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Subject: "Defining Wealth Building" This topic is locked.
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M2
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Sun Jul-20-03 03:27 PM

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25. "Defining Wealth Building"
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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:

Mortgage: $220k
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
Investments: $75k
401k: $60k
IRA: $20k
Cash: $15k

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:

Mortgage: $2,000
Car Note(s) & Insurance: $900
Gas: $300
Food: $350
Utilities: $400
School Loans: $300
Credit Cards: $500

Total: $4,750.00

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.



Peace,









M2



The Blog: http://www.analyticalwealth.com/

An assassinís life is never easy. Still, it beats being an assassinís target.

Enjoy your money, but live below your means, lest you become a 70-yr old Wal-Mart Greeter.

  

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Does black america have real wealth? [View all] , Chris40, Fri Jul-18-03 08:55 AM
 
Subject Author Message Date ID
The Real Issue
Jul 18th 2003
1
So M2
Jul 19th 2003
2
My beef with M2's
Jul 19th 2003
3
Wealth Building is Simple Math
Jul 19th 2003
7
the east indian community in houston
Jul 19th 2003
4
RE: the east indian community in houston
Jul 19th 2003
5
Based on What?
Jul 19th 2003
8
      I guess you have to see it to understand
Jul 19th 2003
9
           Okay.......
Jul 19th 2003
10
                lol
Jul 19th 2003
14
                     Abandon Fantasy
Jul 19th 2003
15
Missing the Point Entirely
Jul 19th 2003
6
At the risk of sounding ignorant..
Jul 20th 2003
18
      It wasn't meant as a Rebuttal
Jul 20th 2003
22
RE: So M2
Jul 19th 2003
11
Excellent Points
Jul 19th 2003
12
RE: So M2
Jul 20th 2003
17
      not nearly on the same level
Jul 20th 2003
20
RE: The Real Issue
Jul 20th 2003
16
Which only enriches certain individuals
Jul 20th 2003
23
      RE: Which only enriches certain individuals
Jul 21st 2003
28
RE: The Real Issue
Jul 21st 2003
30
      Prove me Wrong
Jul 21st 2003
31
In my center
Jul 19th 2003
13
the trend of convergence.
Jul 20th 2003
19
      RE: the trend of convergence.
Jul 20th 2003
21
           can u elaborate
Jul 22nd 2003
32
                RE: can u elaborate
Jul 22nd 2003
33
                     Further
Jul 23rd 2003
37
                          RE: Further
Jul 23rd 2003
38
the main issue
Jul 20th 2003
24
ding ding ding
Jul 22nd 2003
34
great post M2
Jul 22nd 2003
35
      Seek and you shall find
Jul 22nd 2003
36
nice read
Jul 20th 2003
26
80% of all Businesses fail in Five Years
Jul 21st 2003
27
I USED THE WRONG TITLE TO THIS TREAD!!!!
Jul 21st 2003
29

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