I had breakfast the other day with a friend of a friend. His family has managed an inheritance pretty well for the past two generations, and he’d been steered to the Old Money Book blog.
While he freely admits he barely graduated from college (he liked to party), he’s now a successful real estate developer, driving his wife around to antique sales on the weekends, and doting on his four-year-old daughter.
He has a very concrete and concise perspective on what his role is regarding his family’s wealth. He called himself a ‘custodian’ of the family fortune. He detached himself from it, to a certain extent, he explained, and focused instead on what kind of ‘situation’ he’d leave for his daughter, and for her children, years from now.
By ‘situation’, he said that included his daughter’s emotional well-being, as well as her financial well-being. He makes choices that enhance and preserve the sterling reputation he has in the business community. He does the same thing to ensure that his marriage stays healthy. He spends time with his daughter (she sat on his lap during our conversation at the restaurant, quietly drawing on a napkin with a crayon.)
He had what he called a ‘punch list’ for what it takes to adopt the ‘custodian’ mindset. He delivered in the blunt, no-nonsense way that you’d expect from a guy who deals with bankers as well as brick-layers on a daily basis.
It’s worth sharing:
- Security. Being completely comfortable with who you are. You don’t have to buy things to get attention. And when you avoid extravagance, it’s easier to remain financially healthy.
- Patience. Being in it for the long haul so your investments can grow at a steady pace, without taking undue risk. If you’re going to risk, go out raise the capital or earn it yourself, and then roll the dice. But don’t do it with inherited principal.
- Focus. Preservation and growth of the principal won’t help if you hand it off to an unprepared child. You have to focus on them, give them love, give them an education, and expose them to the world at a measured pace, so they’re ready to handle the responsibilities of wealth and adulthood. You’ve got to work to groom the next generation’s custodian.
- Planning. You’ve got to take some time, sit on your butt, think, discuss options, and then take action to preserve wealth. You have to get advice from professionals and listen to your gut in equal measure.
- Awareness. You have to know what the hell is going on in your world, your country, and your community. This is not just what you read in the newspapers or see on television. It’s conversations with everyday people from all walk of life. That will tell you the real temperature of the place.
- Work. If you don’t touch the family fortune, it has a good chance of being passed on. Eat what you kill. Live off what you earn. Better yet, live off half of what you earn, and add ‘throw another log on the fire’ for the next generation.
- Give. If you were lucky enough to be born into money, share it with others less fortunate. Give them money when there’s a crisis. Better yet, give them a job when there’s an opportunity.