Net Worth: #blackAF Edition
Net Worth…is a term to describe ones personal financial health and also one of the key indicators when it comes to personal finances. Having a “high” net worth opens the door to lower interest rates, borrowing and investment opportunities and even helps to bring the concept of generational wealth to fruition. Believe it or not, calculating your net worth isn’t as hard as it may sound either. To determine your net worth, you simply take your assets (e.g. cash, investments, savings account, valuables) and subtract it from your liabilities (e.g. credit card debt, student loans, mortgage)!
Unfortunately, the racial unrest in our country at this time has once again shed a light on how systemic racism has held back the black community particularly as it relates to the wealth gap. According to a study done by the Survey of Consumer Finances (SCF), the median net worth of a black family in 2019 was $24,100 while the median net worth of a white family was $188,200. In the words of Kenya Barris in his Netflix show, #BlackAF, the wealth gap is... you guessed it, because of slavery. Post slavery barriers to black wealth range from income inequality in the workplace that forces us to constantly play catch-up, inequality in education due to poor public schools, the practice of redlining that reduced access to capital in black neighborhoods, to disproportionate amounts of student loan debt that also burdens our community. It has been an uphill battle to build wealth within the black community which has led to this huge gap. Here is a video that goes into details on how we even got here.
Yes, when you think about all this it seems like a grim situation. Although there is so much work that needs to be done to close this wealth gap, here are a few things you can do immediately to help grow your net worth and not become a statistic.
Create some sort of budget. I know you might be tired of hearing this “B” word but it is one of the keys to setting a solid foundation with your finances. Not only will it help you take control of your finances, you can ultimately see where your funds are going and cut-back where needed. And to help you build a budget, make sure to download the free budget supplement to get started on one!
Try to avoid significant lifestyle inflation. I believe a lot of time we get caught up in this mentality of Keeping up with the Joneses that we forget to put our money to work for the future. If my wife and I get raises at our job, we usually put a significant amount of the raise towards our investment and saving goals, and use the rest to treat ourselves a little.
Create passive and/or increase income. Even I can admit, there is only so much cost cutting one can do especially if you already live below your means. Consider tapping into one your skills to create extra income for your household. I suggest checking out Fiverr, a freelancer platform, to offer your services. Additionally, ask for that raise at your job! If your employer discusses how much they value your work, tell them to put their money where their mouth is before another company does.
Start investing your money. Historically, the S&P 500 has returned an average of 10% annually since 1926. Whether it is investing in your company provided retirement account, personal brokerage account, real estate or other vehicles, it is another way to help build our net worth over the long haul. And remember, if your employer offers a company match on retirement accounts, make sure you maximize that free money benefit!
Educate your family and/or children on the importance of personal finances. We want to continue to pass on wealth through the generations. Don’t let the lack of knowledge around money management contribute to poor money making decision for generations to come.
Black families hold 2.6% of the National Wealth, while white families hold 90%. It’s time to get to work. I encourage you to take some time today to calculate your net worth and start implementing the above steps to build your wealth! Let me know your thoughts in the comments. Let’s continue this conversation!
Holding you accountable,
DWM