The True Meaning Of Wealth

How much are you worth? Read on to find out.

Take a lesson. In our January issue, we shared with you the steps it took to become financially empowered through the Black Enterprise Circle of Wealth-knowledge, commitment, investment and portfolio management. In fact, the process is the launching pad for the Black Wealth Initiative, our comprehensive financial education and money management program.

But before you leap into action, take a moment to figure out what wealth really means. Elementary, you may think. Not so. When we surveyed our readers in the blackenterprise.com Financial Health Survey, we found that respondents had many definitions of wealth. (some of those polled checked more than one response). Fully 57% used income as a criterion, while 29.9% and 23.3% viewed education and one’s profession, respectively, as key measures.

But 84.2% selected the appropriate response: they concluded that wealth equals net worth. In other words, wealth is not synonymous with your take-home pay or the money that you draw from your business. Your net worth is calculated by subtracting your liabilities from your assets. Simply put, it’s what you own minus what you owe.

We aren’t just splitting hairs here. It’s extremely important that you make such distinctions because, as you shape your goals, you want to be crystal clear about how to quantify them. Such barometers have become increasingly important as the nation’s economic expansion-now 109 months long and counting-continues. Just a quick history lesson to put the boom in perspective. According to the New York-based Economic Cycle Research Institute, between 1948 and 1990, the average expansion lasted 52 months while the average recession lasted just 11 months.

So, although the economy seems less prone to up-and-down business cycles than it did in the past, that doesn’t mean you shouldn’t be prepared for a downturn. Even though more Americans, like you, are investing in the stock market-the Dow Jones industrial average has been up 300% over the past decade-they are spending just as quickly. According to the Department of Commerce, the personal savings rate-savings as a percentage of after-tax income-dipped to 1.5% in December, a record monthly low. In 1999, the end-of-the-year buying binge pulled the savings rate to an all-time low of 2.4%. In 1998, it was 3.7%.

According to a recent study by the University of Michigan, the wealth divide is expanding. The net worth of the median black household decreased from $8,400 to $7,500 between 1994 and 1999, while at the same time the net worth of the median American household increased 9% to $50,500. “The decision to invest or save discretionary income vs. consume is a zero-sum decision. If all of the discretionary income that you decide to consume is not available to invest, then by default you’ve made a decision not to invest or save,” asserts John E. Williams, chair of the department of economics and business at Morehouse College in Atlanta. “We still have a nation of consumers instead of wealth accumulators. You gain real wealth through a long-term program of savings and investment.”

How you define wealth and, in turn, employ strategies to

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