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Choose Wealth, Not Style

Earl "Butch" Graves Jr., President & CEO, Black Enterprise

Earl "Butch" Graves Jr., President & CEO, Black Enterprise

It’s time we had a heart-to-heart talk about our financial future. I’m sure if you’ve read my column, heard my speeches, or had the chance to talk with me one-on-one, you know I have loudly and consistently beat the drum for sound money management and disciplined, long-term investing. I believe they represent the best means for individual and collective advancement for African Americans, bar none.

Bluntly stated, we are driving in reverse. The yawning wealth gap between African Americans and our white counterparts has grown to its widest level in more than 25 years. Today, white households, on average, have a net worth 20 times that of African Americans; in 1984, that ratio was 12 to 1. What does that mean in dollars? The typical black household has roughly $5,700 in wealth compared with about $113,000 for the typical white household. Moreover, more than a third of our households have zero or negative net worth versus about 15% for whites.

It’s time to shift gears. I truly believe young people hold the best chance for getting on the road to building significant wealth and, in turn, sustaining this process to pass it on to future generations. It’s sad to say that many of my contemporaries have engaged in freewheeling spending, made a meager attempt at investing, and failed to protect their assets—placing them and their families in a financial hole that will take years, if not decades, to climb out. You, however, can avoid similar pitfalls.

First, realize the difference between wealth and income. It may sound rudimentary, but many of us confuse the definition of net worth—what you own (assets such as your home, savings and checking accounts, and stocks and mutual funds) minus what you owe (liabilities such as your mortgage, auto loans, and credit card debt)—with wages and  earnings. Depending on how finances are managed, many professionals with six-figure incomes can—and do—have a negative net worth.

Second, change your behavior. Despite a financial crisis, a recession, and a weak recovery over the past few years, some still have yet to learn the harsh lessons that come with conspicuous consumption. In fact, a friend of my son tried to convince me that waiting several hours to buy a pair of $180 Air Jordan XI Concords—you know, the sneaker frenzy that resulted in violence and arrests—was actually a good investment. He told me how reselling “the kicks” would eventually produce a tidy profit of $50. I quickly shared with him the value of an investment with a much greater long-term return for his 200 bucks: 10 shares of GE stock with reinvested dividends.

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  • Women Are Gamechangers

    It sounds simple yet many people do not put this into practice. I was able to get myself out of debt in one year but then went to grad school. NOw I’m working on a plan to get that paid off. I drive a paid for car and no credit cards. This is a lesson many people need to understand how to put into practice.

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  • phau thuat phaco

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  • zeke

    I still believe the key is a happy medium. Both curb spending and finding a way to bring more income in. Counting pennies will drive you crazy. Stashing some away is great. Yes, fund your retirement & childs education. Taking on a side venture to bring in significant extra income is what I think is needed to help close that gap between b&w wealth.

  • SentAsha

    Peace and Greetings,

    When speaking about the wealth discrepancies and the state of wealth we have to look at the spiritual, psychological and sociological root of budgeting and spending habits of our brothers and sisters. If NBCs (negroes, blacks and coloreds) knew true history and their heritage on a domestic and international level they would consciously build their own estates and reduce spending on frivolous things.
    The question is who is sincerely educating the people about who they really are?

    Also we have to look at the historical root of the establishment of wealth for many Europeans. To date there are many European families that are heirs to estates that were provided by their ancestors via royal charters and land grants, that were granted to them via monarchs in England, Scotland, Spain, etc… Also lets look at bounty land. From the Revolution War all the way up to the Civil War land was provided to the soldiers. Some Europeans are very open about the 50+ acres that has been in the family for centuries. Yes, this was in the past however it forms the root of wealth that has been build upon.

    I think that it is time out for the continuous comparison/contrast to Europeans when it comes to building wealth because from historical records legal and congressional there is not an equal start on the wealth game. It is best to focus on what our people should do.

    One step toward the education process is to inform the people that white and black are not nations of people and they are not races. No “white” person has white skin and no “black” person has black skin. White and Black are classifications, as in “class” “caste system”. For more clarity see Bouvier’s Legal Dictionary 1857 definition for free white person.

    Also see the 1829 Webster Dictionary,
    AMERICAN, n. A native of America; originally applied to the aboriginals, or copper-colored races, found here by the Europeans; but now applied to the descendants of Europeans born in America.

    Great commentary, however, we as a collective have to address the roots along with highlighting the fruits.