New Concern For Blacks: Net Worth Wealth-Building Strategy Helps African Americans Reach Goals
The Rev. Jesse Jackson’s new Wall Street address is one of the more telling signs that for African Americans the holy grail is no longer just about social and political power.
It’s about increasing net worth.
“This may be the most important struggle of all,” said Kelvin Boston, the Detroit-based financial host for a syndicated Black Entertainment TV show, “The Color of Money.”
With 8.2 percent of the nation’s purchasing power, blacks have the most economic clout of any minority group. This year, blacks are expected to spend $469 million in disposable income on goods and services, a 54 percent increase since 1990. During the same period, the spending power of all Americans increased 41 percent.
A booming economy and a burgeoning black middle class is credited for a rise in income, yet African Americans still have little to show for it.
“If I had to rely on my people, I’d have been broke a long time ago,” said William Harris, a financial planner who is black but has a predominantly white clientele at Alchemy Investment Planning in Sacramento, Calif.
“They don’t understand the power of owning shares,” he added. “They can start with as little as $50 or $100 and feed their portfolio like they feed themselves. Then they’ve got the economic power they want. They’ve earned it, they’ve invested.”
Black professionals say a white-dominated financial structure is partly to blame for the lack of saving and investing by the black culture: Of about 14,000 publicly owned U.S. companies, only nine are owned or operated by African Americans. Of 7,000 U.S. mutual funds, only a dozen are either overseen by black money managers or make investments in the black community.
The most recent reports from Black Enterprise magazine show that nationwide in 1994 there were only 13 investment banks, 23 insurance companies and 36 commercial banks owned and operated by blacks.
From his new Manhattan office, Jackson hopes to turn those numbers around by shopping black business ventures and minority communities across the country to investment banks and pension funds, promoting the black businesses as sound investments.
“You have to go to the white-dominated structure to get any capitalization, to get a home loan to get food,” said Ted T. Marsh, managing director and performance coach for Two Win Communications, an Oakland, Calif., consulting group. “It implies you cannot carry your own load. You are totally dependent on the system.”
Saving and investing takes a lower priority for many blacks who are still struggling to make ends meet. The National Urban League Inc. reported in its “1996 State of Black America” that the gap between what blacks and whites earn has widened, along with the gap between the nation’s rich and poor.
“Self-esteem is really a big part of why we handle our money the way we do. It’s very important to us to be able to show visible signs of success,” said Glinda Bridgforth, a financial coach and director of Bridgforth Financial Management Group in Oakland. Bridgforth, who has appeared as a guest on Boston’s show, offers individual and group workshops in cash and debt management.
As they grow more affluent, blacks are hungering for tips on money matters. It’s what motivated Boston to write “Smart Money Moves for African Americans.” The message he hopes to send is that every dollar invested will benefit all blacks and decrease the wealth gap between blacks and whites.
While the information in the book can be useful to anybody who plans to build a financial portfolio, Boston said blacks will be more inclined to read the book and learn more if the information is targeted toward their market.
The 300-page book encourages a holistic approach to building wealth by touching on seven broad financial issues, including how to buy a home, create an investment plan, manage credit and understand insurance. It’s a guide that takes complex financial issues and boils them down to a step-by-step process that’s easy to follow. Boston’s book also includes an extensive reading list, resources lists on black-owned companies, financial institutions and mutual funds, as well as inspirational quotes and parables.
“Research tells us that there is a need on the part of African Americans and other groups to have information on how they can plan for retirement and how to achieve their financial goals,” said David Bland, vice president for Bank of America’s future markets division in San Francisco. “There’s not been a track record of wealth being handed down from generation to generation.”
Boston and others advise that blacks should start by thinking about the financial goals.
“Whether you are a novice or sophisticated investor, you have to start with goals and objectives,” said Marjorie Grace, president of Grace Financial Services in Oakland. “From that you can truly identify the investment portfolio you need to achieve those goals even if your goal is phenomenal wealth.”
Grace finds that most of her black clients plow their resources into personal property such as a home, car or jewelry. A lot of money is invested in low-performing certificates of deposit or savings accounts. These are risky investments, she said, that do not hedge against inflation risk and the loss of purchasing power. She advises you keep only enough cash to pay from three to six months of fixed expenses.
From there, assess your risk and find an investment adviser you can trust and with whom you share financial values.
Sacramento-based planner Harris suggests looking into companies supported by black consumerism, such as Nike Inc., Wal-mart Stores and The Walt Disney Co. Often, African Americans are more motivated to invest in black-owned enterprises.
The Bloomberg Color of Money index, created in December 1994 on Bloomberg Financial Markets with Boston, tracks eight publicly traded companies with annual revenues that are running at about $600 million and that are either owned or operated by blacks.
The index has dropped about 40 percent in the past 12 months, but Greer said that while “their revenues might have been disappointing, they will definitely fall back into favor because most are in industries positioned for growth.”
Whether you’re a black-owned company or an African American, the ones that stay ahead of the curve and arm themselves with knowledge are the ones that have the staying power.
“The successful people come through with tougher skin and have a better ability to meet other challenges in the business marketplace,” Magary added. “Those are the major ingredients for success.”
xxxx TIPS FOR BUILDING WEALTH Here are a few ways African Americans - and everyone else - can increase wealth: Create a wealth-building plan. Unlike a plan that centers on a specific lifestyle goal, such as a vacation, new home or retirement, the wealth-building plan is a life time goal to increase the house hold’s net worth. Invest in your dreams every payday. The ultimate success of increasing the net worth of black households depends on creating a habit of long-term investing. Even if you’re working to pay off debt, pay your savings plan first. Own your own home. Blacks must learn to view homes as investments, so they will be motivated to build up equity, then leverage that equity to move up to higher-priced homes without breaking the budget. Insure your dreams. Learn to use low-cost term insurance and disability insurance plans. Most blacks are only familiar with burial insurance, not insurance that protects earnings. Own a business enterprise. Entrepreneurship offers the greatest opportunity to build and maintain wealth. It is the ultimate “smart money move.” Maximize human resources. Learn to rely on your intellectual, physical and spiritual capital.
Source: “Smart Money Moves for African Americans,” by Kelvin Boston