Despite getting a late jump on their finances in life, doctors are uniquely positioned to build generational wealth for their families.
By being intentional about building generational wealth, doctors can set up a financial legacy for themselves and their descendants that may be added to and passed down for years to come.
There are many ways you can begin building generational wealth to make your children’s and grandchildren’s lives easier in the future.
But what exactly does that mean? Why is it important and how do you achieve it?
Generational wealth is a collection of all the financial resources of a patriarch or matriarch that can be passed down, and added to, by succeeding descendants. Typically, to be classified as generational wealth, it should be passed down through multiple generations, but this is not necessarily vital to be able to apply the term.
The financial resources associated with financial wealth can come from any number of sources including money from bank accounts, real estate, investments, or even businesses.
Generational wealth itself is not accrued for the benefit of the person gathering it. Sure, the person building it will likely be able to live quite comfortably. But, it is collected to be left to any descendants that come after. That means that the point of building generational wealth is not to enhance your own standard of living, but instead to provide a solid financial foundation for your children and grandchildren.
The money and resources you gather to pass down can be used by your descendants to fund college expenses in lieu of withdrawing loans, to purchase first homes or vehicles, or to provide a cushion of protection in case of emergency situations.
There isn’t a limit to the ways you can go about building generational wealth for future generations. That said, here are some of the most sensible you can start working toward building generational wealth for your family.
Live within your means
One of the easiest ways to make and save money to set aside for future generations is to live within your means today. When you make — and stick to — a healthy budget, you’re able to set aside the money that you don’t need now to help safeguard your children’s and grandchildren’s futures.
Doing this can benefit you in many ways. By not exceeding your financial limitations, you can avoid debt and the risks of bankruptcy or foreclosure. Additionally, you’ll be able to save future generations from worrying about funeral expenses or other such financial worries once you pass on.
Learn More: How to Live Within Your Means As a Doctor
Keep a reliable financial safety net
Similarly to living within your means, you need to make sure that you have financial protections set in place in case unexpected emergencies arise. These can range from medical expenses to fixing broken down vehicles to repairing roofs and much more. By putting a financial safety net in place, you have money to fall back on, saving you from making hefty withdrawals from your savings or retirement accounts, taking out loans, or leveraging anything you hold dear to cover the expense.
Hire a financial advisor
Perhaps the smartest way to begin building generational wealth is by consulting an experts, such as a financial advisor or planner, to guide you through the steps you need to take to reach your goals. (After all, it's literally their job.)
They’ll be able to help you establish healthy goals, make wise investments, plan for retirement, and address any concerns you may have far more effectively than a Google search ever could.
Learn More: Financial Planning for Physicians in 2021
Set realistic financial goals
If you choose to work with a financial advisor, they’ll be sure to keep you in check with realistic goals that you can achieve with your finances. But if you don’t work with an advisor, you’ll need to take extra time to really consider the resources you have against the goals you want to accomplish.
If you’ve just entered your residency, saving $25,000 for your retirement within a year will very likely be an unrealistic goal because you won’t be making much money at all. Additionally, unless you are incredibly fortunate, you will have the weight of hundreds of thousands of dollars in student debt over your head that will need to be paid off before you can realistically consider investing.
Learn More: Setting Financial Goals for Doctors
Make wise investments
Making your money work for you is a great way to grow it for future generations. Investing in the stock market or real estate are two great ways you can start building generational wealth now.
Stock market investments are designed to be more profitable the longer you’re invested in them. Real estate is a similarly profitable investment venture, and many people find it easier to invest in than stocks. In fact, many people end up owning their own homes before they retire, which is a form of real estate investment.
Contributing to your 401k is also a smart, accessible way you can begin making these kinds of investments on a regular basis.
Launch a private medical practice
Starting and running a profitable business is another way that you can leave wealth for your descendants. By leaving a business for future generations, you provide them not only with a source of money but also a way to make more money over the years. Providing, of course, that smart business decisions are being made.
For doctors, this means taking the leap into private practice. If you choose to start a medical practice and your children are interested in continuing it, you’ve given them a means by which to make their own fortunes.
And even if they don’t want to operate the practice, they can always sell and use the money to pursue any dreams that they may have.
Get Started: Find a Medical Practice Loan
Jack is the Head of Content Marketing at LeverageRx, the personal finance company that simplifies how healthcare professionals shop for financial products and services. A Creighton University graduate and former advertising creative, he has written extensively about topics in personal finance, work-life, employee benefits, and technology. His work has been featured in MSN, Benzinga, TMCNet, StartupNation, Council for Disability Awareness, and more.