Have you seen these numbers released by the Brookings Institute recently? Does this depress you or serve as a source of motivation?
For me, it’s both.
It’s a reminder of systemic forces (some historical, others current) outside of our control that make it difficult for large numbers to make great financial strides.
It also taps into my competitive nature. I have no qualms about setting goals and working to seize all opportunities available. That includes the opportunity to build wealth.
I don’t mean to minimize the significance of historical factors that have blocked millions in this country from retaining wealth and passing that down to our children. I’m a product of some of those blocked opportunities.
There are sooooooo many:
- Restrictive housing covenants.
- Inequities in GI Bill benefit distribution for war veterans.
- Racial disparities in the application of criminal justice punishments and sentencing.
- Legal (or otherwise) seizure of lands and businesses through intimidation, domestic terrorism, and mob action.
- Countless others (add to my list in the comments below)…
Our country has a deplorable record of intentionally boosting the access to wealth creation opportunities for some groups while keeping the proverbial “knee on the neck” of others.
I get it.
And it sucks.
Annnnnnnnnd I believe it’s important to learn from and appreciate the history of what our parents, grandparents, and beyond faced so we appreciate our place in the present and all that we have access to.
We have a voice with our vote (unless you plan to run for office then you have more sway) which can help impact policies that address wealth inequality in this country. Beyond that, I urge you to focus on closing your personal wealth gap.
Closing our Personal Wealth Gap
Just so we’re clear, wealth (or net worth) is determined by totaling everything you own that has value (your assets) and subtracting your liability (debt).
Have you ever done this? Take a sec and do it now… I’ll wait…
After calculating your net worth, compare it to the averages you see depicted above.
Ideally, we would not have an average for African American families that differed from Hispanic families that differs greatly from our brothers and sister of European descent.
One day, the averages will be the same across the board and the Brookings Institute will just calculate the average American wealth values.
Le*sigh, for now, our world is far from ideal.
Regarding our personal economies, there are specific steps we can take to close our personal wealth gap starting today.
- Commit to a debt-free lifestyle. Consumer debt is a huge drain on your income power. The interest you pay on credit cards, car loans, student loans, etc is working against your ability to build wealth. Focus with fierce energy on attacking your debt and living debt-free in the future.
- Save. Save. Save. Build a habit of saving. Paying yourself first and living on less than you make. Making saving a habit puts you in a better position to weather financial setbacks that pop up unexpectedly. Relying on your savings account rather than a credit card will help you focus on #1.
- Improve your financial literacy. Make this a priority. Learn the difference between whole life and term life insurance products and how this can be used to build wealth. Figure out what type of budgeting process works best for your personality. Understand the impact that late payments have on your credit score. When you know better, you can do better (Thanks Madame Angelou for that nugget).
- Clean up your credit. Speaking of late payments, stop doing that. Don’t beat yourself up, but start paying your bills on time. That is the single best thing that you can do to improve your credit score. Improved credit scores make life less expensive for you in so many areas. This will improve your ability to conserve more of your cash and move in the direction of wealth building.
- Invest in appreciable assets. In other words, spend your money on things that will rise in value before you spend everything you have and then some on items that will be out of style next month. If the thought of investing makes you nervous, schedule an appointment with an investment professional at your bank or credit union and just ask this question, “How can you help me learn to invest?”
Which step are you willing to start today? Let me know in the comments below.