Monday, October 21, 2013

Wealth Money and Family Part 1

Whether you were born in a wealthy family or are creating your wealth in this generation the European saying "clogs to clogs in three generations" should always be on your mind.  All over the world families face the same dilemma.  Wealth that does not make it beyond the 3rd generation and in many families it is lost much earlier.  At first I thought that creating wealth was hard and the answer to all problems then I realized that keeping the wealth, multiplying it and successfully transferring it is the hardest task of all.

You risk hurting your future family by not being responsible in the way you transfer your wealth.  Why doesn't the money last beyond three generations?  Consider the lottery ticket winner who blows off the entire prize money in a few years.  This happens because the lottery winner skipped all the steps required to create the enormous amount of money.  Steps that include good money management skills, budgeting, risk taking, saving, trial and error, diversification, hard work etc.  You can't expect all your family members to want to follow your exact footsteps and continue creating wealth the same way you have.  If they do then that is excellent if they don't they must choose a career that makes them happy as this will not mean the end of the family fortune.

When analyzing a families wealth it is important to realize that money is the last thing that should be considered.  You must first realize that all the family members which make up the human capital are the most important aspect.  Then we must consider the intellectual capital which is all the education, wisdom and experiences all the family members possess.  We also need to consider the social capital which is what the family contributes to society.  Are they giving back by teaching what they have learned?

To be continued ...

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