The Minneapolis Spokesman-Recorder has provided a platform by which we can help community members see more clearly what is at stake and how area minority entrepreneurs are doing in this depressed economy. While shining a spotlight on local entrepreneurs, we hope to provide creative solutions to help find your way out of this economic crisis.
I want to share some information from an article I read by Rex Nutting, global commentary editor for MarketWatch.com, a Wall Street Journal Digital Network website. There are some valid points in the article “Wealth of Black families has disappeared” to consider as we look at African American entrepreneurs.
It is no secret that historically Black households tend to suffer the most when the economy becomes stagnant. Despite the successes of entertainers, sports athletes, or celebrity types, your pocket change jingles with coins while theirs ruffles with stacks of bills.
Unemployment rates have doubled since 2007, according to the Bureau of Labor Statistics. “For Blacks, the jobless rate rose from 7.7 percent to 16.5 percent, while the jobless rate for Whites went from 3.9 percent to 9 percent,” writes Nutting.
If you can’t find a job, create a job. If they won’t hire you, hire yourself!
Median net worth for Black households dropped from $9,300 in 2007 to $2,200 in 2009, far less than the $96,400 owned by the typical White household.
“Median household income for Blacks fell 7.2 percent from 2007 to 2009, significantly more than the 4.2 percent decline for Whites or the 4.9 percent drop in Hispanics’ income, according to the Census Bureau. (The median means half of households had more, half had less.)”
There are multiple reasons for the disparities. One observation is most Black households do not take out enough insurance. Instead of worrying about how their heirs would misuse it, they never considered setting up a trust and setting parameters on how much the person could spend and what they could spend it on. Insurance is the easiest and quickest way to build your estate.
“The vast majority of wealth in this country is owned by a few people, mostly White,” Nutting confirms. “It’s estimated that about 80 percent of all wealth is owned by 20 percent of the people, while about a third is owned by the top one percent. About 40 percent have no wealth at all.”
From 2001 to 2009, the wealth took a nose dive. By 2009, the typical White family had $94,600 in wealth, compared with $2,200 for Blacks, according to an analysis by economist Edward Wolff. In other words, African American families in 2009 had two cents for every White family’s dollar.
Had the bailout been given to the consumer, they would have more money to save, start their own businesses, send their children to school and more. But that makes too much sense. Their savings would have helped the bank coffers and the banks could have really worked to earn the business of the consumer.
Consider my modified “Ten Key Solutions for Black Economic Well-Being”:
1. Start your own business. Few people acquire wealth working for someone else. Hire family, friends and community members. Build the economy of your community. Pass on your successful business as a family inheritance to your children and grandchildren.
2. Higher levels of education translate into better employment opportunities, higher income and wealth. Education begins when you teach your children to value learning and to read well. Add education to the hierarchy of human needs. Without education, existing viably today becomes virtually impossible. Educate or die!
3. Stop renting apartments. Save for a down payment on a house. Then BUY it! Home equity represents largest portion of net worth, not cash assets.
4. By opening a savings account for your children, they learn the value of money and how to earn, save and invest at an early age. Take personal finance classes so that you will become the best teacher for your children — stop buying on credit.
5. Invest your money and your time to enhance your skills and knowledge base and to improve your overall well-being — avoid materialism through consumerism. Second, learn how to make big companies work for you through stock ownership, rather than you only working for them. Third, speak with knowledgeable investors.
6. Manage your credit carefully and avoid unnecessary debt. Beware of spending excessive amounts on anything! Learn to pay cash for what you need or don’t buy it! Create a household budget that includes food, living space and utilities — and live by it. Save for a rainy day. It’s coming!
7. Get married: Two-person-headed households are more viable economically than one-person-headed households. Marriage can be an economic advantage when both parties are aligned on financial priorities and fiscal realities. Sixty-five to 70 percent of Black children are born into single-parent households and begin life in poverty. Most of them never make it out.
8. Enhance your life through good nutrition, plenty of exercise, and proper rest so that you can share your good fortune and a long, healthy life with your family and friends.
9. Start your own nonprofit.
10. Create a will: Ensure that your accumulated wealth is passed on to the next generation. Studies suggest as much as 70 percent of most households’ current wealth was inherited from a previous generation.
Ste Brown, M.S., is a corporate consultant who welcomes reader responses to firstname.lastname@example.org.