If you cannot save 10 percent of all that you earn, the seeds of greatness are not in you.
That’s the warning first offered by W. Clement Stone and reiterated by Dennis Kimbro in his best-selling book, The Wealth Choice: Success Secrets of Black Millionaires.
Kimbro understood quite well that in order to build wealth you have to live below your means, while paying off debt, saving and investing what’s left over.
Yet, I question if we, as African Americans, can’t take care of our own wealth needs because we’re too busy giving money to everyone else.
A 2008 University of Chicago study, for instance, found that blacks spend more than whites on conspicuous consumption of luxury goods at every level of income. This spending, in turn, impedes our ability to create wealth.
This may explain why, according to a 2014 Pew Center report, the median black household in America possessed a meager $11,000 in wealth compared to the $141,900 in wealth held by the median white family.
The sad part is that we have the money at our disposal to create wealth. The Nielsen rating agency predicts that the buying power of African Americans will reach 1.3 trillion by the year 2017.
The question we have to ask is whether or not building wealth is important to us. If so, then saving 10 percent of our income must become a priority. Consider that the typical family earns $53,647 each year. This would require a savings of $447 a month. Saving this amount may seem daunting at first, but if you take a closer look, you’ll realize that it’s easier than it seems. You just have to be committed. Consider these tips in your savings quest:
1. Plug your money holes.
Experts predict that most Americans easily squander 10 to 15 percent of their salary. Make the decision to plug one money hole each month. Switch to a low-fee credit union for instance. Cancel that seldom-used gym membership. Shop around for lower car insurance or install a programmable thermostat to lower your utility bills. Fix one money hole each month, and by the end of a year, you’ll be in charge of a financially fit ship.
2. Don’t let your possessions define you.
Too often our self-esteem is tied up in what we drive, who we wear or where we live. This dangerous trap destroys any hopes of achieving financial freedom. Remember that it’s not the size of the car but the size of the bank statement that counts.
3. Don’t become slave to your toys.
Instead of working to live, too many of my friends are living to work. They’ve become slaves to their possessions, so they must work incessantly to make the payments on all of their toys. Refuse to fall into that trap.
4. Sacrifice your sacred cows.
We all have those sacred cows—you know, the expenses we don’t touch because we feel we’ve “earned” them or that they’re a “normal” part of modern life.
Take, for instance, automobile ownership. We often hold sacred the idea that owning two family cars is an absolute necessity. For some families this may be true, but for others the extra $5,000 to $10,000 savings from owning just one car may just be the ticket to financial freedom.
But it’s not just cars that serve as the sacred cows. We often feel “entitled” to 100+ cable TV channels, large $100 monthly bills for smart phones and eating out constantly. These sacred cows may be ripe for the sacrificial altar.
By taking a closer look at your finances, you’ll find new ways to save money and build wealth in the process.
BMWK, do we as African Americans squander our money?