% has. And the gap is only continuing to grow with government policies that really favor the rich, like tax breaks for the highest earners in the country and major corporations. Axios found that 10% of the population owns 93% of stock market wealth. That's why the middle class and lower income households are feeling the pain of this economy so much worse. The cost of living is going up. The sandwich generation is supporting both their parents and children and tariffs are inflicting the most damage on people whose budgets are already stretched very thin. A 30% jump in grocery prices is just going to hurt less for people who have the money to blow. That's simply put. It's like that one arrested development quote. It's one banana, Michael. How much could it possibly cost? $10? We also know that 98% of the top 1% are men and 91% are white, according to reporting from Vox. I know that people really don't want to confront that fact, but it is undeniably true. We don't even have to bring gender and race into the conversation, but that is just the fact of the matter. The rich getting richer only continues to disenfranchise women and people of color more, and it makes it harder for these communities to break the glass ceilings that have very long hurt them. So here's my point. Thinking about generational wealth matters when you want to make things better for yourself and the people around you. Building up wealth means more resources for your loved ones, a better head start for your kids, and the chance for them to freely enter spaces that you had to fight, claw, tooth and nail to be in. That doesn't just apply to women or non-white folks. I mean, anyone who has worked incredibly hard to open doors that were previously shut to them. We all know some Brantford Winston Worth III that waltzed into your office and managed to get a job right in the C-suite because he was Papa's number one boy. And guess what? Unfortunately, we don't all get to be born that way. But in order to actually see progress, we have to lay down the path. That's why I believe in the power of financial literacy. If you continue to treat money like it's temporary, you will always get the shorter end of the stick. But if you and lots of hardworking people are invested in building something permanent, we will start to see the winds shift in our favor. Let's look at a really specific example, working for your parents. The United States Census Bureau found that working for a parent's employer leads to a 24% increase in earnings at a young worker's first job compared to those hired without a parental connection. Three years later, individuals who began their careers at places where their parents worked earned 20% more than their peers who did not. Whether your parent owns a company or simply works at one, a parental employment connection can lead to higher earning wages throughout your kid's entire career. I saw this all the time, whether it was parents who had previously worked at J.P. Morgan or maybe parents who were high-powered clients of the firm, their kids always got an elevator ride to the top. They got the interview, they got the job, whereas the rest of us, we had to go through rounds of on-campus recruiting, virtual recruiting. in office recruiting then we had to speed date for which desk we actually got to work on then we had to be interns then we had to finally get our analyst careers it's just a lot and this is all to say some people are born on third base and some people are born all the way out in the parking lot by the illegal hot dog cart so right here right now i'm making the announcement let's stop hating on nepo babies it's not their fault that their parents learned how to keep money in the family, but it is important that we learn from them. I think it's important to talk about generational wealth right now because there's a huge fuck it we ball mentality with younger generations. I mean, all we've seen in our adult lives is recession, shrinkflation, layoffs, tariffs, COVID, bus, club, another bus, another club. It also blows my mind how often I come across content of young women just saying they'd rather marry a millionaire than become one. So it's kind of hard to explain why it's important to think about the future when most young people think the world is just going to explode by the time they hit 45. But it is important, whether it's about making sure that more women are given the keys to financial independence and freedom, laying a foundation so the generation after you can struggle a little less, or even just making sure that you have the final say around the money you earned. Generational wealth is important. These things aren't just going to happen to you one day. You have to go and make them happen. And if I can give you just one story of forewarning, I know a woman who lived her entire life on Easy Street. She grew up in a well-to-do family. She ended up getting married to a very wealthy man. Everything was perfect. She had never worked. She was incredibly smart, but her family's wealth was poorly managed. She ended up in an abusive relationship. You would never know because she had this stunning home in a very nice neighborhood where all the most designer beautiful clothes, but she had a really sucky life because if she wanted to continue to live comfortably, she would have to stay with a partner who did not respect her, who did not treat her with kindness. and this is all to say generational wealth is so powerful whether it's you making sure you're inheriting it and doing the right thing with it whether it you building it so that the next generation can have it having that money gives us power it gives us options We can leave crappy jobs crappy partners and crappy situations We need to have money and it is important that we prioritize it. Hi, friends. Quick pause in our show to share my rich tip of the week presented by Adobe Acrobat. Time is money. Seriously. When we think of purchases, we tend to think of the overall cost of something, but I want you to use the You're Rich BFF, is it worth it equation. Let's say you want to buy a pair of $80 leggings, like really nice fancy ones. First, you're going to calculate how much you're making per hour after taxes. For ease of math, let's just say it's $20 an hour. Next, we're going to calculate how many hours you would have to work in order to afford that pair of leggings. In this example, it would cost you four hours, four times 20 equals 80, to actually be able to afford those leggings. Is that worth it to you? Maybe it is, and you've been dreaming about these, and you work out all the time, so you're gonna get a ton of use out of them. Or maybe you'll actually realize you don't need them and you've just been served one too many ads about them. It's really up to you. This is gonna help you determine what's worth it in your life, what you actually wanna spend money on versus what you can deprioritize. Now, if you're deciding whether to pay for something that saves you time, meal prep service, house cleaner, virtual assistant, fancy software, you know, do this math. How many hours will this save me monthly? Multiply that by your hourly rate. If that number is more than what the service costs per month, it's literally making you money. Now back to our show. So now let's get into some Q&A that we have sourced. First question is, how do I calculate my net worth? So net worth isn't just something that exists for the super rich. Like when you Google, like, how much is Kim Kardashian worth? Like everybody has a net worth and you can easily calculate yours. Here's how to do it. Basically, you add up all of the value of your assets. So things that you own and then you subtract your liabilities, things that you owe. That's literally it. So, for example, I would add up all the things like the cash I have, the stocks I'm invested in, the equity in my home. And then I would subtract things like my mortgage, any sort of debt that I might have, whether that be student loan or credit card debt. I would subtract any sort of payments that I might owe, like, you know, the people who come and service my apartment, whatever. You do what you own minus what you owe. Knowing your net worth, aside from it being like a fun fact, is a really helpful thing for two key reasons. One, it lets you understand your current financial situation and it gives you a reference point for measuring progress towards your goals. Say you want to have a million dollars to leave behind for your kids or you want to have saved five million dollars by the time you retire. So you can live out your golden years chilling on a beach drinking margaritas or something. Having a reference point like your net worth is so important in building generational wealth and knowing if you need to lock in or if you can continue to ride out the exact path you're currently on. And it's a better marker than just thinking about all the things that are in your bank, because oftentimes that doesn't take into account any sort of debts and it doesn't take into account any sort of things that are non-cash. So net worth is just the most accurate way to essentially be a barometer of how your finances are doing. Next question. What is the great wealth transfer? So maybe you've heard this term already and maybe you have no idea, but here's the situation. America is currently about to undergo the biggest shift in personal finance ever measured. A generational wealth transfer of nearly $124 trillion with a T dollars in assets over the next 25 years. Simply put, old people are going to die and young people are going to inherit stuff. It's going to impact everything. There's going to be 124 trillion tax-free dollars now being spent on healthcare, labor markets, social and environmental causes. Because basically, baby boomers changed a bunch of tax and investing laws way back in the day. They're holding on to a lot of money, like a lot of money, and they are, sorry, about to die. But all that money is going to their kids. So it's not going to be like everyone's about to come into a pile of money. The sandwich generation is still hurting and it's not immediate relief, but certain pockets of people are going to inherit an absolutely monstrous sum, a life changing windfall of money. And this isn't to say every single person is going to inherit millions of dollars, but even a six figure sum could change the trajectory of your financial future. So I would actually say have a conversation with your parents. Ask them if there is something to inherit. Ask them if they are prepared for retirement. If not, how can you help? So this is just a really good time to have that conversation. Next question. So should I keep renting or buy a place if I want to build wealth? The rent versus buy debate is a lot more complicated than people actually realize. Buying a home can be such an exciting next step in your life, but it also comes with a significant cost and responsibilities. And right now it is cheaper to rent than buy in the U.S.'s largest 50 metro areas. Here's how the decision typically breaks down. When it comes to renting, you have flexibility. You can move without the hassle of selling a property. There are lower upfront costs, usually just a security deposit and first month's rent. There are little to no maintenance costs because if something breaks, it's usually your landlord's problem. and you'll have more money to invest because since you'll have lower upfront monthly costs, you'll be able to invest more of your dollars, which may lead to your investment portfolio growing at a higher rate than potentially a home would. However, there are some great pros to buying as well. You're building equity. Every single mortgage payment helps you own more of your home. Stability, your monthly payment, if you have a fixed mortgage rate, won't increase at any point like rent might. Potential appreciation. Listen, over time, your home could increase in value. And we have seen great real estate appreciation over the last few decades. And when it comes to real estate investing and investing in the stock market, there are a couple of things that I want you to think about. First of all, risk. Stocks can be volatile while real estate tends to be more stable, but can also fluctuate based on your local market conditions. The reason why real estate investing is such a hard conversation to have in general like on a podcast like this that appeals to all 50 states is because it is hyper localized You might live in a town where it is much smarter to buy Someone else listening to this might live in a town where it is almost guaranteed to be smarter to rent. It is up to you to make that decision. As for, you know, back to that investing in real estate versus investing in the stock market conversation, time horizon. Real estate is usually a long term investment. More often than not, it doesn't make sense to buy a home unless you're going to be in it for at least five to seven years. While stocks can be a little bit more flexible depending on your strategy. Also, there's costs. Home ownership comes with additional costs like maintenance, property taxes, insurance, which can eat into some of those profits. What I recommend is actually checking out the New York Times rent versus buy calculator to help you make your decision. Just search, you know, New York Times rent versus buy calculator. It should be the first thing that comes up on Google. You put in info about where you live, how much you pay in rent versus a mortgage, and how long you want to live there. And it can help you figure out what is the best financial decision. Next question, can my kids or spouse inherit my Roth IRA? What about my 401k? Yes. Whoever you list as the beneficiary on those accounts, typically a payable on death or transfer on death, a POD or TOD, will receive the money in there when you pass on to the next life. You can name a sibling, a child, a spouse, or even a friend. That makes sure that your money stays out a probate court as well so you can keep the money within your loved ones. That said, if you actually want more control over how you divvy up your money, you don't want just the whole account going to somebody and letting them willy-nilly get on with it, you can consult with a financial advisor and see if a trust fund is the right choice for you. With a trust fund, you can actually avoid the public nature of a will and have more discretion and say over how the funds are released. Yes, it is true. This is going to take a little bit more paperwork, a little bit more legwork, and you will have to pay to set this trust up, but it could certainly make a lot more sense if you have specific directions on how you'd like that money to be directed and spent. If you want to learn more about that, definitely check out my book, Well Endowed. It just released. You can learn all about setting up the trust, how to save money when setting it up, how to make sure that you leave money behind without turning your kids into dirt bags. This is the generational wealth blueprint. So check it out. It's called Well Endowed and you can grab it at richbffbook.com or wherever books are sold. Okay, next question. What's the difference between investing in my retirement account and putting money in the stock market if they're both investments? This is such a great question because actually your retirement account is not an investment. It is just an account. So what I think people often get confused is things like a 401k and a Roth IRA. Those are retirement accounts. They are not investments. They are just buckets. They hold stuff. And once you go into those accounts and you put cash in those accounts, you take that cash and you then purchase things, perhaps things that trade on the stock market. So it's not one or the other. When you hear people say invest in the stock market, they could mean it's in their retirement account that they're doing that or an individual brokerage account that they're doing that. But they're always doing it in some sort of an account. So please do not conflate having a retirement account with investing. you just have a digital tote bag a tote bag that carries stuff you actually still have to put cash into that bag and you have to take that cash and go buy stuff in that bag also just so that everybody's clear i want to give a quick breakdown on like you know investing in the stock market and index funds as well as like what those retirement accounts do so let's talk about this index funds like just picture index funds like a playlist of top hits instead of having to pick individual songs or stocks in this case you get a mix of the market's greatest hits they track a specific market index like the S&P 500 offering broad market exposure and diversification, which is the name of the game here. You want to make sure that your investments are diversified. Many people appreciate index funds because they have pretty low fees. They're super simple. They don't require you to be a stock picking genius. And this makes them a really popular choice for beginners. You can purchase index funds in an individual brokerage account, in retirement accounts, in a 529, which is to help save for your children's education. You can purchase these in any sort of investment account. As for retirement accounts, the reason why retirement accounts are so popular is think about it like a way to very literally avoid taxes, get away with it, and have it be completely legal. Popular options obviously include like a 401k or 403b if you work at a non-profit and IRAs and Roth IRAs. The 401k is often offered through an employer and it allows you to put pre-tax contributions, meaning you're able to lower your taxable income for this year. The same thing with a traditional IRA. A Roth IRA, however, or a Roth 401k is the opposite. You contribute after tax dollars, meaning you do not get a tax break this year, but your money grows tax-free. And when you withdraw in retirement, those are tax-free too. So this is all just to say, you want to make sure that your bucket, your tote bag is tax optimized, but I wouldn't belabor the exact choice of where you want to get that tax savings. I would just pick one and start investing now sooner rather than later because the more time you have in the market the better off you are likely to be. So in conclusion let's wrap us all up. Why do we make money at all? To live a comfortable life. Sure. To build peace of mind support and resources and for many of us it's to make sure that our children and their children can have a better head start than we did. That's certainly my goal. I know it's easy to get caught up in the details of how to max out your savings and take advantage of all the tax loopholes that exist in our weird, complicated system. But I hope you can occasionally take a step back and look at the bigger picture. You're making money because you want to build something important. And that's a great thing. Do not forget that. I'll catch you guys next week, besties. And if you want more intel on generational wealth building, please do not forget to order Well Endowed RichBFFBook.com is where you can grab it or you can find it wherever books are sold. Thanks for tuning into this week's episode of Net Worth and Chill, part of the Vox Media Podcast Network. If you liked the episode, make sure to leave a rating and review and subscribe so you never miss an episode. Got a burning financial question that you want covered in a future episode? Write to us via podcast at yourrichbff.com. Follow Net Worth and Chill Pod on Instagram to stay up to date on all podcast related news. And you can follow me at yourrichbff for even more financial know-how. See you next week. Bye.