4399, Defining Wealth Building|
Posted by M2, Sun Jul-20-03 03:27 PM
I think we need to really define what building wealth is before we really discuss this further.
Your "wealth" (Or Lack thereof) is just a general term to describe your Net Worth, the idea behind your net worth is the amount of money you would have if you used all of your assets to pay off all of your debts.
To determine your Net Worth, you would take the sum total of your assets, subtract the sum total of your debts - the remaining amount is your Net Worth.
For example, let's say we have a family with no children, and their debts are as follows:
Car Note(s): $15k
School Loans: $8
Credit Cards: $5k
Total Debts: $248k
Let's say their assets as are as follows:
Home Equity: $80k
Total Assets: $260k
Net Worth (Wealth): $12,000.00
A nice piece of change to be sure, but nothing you could retire off of or even support yourself with long term if you were to lose your job.
Let's say that the Husband brings in $70k and the Wife kicks in $50k for a total of $120k, making their take home (off the cuff calc) around $6,800.00
So let's say their monthly expenses boil down like this:
Car Note(s) & Insurance: $900
School Loans: $300
Credit Cards: $500
Which leaves our couple with $2,050.00 in Disposable Income.
Now let's say we have two couples in this situation - one decides to put a collective $300 towards their 401ks and IRAs and to just spend the rest.
The other couple decides to invest $1,000/month between stocks, cash savings, 401ks and IRAs and just frugally spend the other $1k/month on whatever.
Over the course of the next ten years:
Couple A: Improves their net worth - they contribute a total of $36,0000.00 to their investments and their home equity grows by about $60k
Couple B: Also improves their net worth, they contribute a toal of $120,000 to their investments and also grow their home equity by $60k.
In both cases, both couple's investments grow by 5% compounded annually over the 10 years.
Couple A's Investments Grow to a value of $300k
Couple B's Investments Grow to a value of $407k
In another 10-15 years, Couple B will be millionaires - not to mention the fact that in most cases, Couple B will probably have another $40-$50k laying around since their cheap in the first place and that couple A would never have built up any sort of investments in the first place.
In America, 2/3 of our households are Middle Class and most of them are like Couple A, only without the Investments, 401ks and IRAs - while white families with similar incomes are managing their money like Couple B.
When disaster hits - Couple B has tons of cash laying around, couple A just has the equity in their house and maybe a few grand in a 401k.
When discussing the spending power of America - we need to be talking about acting like Couple B - granted, most PEOPLE let alone Blacks make less than 120k/year - but even when scaling for income, the lesson is clear.
If Blacks could decrease their spending by 5-15%/per year - we would create BILLIONS in Black Wealth per year, as I pointed out in post #22.
No matter who you are, 90% of your money goes to a large corporation so trying to spend the other 10% with a Black Person may help those Black Owners, but it ignores the larger issue of how we need to start managing our money.
Just think, if even the 2/3 of us who are middle class were to reduce our spending by 5% over the next 12 months, we would create Billions in Black Wealth.
Not everyone can run a successful business, not everyone can find a Black Vendor for everything they need - but a lot of us can save 5% more than we do now and start to significantly reduce the wealth gap.
Then we then start using that money for additional investments, investing in each other's businesses, pooling money to start businesses (like the Asians, Jews and Indians do), etc - we can reduce it even more.
What the authors of these constant "Spend Black Articles" don't realize is that much of the wealth of other immigrant groups, doesn't come from the chinatowns or small business owners, it comes from their professional class, who invest their money, start large companies, invest in other's companies, buy property, pool money to start companies, etc.