Why The Black Wealth Gap Can’t Hold You Back From Building Black Wealth [2021]
What is the Black wealth gap? Let me break this down for you. In 2014, the median net worth of non-Hispanic White households was $130,800. The median net worth of Black households was $9,590. So, the Black wealth gap, simply means White households have a net worth that is 13.5 times Black households.
Wealth means an individual’s or family’s financial net worth. Wealth serves as a generational stepping stone from which future generations benefit and build over time.
For this reason, I wanted to create a comprehensive article - in plain English. Below is what we will be covering.
TABLE OF CONTENTS:
It’s not that Whites are better money managers. There are many systemic issues that contribute to the Black wealth vs White wealth gap, such as:
Blacks have lower incomes. Black income is half that of White households in the US – just like it was in the 1950s. No studies prove that white people save more – they just have more income!
Black have less upward mobility. Black unemployment is historically double that of Whites, even in the best of times.
Black gains in education have widened the gap. Blacks with college degrees are twice as likely to be unemployed as other graduates. A Black college student has the same chances of getting a job as a White high school dropout.
How are Black people supposed to magically save up money from a job where they may earn 50% less than their White counterparts?
And even though they might be better educated, they are more likely to lose their job or become unemployed or underemployed compared to them?
These are the systemic issues that contribute to a widening Black wealth vs White wealth gap.
The economic outlook for Black people in America is challenging but not hopeless. While reparations programs may help close the Black wealth vs White wealth gap, there are also things Black people can do for themselves that will prove to be tremendously effective such as knowing more (financial literacy), owning more (real estate, businesses and stocks) and passing down more (legacy moves).
There is an economic tsunami heading directly toward Black America and it will hit in approximately 25 years. Like any natural disaster, it will have catastrophic consequences. This economic disaster will widen an already cavernous wealth gap and potentially wipe out Black wealth.
No one living then will escape it. The game will change in a major way.
This economic tsunami refers to a $68 trillion transfer of wealth happening by 2045. This means there will be an entirely new group of individuals ruling the realm of the elite. However how many of those people will be us, those who make up the Black communities of America?
Most reports estimate only 3% of this transfer of generational wealth will be seen in the homes of Black Americans.
So, while Blue Ivy, Christian Combs, North West, Diggy Simmons and other celebrity youth will have a large amount of money coming to them, what about your kids and mine?
Think about it. If you are twenty now, you will be forty-five then and probably not inheriting any money while your White and Asian peers inherit more power and privilege. If you are forty now, you will be sixty-five then and probably not in position to transfer any wealth unless you become the culture of money today!
You’ve got to admit that the 3% figure is disturbing. Think about it.
This great wealth transfer will be an economic tsunami that hurts us bad. What will you do to make sure that you survive the implications?
What will you do to make sure that the loved ones who come up after you have a financial head start? How will they have a fighting chance in a society where most of the wealth will be in the hands of “other” people?
Closing The Black Wealth Gap Is Difficult But Not Impossible
Closing the gap will not eliminate economic inequality but it is a place to start.
There are both systemic solutions and personal solutions. By systemic, I mean the things government agencies can do to increase Black wealth more rapidly. This includes things like reparations, education, housing, savings, baby bonds.
What politicians mean when they use the term reparations is not clear.
Reparations generally means providing compensation to make amends for the history of racial policies and resulting economic injustices Black people have suffered.
The Black American experience began with slavery, which is the opposite of opportunity. Slavery created a profit advantage for White people.
It basically gave them 300 years around the Monopoly board to own property, make deals and accumulate before Black people got a fair first turn to roll the dice.
As a result of the original sin, Black people struggle with keeping pace in key areas – business ownership, home ownership, savings, retirement, and investing. All a direct result of income inequality.
The economic impact of the original sin cannot be underestimated, so there should be no argument that reparations are just.
Reparations, have been proposed since Reconstruction. Japanese people received compensation after World War II. Payments can take on many forms.
Reduction of student loans and addressing the cost of college could be helpful. However, as I mentioned previously, educational strides have actually reduced wealth.
Addressing housing policies is important since the policies have historically benefited whites. Owning real estate is one of the best ways wealth has been passed down.
Increasing the savings of Black people with direct payments and/or bonds for small children could also cut into the Black wealth vs White wealth gap.
Even if enacted, most of these policies would only affect people after they entered adulthood, which is way too late. Most Blacks have experienced injustice and inequity by then so more must be done.
Making direct payments to Black people is a source of justice and equity but will not address generational disadvantages. We need to fight for reparations but also take matters into our own hands.
Building Black Wealth Begins With Owning The Solution
Black excellence must be redefined to mean more than the visual success comprised of fit, title and lavish expenditures. We need to switch our focus to knowledge, wealth and legacy. We must own the culture of money.
The culture of money is future proof of Black excellence and taking it upon ourselves to know more, own more and pass down more to the next generation. Every Black church, educator, politician, corporate leader and family needs to own this.
This is not my wealth movement: it’s ours. I’m just the voice sent to provide navigation with an awakening message.
Knowing more creates better ownership potential and owning more creates better legacy potential.
Passing down more is simply leaving a financial inheritance and legacy values for the next generation.
The culture of money just can’t start and end with you.
It is getting exhausting reading the stories about others who get a head start because of the birth lottery. They were just lucky enough to be born into the right family, living in the right zip code. This hurts because it implies being born Black is simply bad luck.
To change this, today’s 20-year-old Blacks need to get woke about Black legacy. Today’s 40-year-old Blacks need to become more self-sacrificing, so we have a future. Even if you don’t accumulate the money to leave a financial legacy, make sure the next generation receives these Black cultural values to know more, own more and pass down more.
The wealth gap is real. That tsunami is coming. The best way to tackle it will always be wealth generation for the purpose of leaving an inheritance.
As the Proverbs say, “a good man” or woman leaves an inheritance. This is a Black issue to solve. It is a major problem among Black people. We must own it individually and corporately.
Close The Black Wealth Gap With Financial Literacy
First, we must aim to know more. Financial education is the cornerstone of financial freedom. Without it, Black people will continue to struggle financially. Knowing more is a commitment to financial education. We cannot act on what we do not know, and what we do not know is killing us.
Financial education is the key to gaining our own financial breakthroughs. Gaining more knowledge is the first great investment you can make, and you don’t need a lot of money to do so.
Invest in yourself to become educated, build skills and never be locked out again due to a lack of financial education. Value knowing and growing so that we are no longer left out of great economic booms or new wealth creation opportunities.
Once we know more, we can then seek to own more. Owning more is about serious wealth building. I need to pause here to share why these values are progressively important. Embracing one leads to the fulfillment of the next.
In other words, you can’t own more of the right kinds of assets unless you become financially educated.
Only six states require a personal finance course for high schoolers, according to California-based nonprofit NextGen Finance’s report on the 2019-20 school year.
In states without such a mandate, 1 in 7 students in schools with 50% or more pupils receiving free or reduced lunches are required to take a personal finance course. In schools with a population of 50% or more Black and Brown students, only 1 in 22 is required to take such a class.
By taking ownership of your financial education, you can change not only your life, but your family’s life for the better.
For Many Families, Housing Is The Biggest Component Of Their Wealth
Owning more is embracing the mentality of our forefathers who left the plantations with one goal: to own their own land. This was best demonstrated in Alex Haley’s book Roots when the whole family pooled their money together to buy land in Tennessee. The general consensus was that owning land was the way to solidify the family’s Black identity and culture for future generations.
We should invest in assets like our ancestors, did. They aren’t making more land anytime soon.
Wealth begets wealth. Racism is very profitable! The way to overcome this is to press forward into ownership now that the world is watching!
We can’t pass down what we don’t own. Passing down rent payments to the next generation is not the same as passing down the real estate for them to collect rents.
Ownership is everything. Ownership is freedom. Ownership is American. Ownership must be more Black!
Why would you not want to own real estate when over the past 200 years, roughly 90% of the world’s millionaires have been created by investing in real estate!
For the average person, real estate offers the best way to develop significant wealth. If freed slaves could see the value of buying land and figure it out, so can you. If you are in your 20s, don’t listen to your friends who will tell you owning a home is too much responsibility. Get out of your parents’ house and own your own.
I know there are many sophisticated arguments and models that argue against homeownership. But as far as I’m concerned, the numbers don’t lie; owning real estate is the #1 way to build wealth and pass down more.
Don’t believe me? Consider that today, the five largest White landowners own more land than all Black people combined: over 9 million acres.
There’s open discussion on the clear connection between the wealth gap and housing inequality. New research by macroeconomist Matthew Rognlie found that housing inequality (that is, how much more expensive some houses are than others) is the key factor in rising wealth. His research shows that the percentage of wealth from real estate ownership has grown significantly since around 1950. It has grown substantially more than other forms of capital such as business ownership and equities.
Close The Black Wealth Gap By Investing In The Stock Market
We need to own more than real estate – we need to be in the market. The historical rate of return in the market is roughly 7%. So, the only thing you need to do to earn that average is invest long enough through the market’s downturns and upturns to experience that 7% gain or better.
During the last decade, we have largely missed out on the greatest stock market run in history. In spite of the Covid-19 market correction of 2020, more wealth has been created in this market run than at any other point…but Black wealth creation during this market was not significant.
Generally, most Blacks don’t invest in the market; not because we can’t or don’t have access. There is a clear disconnect in what we know and understand about the market.
The best way to get your “money making money” while you sleep is to invest in the stock market. The beauty of the market is that you can own a slice of a business without having to work. Perhaps not everyone can be an entrepreneur, but anyone can be a partial business owner.
The easiest way to own a piece of a business is to buy stock in one.
Investments put your money to work for you and like real estate and business ownership, they can create another stream of income and wealth. You can take one stream of income (your paycheck) and turn it into several investment streams through ownership.
Here’s the cheat code to investment: you don’t need a lot of money to build a stock market portfolio. You need time and consistency.
After Covid-19, start thinking about ‘How do I create generational wealth for my family?’ Rather than buying family gifts and toys, consider buying the ownership of a company. Buy them stocks.
Close The Black Wealth Gap Faster By Owning A Business
Ownership is how you create lasting wealth.
There are over 11 million millionaires in America and most of them did not inherit wealth; they built it from scratch. One study shows that business ownership is the greatest equalizer in wealth disparity, reducing the average wealth gap from a multiplier of 13 to three. Let me break this down for you.
In 2014, the median net worth of non-Hispanic White households was $130,800. The median net worth of Black households was $9,590. This simply means White households have a net worth that is 13.5 times Black households. But owning a business can dramatically and quickly reduce that gap. This means the numbers would look more like $130,800 for White households and $43,600 if members of the Black community owned more businesses. We would not be on par with other ethnic groups, but in a much better place.
Blacks need to own more businesses because it has the potential to increase net worth by 13 times. While we have many individual success stories, we need more ownership.
Regardless of how you feel about him, Jay-Z didn’t become the first hip hop billionaire from rapping. He might have started off with rapping, but then he developed an impressive business ownership collection–including a clothing line, several brands of alcohol, sports management services and music streaming services to name a few.
Many Black moguls in entertainment are following his pattern of investing in businesses. For instance, Jay-Z’s protégé, Nas, is part of a really dope investment team, QueensBridge Venture Partners out of Harlem, that has made some impressive moves like investing in Dropbox, Lyft, Casper and Robin Hood.
We are failing the Golden Rule (Leviticus 19:18, Matthew 7:12) when we don’t support Black ownership. Let me be both clear and realistic – we live in a global economy – so it’s impossible to support only Black ownership. But we can be more intentional and prioritize our support.
The culture of money supports Black ownership in all forms. We put our dollars where Black owners have taken risk.
Close The Black Wealth Gap By Passing Down More
I’ll repeat this message until it overtakes your spirit – an economic tsunami is heading our way! The most significant wealth transfer in history is lining up. With the transmission of that money comes power and privilege. Are we really going to trust that the next generation of rich White people are going to do right by Black people?
30% of white families have received an inheritance or gift vs 10% of blacks.
Your financial immaturity may come back to haunt you when you reach your 70s and still need to work because you won’t have enough money to survive on your fixed income. It is selfish to live your whole life without a care about money only to die broke and leave your closest relative with a big funeral bill that is not his responsibility to pay.
Of course, you may not be this kind of person, but many short-sighted, well-intended Black folks are missing the big point: the small number of wealthy legacies left among us don’t lie. We are way behind!
As I previously stated, the U.S. is on the brink of a $68 trillion wealth transfer.
Most of this money will be inherited by individuals, but not much will be disbursed among the Black diaspora.
It’s time for us to get in this race, overcome like we always do and win as the underdog.
We’ve done it before, and we will do it again!