Equity and Ownership - The Key to generational wealth (Part 1)
Part 1 – What is Equity?
Our goal is to explore the concept of equity, how it plays a role in building long-term wealth, and why understanding ownership can be the game changer for securing financial independence across generations. In this series, we’ll break down the principles of equity, dive into strategies to build it, and show you how ownership can set the foundation for wealth that lasts long after you're gone. Let’s get started!
Equity, put simply, is the value of one’s ownership in an asset. Whether it’s a home, a rental property, or another type of investment, equity represents the theoretical cash you’d have in your pocket if you sold that asset today, after settling any remaining mortgages or loans. It’s a snapshot of your ownership in real dollars, and having ownership becomes a powerful tool for wealth-building. It allows you to leverage that equity for future investments or to pass it down to future generations.
But equity isn’t just about owning a home, it’s about understanding how ownership can lead to financial freedom. Whether you’re buying a home, beginning long-term investing, or simply looking to increase your wealth over time, understanding how equity works is key to unlocking your path to generational wealth.
So how do you gain equity? One answer is: buy something. For many, a home is the largest asset they’ll ever own. Over time, as you pay down your mortgage and if your property appreciates, your equity increases. Another answer is: start a business. Melissa Houston from Forbes.com said,
“When you own a business, you're not just generating income, you're building an asset that can appreciate in value over time. This asset can be sold in the future, potentially yielding a substantial lump sum. Furthermore, a well-established business can be a legacy passed down to future generations, providing long-term financial security for your family.”
Just like a home, a business has the potential to grow in value. As the business’ value increases, your equity, your stake in the business, appreciates. This equity can be realized in different forms: through reinvesting the profits, selling the business for a payout, or leveraging the business's value to secure financing for future opportunities. Overall, equity in an asset, whether that’s a business or a home, represents lasting and growing value that can be used for financial security and legacy building.
In conclusion, the main takeaway is this: equity is a tool that when used well, can create financial growth and lay the groundwork for generational wealth. By understanding how equity works and creating or taking ownership of valuable assets, you can create opportunities now that have the potential to continue past your own lifetime.
Now that we know the “What”, check back in with us next week as we learn the “Why” for turning equity and ownership into financial independence. We’ll take a deeper dive into the concept of Generational Wealth and how owning things makes you rich!
Houston, M. (2024b, May 3). How to get rich through business ownership. Forbes. https://www.forbes.com/sites/melissahouston/2024/05/03/how-to-get-rich-through-business-ownership/
Viewpoints, F. (n.d.). What is equity and how does it work? https://www.fidelity.com/learning-center/trading-investing/what-is-equity
