She Means Profit

Why Personal Finance Matters for Generational Wealth

• Melissa Houston • Season 2 • Episode 170

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Are you building wealth that will stand the test of time?

In this episode, I'm diving into the final step of the Profit Method Framework: creating generational wealth. If you’ve been following along with the previous steps, you know that building a profitable business is just the beginning. Today, we’re focusing on how to ensure that all your hard work doesn’t just benefit you but continues to support and empower future generations.

Generational wealth is more than a bank balance—it’s about creating lasting security and opportunity for your family. In this episode, I’ll break down what generational wealth means and why it’s essential for entrepreneurs. I’ll also share actionable steps on how to effectively manage personal finances, why it’s crucial to diversify investments beyond your business, and how to take advantage of tax benefits to maximize your wealth potential.

I’ll talk about the importance of paying yourself first, setting up an emergency fund, and planning for retirement in ways that aren’t entirely dependent on your business. We’re not just discussing profit; we’re talking about creating a legacy that empowers your family and leaves a positive impact on future generations. Tune in to learn how you can turn your business success into a financial legacy that lasts well beyond your working years.

Listen to learn:‌

  • What is Generational Wealth? - Understand the concept of wealth that extends beyond one’s lifetime, providing benefits for future generations.
  • Pay Yourself First - It’s crucial to consistently pay yourself as a business owner to avoid creating a financially unstable business.
  • Create Personal Emergency Funds - Having a personal financial cushion is as essential as business cash reserves for navigating unexpected expenses.
  • Strategic Tax Planning - Utilize tax advantages with the help of a tax CPA to avoid leaving money on the table.
  • Invest Outside of Your Business - Expand investments to real estate, stocks, and bonds to build a diversified financial portfolio.
  • Legacy of Opportunity - Financial planning isn’t just for wealth but for ensuring opportunities for future generations.

Links:‌ ‌  

Courses:

Work with me:

Follow me on:

IG: @melissahoustoncpa
LinkedIn: @melissahoustoncpa

Note: We use AI transcription so there may be some inaccuracies

Melissa Houston: Welcome to episode 170 of the She Means Profit podcast. And today we're exploring the final step in the profit method framework. If you've been with us, we've explored steps one to five to this point in the profit method framework that I'm rolling out. And now we're focusing on the final step, which is generational wealth.

So your journey as a business owner, it's not just about making enough money to get by day by day. It's about you ensuring that you, your family, and future generations can benefit from the hard work that you're putting in now in your business. So today we're going to explore what generational wealth is, why it's so important for entrepreneurs, and how you can master your personal finances, and how it plays a critical role in making your dream a reality.

So before we get started, we're going to do a little catch up because I'm a little ticked off. Hadn't had the best week. So in the middle of the night, on Saturday night, a while ago, I got hacked. My Facebook account got hacked. They got in. I don't know how, because I've got that double authentication, whatever it is, that two step thing.

I've done all the precautions. I change my password regularly, but somehow they got in. And everything is gone. I have lost years and years of hard work. All my followers, my Facebook group, all my friends, all my Facebook ad data, my Facebook business page, it's all gone. Messages that I had archived from Messenger, because I keep everything.

And because I like to refer back to it if I ever need it, right? And it's all gone now. And trying to get a hold of Facebook to get help. Good luck with that. It's been like, I spent so much time trying to recover this account and I'm defeated. I feel completely defeated. I don't know what to do. I opened a new account, but I think I'd like have two or three friends in it because what happened was I started friend requesting and then a couple of my friends reported my new account because they're like, this isn't like, this is a fake account because we're already connected on Facebook.

Even though I had sent the messages in advance saying, Hey, my Facebook page got hacked and I lost everything. So I'm rebuilding. So I ended up in Facebook jail again for a bit. So at this point, I just don't know what to do. I'm like, I don't know if I've got the energy for Facebook because these stories happen all the time.

All the time. I keep hearing more and more stories about it now that I've experienced it. People are like, Oh my God, I did too. and for whatever reason, you know how your Facebook account and your Instagram account are connected for whatever reason, Instagram doesn't appear to have been affected at all.

It's strictly Facebook. So I've still got my Instagram account. I've got my LinkedIn account. You never hear about LinkedIn getting hacked. So if you're not following me on LinkedIn, please do so. and I don't think I'll be. Rebuilding on that Facebook platform. It is like so Absolutely depressing that I'm at this.

 I shouldn't say it's absolutely depressing. I mean like upset, but I'm not devastated So if you had been connected with me on Facebook, you may have noticed that i'm gone So either connect with me on instagram connect with me on linkedin Sign up for our email list. And make sure that you're tuning in every week, whatever, however you want to connect, it's up to you, but definitely not through Facebook at this point.

Anyhow, let's get into it. Okay, so let's talk about personal finances and why it's the final step. In the profit method framework, the idea is that you've put all your hard work in and now you should have extra money. So it's time to start investing that money. Maybe you're happy with the growth of your business.

Maybe you're happy with where you are, so you don't need to take that profit and reinvest it back into your business to grow it. Or maybe you're like, I want to start diversifying. So you want to put part of the profit back into your business and then start investing additional money elsewhere. So we are going to talk about that today.

But first, we're going to talk about the basics. What is generational wealth? So generational wealth, you're going to, you've probably heard that term. spoken in the last couple years, it's become a popular topic,it's any kind of financial asset. So whether it's money, property, or investments, it's all wealth, right?

That you can pass down from generation to generation so you can pass it down to your children, your grandchildren, your great grandchildren and beyond. It's the wealth that keeps working long after you're gone. Okay? So what it is, it's your personal net worth. It's not how much money you make that makes you rich.

It's your personal net worth. So this is the wealth that keeps working long after you're gone. It's a legacy, not of just financial success, but opportunities you're creating future generations. Think about that too, right? Because I always say money doesn't buy happiness, but money buys opportunity. So the more Personal net worth that you have, the more opportunities you're going to have in life.

 it's a sad fact, but it's true. Don't kill the messenger, right? And think about the opportunities you're going to be offering from generation to generation when you manage your money well. So as a business owner, you have a unique opportunity to build your wealth that can far exceed what you probably would have done working for somebody else.

Your business is not just money that you're bringing in. Your business is a financial asset. That's something that you own and you can sell if you desire for whatever rate , you can get for it, right? And stay tuned because we're going to do an episode on that as well, because it's important to understand the things that you need to do now.

To ensure that you are going to be able to exit your business and sell it for top dollar. Really important episode. I'll probably do it in the coming weeks. Okay, but generational wealth is not going to happen by accident. It requires planning and smart financial decisions. Hence, she means profit, because we're here to help you through the navigation of wealth in your business.

So, only 30 percent of family businesses successfully pass to the second generation. And that percentage drops dramatically for the third generation and so on. And why does this happen? Often because the first generation focused too much on the business that you didn't properly manage the wealth that you're building.

Okay, you need to teach the generation, next generation, how to manage it as well. We got to start talking about money management. People aren't talking about it enough. It's like this secret that nobody wants to talk about the big family secret or what have you get those conversations going, especially if you plan on building generational wealth.

I mean, if you plan on just selling your business and spending all your money before you die, that's your business. Like, go for it. But if you really want to set your family up for success for generations, you've got to get talking about this stuff.

Okay, now here's where personal financial management comes in. You can't build generational wealth if you're not managing your personal finances. It's really as simple as that. Too many business owners focus solely on the money flowing in and out of your business. You forget that personal finance is just important.

And here at Shemea's Profit, we talk about everything. We talk about your business financial literacy and your personal financial literacy. So think about it. Your business might be thriving, but if you're not paying yourself enough, if you're not saving for retirement, if you're carrying personal debt, or if you don't have investments outside of your business, you are limiting your potential for long term growth.

Here, we're going to talk about a few areas where personal finance management plays a critical role in your life. I've said it before, I'll say it again, I'll say it always, you have to pay yourself first. As a business owner, it's tempting to take all your money and reinvest it back into the business, but you need to pay yourself.

If you can't survive, By paying yourself, you need to make changes in your business to ensure that you can. And we often talk about this, this is included in your business financial plan, where you have to make your budget and include any payment that you need to make to yourself so that you can survive personally, right?

So you have to pay yourself a salary that you can depend on from your business. You don't just pay yourself whenever you can afford it. You have to consistently pay yourself every month so that your business or you can depend on your business paying you.

Because if your personal finances are suffering, you have a problem. You're not a hobby business or a pay you whenever you can business. You need to pay yourself regularly and if your business cannot do that, you need to make changes. You need to ensure that you're building personal financial security outside of your business.

Okay, tip number two is you need to have savings and emergency funds. I talk about cash reserves in your business, but you need to have that personal emergency fund just as much as your business does. Life happens, we all get it, and unexpected expenses come up. We get sick, we have car repairs, we have, I don't know, anything unexpected.

Without savings, you could find yourself in financial trouble if Even if your business is doing well, so you have to plan for the unexpected. The third thing is retirement planning. Many business owners don't prioritize retirement savings because you think your business will be your retirement plan. You may have heard, oh, I can just sell my business, but it doesn't quite work like that because if you don't have all the things in place to get top dollar for your business, You may not even be able to sell it.

So everything takes a plan and I would never recommend putting all your eggs in one basket and say, okay, I'm just going to survive on whatever I get my business. Cause that's not how it works because you could be unpleasantly surprised, right? I don't know. The market could take a nosedive. There's no longer a demand for what you offer in your business.

Whatever happens. You need to diversify. So diversifying your wealth outside of your business with a retirement account is key. Number four is investing. Yes, your business is an investment, but it's important to have diversity. So diversify your financial portfolio. Other things you can invest in are real estate, stocks, bonds.

These are all areas where you can grow your personal wealth alongside your business income. And then tax planning, proper tax planning is essential. Are you taking advantage of all the tax benefits available to you as a business owner? You need to work with a CPA, a tax CPA, not a CPA like me, somebody who specializes in tax.

It is worth the investment or the cost it's going to cost you to get a good tax planning advice. You need to invest in that. To ensure that you're maximizing your tax strategy for both your business and your personal finances. This is an area where many business owners lose money unnecessarily.

Because you don't want to pay the CPA to give you the tax advice. But believe me, you are leaving money on the table if you don't do that. Having an appointment with your CPA tax person is essential for tax planning. and making that extra money. Okay, now let's tie this all back to your business. So as I mentioned earlier, your business is one of the most powerful tools you have to build generational wealth.

And why? It's because there's equity growth. As your business grows in value, so will your personal wealth, because you own your business and your business shows up on your personal net worth statement. So, whatever equity you have in your business, the equity you build can be used to expand.

You can invest it in other ventures or even use it as collateral for other investments. But you want to be very careful when it comes to this and consult a financial planner when it comes to, getting into, just more complex financial investing. You can sell your business or pass it down.

So whether you plan to sell your business or pass it down to the next generation, or just keep it as a cash flowing asset, your business can provide wealth far beyond your working years. So remember that. And then, like I said, the tax advantages, owning a business comes with numerous tax advantages that can help you build your wealth and preserve it.

So the key is to know how to leverage those tax advantages. It is. So make sure that you've invested in the knowledge to understand that. But remember, your business is just one piece of the puzzle. If you're not managing your personal finances effectively, you are leaving money on the table and you could be your ability to pass down future wealth.

 Is personal financial management key to generational wealth? The bottom line is, personal financial management is not optional when it comes to building generational wealth. Or anything, whether you want to build generational wealth or not, really have to be managing your personal finances.

If you're feeling stressed out, you can't sleep at night, you can't eat, your relationship with your spouse is strained, whatever's going on in your life, you need to ensure that you look at the root cause. And if the root cause is because your finances are a mess, you need to deal with them. Right. You need to get your beep in order.

So it is a necessary component of your overall financial strategy by paying yourself, saving and investing outside of your business and planning for your taxes and retirement and keeping your debt low. or non existent. Debt is bad no matter what because you're paying interest on it. You keep hearing good debt, bad debt.

Debt is debt and if you owe money that means you're paying interest on it. So stay away from debt. I know sometimes it's impossible like I too have debt.carry debt for my business. I carry debt for my mortgage but I also am cognizant of this and I have a very aggressive plan to pay down this debt.

Okay, and this financial foundation will help ensure that the wealth you're working so hard to build will not disappear in a generation or two. So if you want to ensure that you are passing down opportunities to your family, make sure that you manage your business and personal financial wealth. So if you've made it this far in the episode, you know that building generational wealth takes more than just running a successful business.

It takes a financial plan. that's why I've created the cash catalyst course. This is a course that's specifically for you as a business owner. When you want to level up your personal financial game in this course, you're going to learn how to manage your finances with the same level of strategy and precision that you apply to your business.

So the idea was, and is, is that, your mindset, Is the first step in the profit method. You have to have the right mindset to ensure that you're building a successful business. And then we go into building that business, making sure that it's profitable, making sure that you're making money, taking that money, reinvesting it into your business and growing your business.

And then you take that money and you start diversifying it. And that's where cash catalyst comes in and it teaches you how to plan, manage your debt. Invest, plan for your retirement, pay off your mortgage, get debt free, and build generational wealth.

From setting up savings and investments to creating a rock solid retirement plan, we cover it all in Cash Catalyst. So if you're ready to build generational wealth and secure your financial future, head over to SheMeansProfit. com forward slash online. Offers and sign up for the cash catalyst course today.

I will leave the direct link to the course in the show notes as well. And remember your financial legacy is waiting.