Two Paths To A Legacy


What kind of legacy should you leave your heirs and future generations? A financial one? One of wisdom and knowledge?

There are two paths to a legacy, but the one that will be the most lasting will be one where the paths converge. So the answer to what kind of legacy you should seek to leave your descendants is both. Wealth without financial wisdom will result in the end of that wealth. Financial wisdom without the financial resources to execute that wisdom is also a dead-end street.

The late billionaire Larry H. Miller built a fortune from a string of automotive dealerships throughout the western United States and various other ventures, including real estate, movie theaters, financial services, and most famously, his ownership of the NBA franchise, the Utah Jazz.

Miller died in 2009 due to complications from diabetes. He left his fortune to his wife and children. Instead of continuing Miller’s various business ventures, the family has been steadily selling off the estate’s assets, including the Utah Jazz – content to live off the existing fortune. By liquidating all the assets responsible for building and sustaining Miller’s wealth, all of Miller’s money will likely eventually run out within a matter of just a few generations without any means to replenish all the family spending.

If Miller’s fortune runs out, It won’t be the first time a business tycoon left a substantial fortune only for it to disappear. The Vanderbilts are the most oft-cited example. At his death in 1877, Cornelius Vanderbilt was worth $100 million ($185 billion in today’s dollars). By 1973, there was not a single millionaire among the remaining descendants at a Vanderbilt family reunion – the fortune was completely squandered.

Ultra-high-net-worth investors (UHNWIs) have unlocked the secrets for building, growing, and sustaining wealth – multigenerational wealth built to last for generations. So how do UHNWIs build multigenerational wealth while most Americans struggle to make ends meet in retirement? They approach investments differently than everyone else.

Most UHNWIs started from the bottom, just like everyone else. They could have been professionals, or maybe they climbed the corporate ladder, but once they started making real money, they came to a crossroads and were faced with decisions that would determine their financial futures.

Once the money starts rolling in, many in the same spot ramp up their spending by buying bigger houses, and fancier cars. They even go into debt so that they’re barely making ends meet even with a high salary. These individuals are income rich but net-worth poor. They have high salaries but low net worth. If they stopped working, their financial house of cards would collapse, and they could lose everything.

The smart ones, the ones who start making good money, do something differently. Instead of spending money on things that don’t last and drain bank accounts, they put their money to work for them by investing in assets that cash flow – particularly passive ones that can generate income in their sleep.

Smart investors gravitate towards private investments insulated from Wall Street volatility for passive income. Tangible assets like commercial real estate and income-producing businesses are ideal for building, growing, and sustaining wealth – especially when done passively through leveraging the expertise of others. Investing passively allows smart investors to create multiple streams of income that would not be possible if they did everything themselves.

Cash flow coupled with appreciation is the key to wealth, which is exactly why UHNWIs allocate most of their assets to private investments and not stocks. Besides better returns, cash-flowing private investments are insulated from stock market volatility and can also serve as a hedge against inflation with income that keeps pace with rising prices.

UHNWIs build their financial legacies by doing the opposite of what most investing public does. Instead of chasing home runs in the stock market, the wealthy chase passive income to build multigenerational wealth. But all this wealth will be for naught if the wealthy don’t leave their descendants with a legacy of financial wisdom and knowledge.

The wealthy who have had their wealth endure didn’t just leave a financial legacy; they left one of wisdom and knowledge. They indoctrinated in their heirs the same principles of wealth they used to build their fortunes. Through education, they passed on a legacy of financial and investment wisdom and knowledge to ensure the longevity of their wealth. They undoubtedly taught the principles of investing in income-producing assets, without which it is impossible to compound wealth through reinvestment.

What type of legacy do you want to leave? A financial one? One of knowledge? It should be both. Build your fortune through cash-flowing tangible assets, then teach your heirs the same principles.

Education is the key to preventing your heirs from squandering your wealth like the Vanderbilts. Ironically, Cornelius Vanderbilt once said, “Any fool can make a fortune; it takes a man of brains to hold onto it.”

It takes a person of brains to hold onto it and a person willing to pass on what’s in their brains to their descendants for them to hold onto it.