How to Create and Preserve Wealth that Lasts Generations

Introduction

Have you tried balancing on one leg? It will be extremely hurtful and, in all probability, you will fall after some time. It is not only stressful but highly risky to stand on one leg – the same holds true in your financial life. If you stand on one leg, you will definitely fall and hurt yourself, yet so many people keep standing on one leg financially all their lives.

To be financially stable you have to stand on minimum two legs:

Employee + Investment

Self Employed + Investment

Business + Investment

Investing is the key to your financial stability whether you are an employee, self-employed or in business. There is a view that only people in jobs who do not invest are financially vulnerable. You will be surprised to learn that even very smart businessmen do not invest and their financial empire collapses because of this reason. Nothing can be further from truth. There are smart guys who build a great business and sell it for a profit of millions of dollars. They then want to repeat the process and start a new venture only to lose their entire capital.

Businesses, as they grow, demand more and more capital. In some cases, businessmen continue pouring money in expansion of their business rather than investing a part of their profits outside their business to gain financial stability.

Even a most profitable business standing on one financial leg is unstable. Smart businessmen, however, choose to do otherwise: Bill Gates sells his shares of Microsoft every year and invests in other areas to continue growing rich. His current holding in Microsoft is only 4%. Yet he continues to one of the richest men on earth.

The strongest financial legs are: business + investor, because you generate excessive cash flow from a well-run business to invest in passive income investments. Employees and self-employed people are limited in their capacity to create huge cash flow because they do not have tax advantage, leveraging power or time freedom for wealth creation. They can become wealthy if they invest intelligently but will find it extremely difficult to create accelerated wealth.

Let us examine in detail on how you can systematically graduate from your current situation to create not only financial stability but sustainable wealth that can last for generations.

In this book, we will focus on how you can create sustainable wealth by standing on two or more financial legs and more importantly preserve it so that you and your loved ones enjoy the fruits of your labor.

How to Create Sustainable Wealth?

What is sustainable wealth? The answer to this question is in this statement by Robert Kiyosaki: The rich have lots of money but the wealthy don’t worry about money.

It is important to understand the difference between being rich and wealthy. A rich person can have a lot of money and possessions but a wealthy person has adequate passive cash flow to fund his or her lifestyle whether they work or not. You will be surprised to know that there are very rich people in high paying jobs who will not be able to sustain even a very basic lifestyle if they were to lose their job for some reason.

You will also be surprised to learn that a very large percentage of high income earners such as sportspersons, movie stars, doctors, engineers etc. who buy expensive cars, boats, houses, clothes, jewelry and even fancy planes to impress people; do not believe in investing and lead financially unsustainable lifestyle. They often appear to be rich but are going nowhere – they spend their money recklessly, their expenses keep them worried at night.

Have you heard about Mel B of the Spice Girls fame? She earned over $50 million and blew it all up on fancy cars, private jet holidays, clothes and shoes. It is claimed that she never wore a dress twice. Her financial miss-management highlight was a gift of an island to her beloved husband who later divorced her and sued her for even more money – Mel is the perfect example of being rich and not wealthy.

Wealth means number of days/ months/ years you and your family can survive without physically working and still maintain a standard of living you are used to. If you can survive only for a few days or months, then you are not doing well. If you can sustain your lifestyle indefinitely without working, you are wealthy. You are super wealthy if you not only sustain but constantly keep increasing your wealth each year without working.

Your aim should be to create sustainable wealth. This is only possible by standing on two strong financial legs—one of which is investing. If you wish to be wealthy, you have to continually buy assets that give you passive cash flow. As you buy more and more assets, your cash flow will grow and make you wealthy. As a matter of principle, you have to keep your expenses less than the cash flow your assets are generating and with the surplus cash, you need to continuously buy income producing assets –this will not only keep you ahead of inflation but also compound your wealth.

Your first step to financial freedom should be to become wealthy. Your next step should be to become rich and wealthy. We will examine this in some depth and how it can be achieved.

Active and Passive Cash flow

‘The most important word in the world of money is