Reply to Preventing generational decline

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Generational wealth here. I think key is not to touch the principal and have good investing strategy.  We definitely do not make enough to add to the pot (make high six figures through our professional careers) but key is not to actually spend any of the inherited wealth and only spend the interest, if at all. Get good lawyers, FAs and accountants.[/quote]

I’m also in the generational wealth camp and I’ve never understood this “don’t spend the principal” thing. What do you even count as principal? Why would interest or dividends be in a different category than other gains?

I agree to have good professionals but imo you need to think a lot harder than “don’t touch the principal.”[/quote]

Let me get this straight, you don’t understand why you don’t touch the principal? When you burn through the principal and you are broke you will quickly learn why. You are the example of why generational wealth only lasts a generation or two.[/quote]

Not touching principal is wrong-headed.  What matters is total return.  It's entirely possible to consume both income and a percentage of principal and still have overall portfolio growth - it all depends on overall portfolio growth rate and the percentage of principal being consumed annually.  Obviously, the less income and principal one consumes the larger the rate of portfolio growth will usually be, depending on market conditions, but it's a fallacy to assert that one can never consume principal and still have portfolio growth.  [/quote]

Middle manager eeking out a HHI of 280 having come from LMC start. In the context of this discussion this is clearly shorthand for don't take out more than is needed to keep the growth that is necessary to preserve the money. My farmer forebeares would say "don't eat the corn seed." The principle is the same (but not the principal!) [/quote]

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