The 4 Mantras To Build Generational Wealth

The idea of creating generational wealth that can be passed on to your children and grandchildren and their children feels wonderful. 

The strong educational opportunities that my parents gave me was the wealth I received and I am grateful for it. 

My goal is take that gift and convert it into financial and relational wealth for my future generations that allows them to lead fulfilling lives.

I follow 4 mantras to accomplish this goal.

Mixed media graphic of someone "cashing in time", hand placing a clock into a slot as a symbol for converting active income to passive income

Convert Active Income to Passive Income

Wealth exists in two forms – your net worth (assets you own minus your liabilities), and your income stream. (In fact, this is how the SEC defines accredited investors who are allowed to participate in private placement funds as well – based on a particular net worth or income. We’ll talk about these in a future post).

Your net worth is static at a given time and your goal is to increase it every time you take a new snapshot. So, effectively, you need to keep adding more assets to your portfolio and reduce your liabilities (usually loans and credit card debt).

Your income is liquid and functional by nature. It flows and ebbs continuously and it determines your true wealth. This is what determines whether you have the freedom to do what you want when you want. 

For most of us, we tend to heavily rely on active income earned through salary or wages from a service we perform effectively trading time for money. The key to creating wealth is to convert this to passive income. As soon as it becomes possible, put aside a rainy day fund from your active income, and then start working at making it passive.

Invest, invest, invest. 

Person pulling money out of their wallet to invest in future generational wealth

When you invest, remember the following:

  • Invest in things that produce income (cash flow). If they don’t produce an income, that investment is dead until it does. Speculation in the stock market can boost your cash through the dumb luck of a gambler. However, investments in rental properties and businesses involved in commercial projects usually produce cash flow from day one, or within a short period of time.
  • Invest in things you understand. Housing is easy to understand. So investing in single family rentals or apartment complexes is easily understood. Office buildings make sense (except when you have to worry if the pandemic has driven everyone remote). Retail is harder to feel comfortable with, but if it’s a grocery store you know that business is not going anywhere. So, learn about the things you invest in before you put your hard earned money into it.
  • Invest in assets with intrinsic value. Stocks are not real assets and are nothing more than paperware. Panic in the stock market is a frequent occurrence and the value of stock plummets and sometimes vanishes. I’m not saying don’t invest in stocks, just don’t gamble on it too much. On the other hand, apartment buildings, self storage units, senior living facilities – these are tangible assets that don’t disappear. They have a core value and also produce income.
Apartment complex, passive income, group investing in rental properties

Generate Compounding Returns

It’s often said that compounding is the 8th wonder of the world. I agree. This maxim is even more interesting applied to investing for passive income. It is the key to generating residual income which in turn builds generational wealth. 

For instance, you join a group investment in a commercial project. The project provides you with 7% prorated cash flow every month or quarter contributing to your passive income sources. If you invested $100,000 that means you receive $7,000 every year of passive income. 

After a few years, the project either gets sold since it has gained in value. Now, you get your original investment back along with a tidy chunk of cash from the sale profits. Let’s say you get back $150,000. You take that money and invest it in another group investment for a commercial project. Say this also provides you 7% cash flow. Now you start receiving $10,500 every year of passive income. 

Your income just went up without any additional work – residual income – meanwhile the value of your ownership in the asset keeps increasing over time.

Family at the beach enjoying their time together

Focus On Freeing Your Time

Every investment step you take, view it from the standpoint of whether it will free your time

More passive income means less dependence on your job or wage earning service. That’s time you get with your loved ones and time to do things you love to do. It allows you to live a life of freedom. 

Keep converting active income to passive and keep generating compounding returns. Eventually, you might reach a point where living on the beach reading books or buying a lakeside cottage to spend time with your children and later grandchildren is all you need to do while the passive income keeps flowing.

The four mantras for generational wealth, parents teaching child how to invest and generate multi generational passive income

Include Your Children in the Journey

This is a crucial mantra for generational wealth. You’ve spent a lot of sweat and tears on building wealth. You don’t want your children to fritter it away. In fact, statistically most wealth is lost by the second or third generation.

The best way to ensure that doesn’t happen is to include your children through your journey. Give them the opportunity to observe you in action making investment decisions. Explain to them why you made the decision and what benefit it brings you and the family. Contextualize the investment for them based on their age. Play act by renting them their room and demonstrate the concepts of rental income and how they would have to earn to pay the rent. Give them a loan to buy their room from you. Then rent out a part of their room so they can use the rent to pay the loan.

Educating your children to protect their inheritance is a significant enough topic that I have an entire article about it for you. Read it here.

Generational wealth, man holding his son on his shoulders


Generational wealth is not an objective in itself. It stems from the desire to ensure that every generation is able to do better than the previous one. To make that happen, you need a systematic approach. My 4 mantras can help you get there – 

  • Continuously convert active to passive income
  • Generate compounding returns by reinvesting repeatedly while receiving passive income
  • Always invest in things that lead to freeing your time
  • Include your children in your investing journey and teach them along the way

Keep Your Wealth Chakras Spinning Efficiently