Prescription for Wealth

Our economists show how African Americans can create, transfer and leverage wealth in the century ahead

the Declaration of Financial Empowerment (DOFE), the centerpiece of the Black Wealth Initiative that be will be advocating going forward into the next century. It’s an initiative that’s been spearheaded by Earl G. Graves. “This is as important a thing as we’ve done at this magazine for as long as we’ve been here,” Graves says. “I would hope that five years from now, when someone asks how did this program start, we can be the drum majors for something that was very critical to the black community.”

Indeed, the initiative was met with enthusiasm. Each member agreed that by actively following the tenets of DOFE, African Americans could finally begin on the long road toward wealth creation.

“DOFE is a self-empowerment tool,” says be COO Earl Graves Jr. “This is having you take this declaration and say that you commit to doing these specific things.”

But it will take much more than a simple declaration to alter your financial path. If DOFE is to have any lasting impact, those who commit to it must be ready to embrace a change in their lifestyle. And, sorry to say, simply being frugal with your nickels and dimes won’t be enough to turn you into “the millionaire next door.” “If we’re talking about true wealth accumulation, you’re not going to accumulate great wealth by saving,” says Simms.

Indeed, most of the studies on wealth creation focus in on intergenerational transfers and inheritances, chimes in Williams. “This is really the biggest factor that explains the wealth gap between African Americans and whites. That’s why the DOFE principle on ‘insuring that my wealth is passed on to future generations’ is so critical. That is the single biggest factor that explains the wealth gap.” According to Williams, the savings rate between blacks and whites is not so dissimilar, and the income gap is much smaller than the wealth gap. “So it’s either something to do with behavior-how we allocate assets-or how much is actually being handed down from generation to generation,” he says.

Adds Alexis, “At comparable income levels blacks now are actually saving more than whites. People don’t want to believe it, but it’s been true for 75 years if you go back and study it. That means people don’t just act silly with their money.”

Spriggs concurred, “Black people do save. The question is, given how the market has turned, could we save more wisely? The answer is yes, we could.” But Spriggs believes that there must be a recognition that African Americans are often working from a different platform. “We have to do it differently because we have less of a liquid position and a higher unemployment rate than whites do. So we have even greater hazards. Blacks don’t act as irrationally as some would have you believe when you take those things into account,” he says.

But if saving alone doesn’t do the trick, then exactly how does one become wealthy? Step one is understanding that saving is exactly that, step one. “First you save. Then

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