What does it mean to you to leave a legacy?

By Alina Trigub

What does it mean to you to leave a legacy?

What will our children, and the children of our children remember us by?

There is no cookie cutter approach to building a legacy after we are long gone. So how do we achieve it?

There are the obvious great choices: be a truly caring person – donate what you can to various worthwhile causes as well as volunteer time and knowledge to philanthropic organizations.

Both, are phenomenal options that will take you in the right direction. There are also many notable humanitarians from whom we should all take queues – Mahatma Gandhi, Nelson Mandela, and Mother Teresa, just to name a few. Their actions and footsteps proved to be excellent examples of generosity and compassion. Their examples also show that in rare cases renouncing wealth does not compromise leaving a legacy. But frankly speaking for the rest of us, wealth can really clear the path to creating our legacies. So, let’s spend a few minutes unpacking wealth creation.

How does someone become a millionaire, a multi-millionaire, or even a billionaire?

With the current devaluation of money, it is not that difficult to become a millionaire. What is more challenging is to retain such status beyond the potential recession and its consequences.

I suggest starting by educating yourself on the topic of building wealth early on in life, as early as in school. Read books about financial literacy as well as about the lives and ups and downs of the self-made millionaires. There is no need to reinvent the wheel – just follow leads of the multitude of readily available examples. And once you build your nest egg, you can explore becoming a philanthropist and giving more time and financial resources to others in need.

For generations the concept of wealth management was only available to the wealthy. Nowadays it is more commonly used by the “regular” folks; primarily those that qualify for the so-called “accredited investor” status. This symbol of wealth accumulation signifies that these individuals are able to invest in certain investment vehicles, which are not available to the less financially-privileged.

Let me first define what being an “accredited investor” entail.

To be considered an accredited investor as an individual, there are a few options:

earning must be at least $200k a year if single for the previous two years, or $300k if married for the same time, with a reasonable belief that earnings will be just as much this year.
net worth must be at least one million dollars, excluding the value of your primary residence.
a new alternative that was added in 2020 to be considered an accredited is someone who holds a Series 7, 65or 82 FINRA licenses and is in good standing.

What does net worth include you may ask? Well, simply put it is all of your assets less your liabilities. And what is considered an asset? It’s your savings, including your 401(k) plan, your Roth or Regular IRA accounts, your brokerage investments, any real estate investment properties, etc. As for the liabilities, a good example is a mortgage on your investment property or other types of loans.

An accredited investor may also be an entity, such as a business trust, partnership, or limited liability company, etc. As an entity:

total assets have to be worth more than $5 million, and this entity cannot be formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person; or
all of the equity owners are individual accredited investors; or
family offices with at least $5 million in assets of their “family clients” under management; or
spousal equivalent to the accredited investor definition, where spousal equivalents pool their finances to qualify as accredited investors; or
certain other specialized entities described in Rule 501.

Let’s also take a look at the main differences between wealth management and financial planning. Financial planning is intended to help people build funds mainly for two primary reasons – children’s college payments and retirement funds. Typically, financial planners have the designation of a Certified Financial Panner (CFP). CFPs help build an investment portfolio that is 100% based on Wall Street investments . But what they don’t offer is to build a well-diversified portfolio of alternative investments. Such investments include real estate, gold, oil, and etc.

Wealth Management firms typically focus beyond these two goals of kids’ college payments and retirement funds. Wealth managers analyze the overall financial picture to keep increasing their clients’ investment portfolios with no risks or very minimal risks involved. However, all these professionals typically concentrate on investing clients’ funds into Wall Street only. When it comes to the alternative investments, it is on you to locate them/

Let’s return to the main point of this article – building a legacy.

One of the best ways to leave a legacy is to start in your own home by educating your children.

Teach them what you know and what you had learned about finances over the years. Be patient – it is entirely expected that not all of your wisdom will sink in right away or even be well accepted. The important step is to start the conversations with your kids and try to make it fun. You will be pleasantly surprised when one day your kids will show that they were indeed listening to you. As the kids get older, they will want to learn more on their own and eventually they will start asking more and more detailed questions. You just need to find that sweet spot of being persistent yet easy-going, and let your kids develop enthusiasm around money matters and financial literacy.

When you know that your persistence paid off and that your children learned some or a lot from you: you’ve set the foundation for your legacy. And I can tell you from my personal experience: it is a lot of work, but feels so rewarding when your own kids finally listen to their mother and start asking the right kind of questions about investing and building wealth. It is at this point you’re ready to pass your knowhow outside of your immediate family; this is when the building blocks of your legacy will start taking shape.