Since February is black history month, I hope you don’t mind if we have some real talk. The last financial recession, or crisis, wiped out about 53 percent of Black wealth according to Eddie S. Glaude Jr in his book Democracy in Black. The average Black family net worth is approximately $11,000.00, while the average White family net worth is approximately $141,900.00.
Pew Research Center has shown is that White families have 13 times more wealth than Black families. And the truth is, living in a beautiful house, driving a high end vehicle, your kids attending private school and having an advanced degree doesn’t mean you’ve escaped the wealth gap. The average White family with a college degree has over $300,000.00 more in wealth than a Black family with a college degree. Over the last 30 plus years the average wealth of White families has grown at three times the rate of average Black families, according to the Collins Ever-Growing Gap.
My point is, the wealth gap is widening at an accelerated rate! This brings me to the concept of stop gap. What are you going to do to stop if not reverse the wealth gap?
There are many reasons for the wealth gap, but some of them are self-inflicted. The first Black entrepreneur, self-made millionaire in the United States was a woman named Sarah Breedlove, known to most as Madam C.J. Walker. Walker made her fortune selling hair care products to Black women in 1910. But since the year 1910 not much has changed. According to the latest report on how Black people spend their money, blacks spent $54.4 million in ethnic hair and beauty aids in 2019. But that’s not the story! The story is that a total of $63.5 million was spent in America on hair products in 2019.
What I’m saying is that black people spent 85.6% of the total amount of money spent in American on hair and hair products in 2019. How can the wealth gap close when people of color spend so much of their money on items which do not appreciate? If that much is spent by one group who constitutes about 14% of America’s population on non-appreciable assets, do blacks expect the wealth gap to close? Is this kind of spending not self-inflicted?
The fact that the new government administration has proposed a minimum wage increase of $15.00 per hour is not going to narrow the wealth gap, when money is not valued in the black community. Earning more, does not close the wealth gap when poor choices are exercised in making investments and spending on clothes, jewelry, and depreciating vehicles. With such financial practices aspects of the wealth gap are self-inflicted!
In addition, a 2013 a Pew Research Center study revealed that for White families, every additional dollar they earn in income leads to $5.19 in wealth. While, for Black families, each dollar creates sixty-nine cents in total wealth, I have said this before but it bears repeating over and over and over! A dollar circulates 30 days in the Asian community; 20 days in the Jewish community; 17 days in the White community but only six hours in black communities! When people of color and minorities spend and invest on depreciating vehicles, clothes and do not become owners and shareholders of these depreciating asset companies the gap cannot close. It remains self-inflicted!
How do people become wealthy? Usually, wealth is generated through inheritance or earned through building a business. Therefore, it should come as no surprise when I tell you that 37% of Whites hold equity in business assets as opposed to only 9% of Blacks. Additionally, 21% of Whites total assets are invested in their own business. If that much of White wealth is concentrated in their own business, it should tell you that wealth is built through entrepreneurship. Let me be direct! You generally won’t get wealthy working for somebody! You’ll pay more taxes without a business and wise investments on non-depreciable assets.
If the wealth gap is going to close, it starts with you! In your new year’s resolution plan have you intentionally identified time each month in which you are going to have family meetings/conversations with you children about finances, or is your story that you don’t know much about finance, you don’t understand numbers, you’re not an accountant or you’re not good with math, therefore you can’t talk with them about that?
What does that look like? I’ll tell you! It looks like your children, cousins, nieces and nephews potentially ending up following and making the same financial mistakes and mismanagement you made. Is that how you plan to close the wealth gap? Call to action! Start your meeting this Black history month. Become proactive about the ways in which you and your family and going to stop the wealth gap.