As African-Americans we’ve arrived a little late to the wealth game. 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.
While institutional racism, unequal access to quality education, and other factors contribute to this finding, there are things we can do to improve our finances and help close this colossal black-white wealth gap.
1. Forget the Joneses. They’re broke.
Will Rogers once observed that, “Too many people spend money they haven’t earned … to buy things they don’t want … to impress people that they don’t like.” The urge to keep up with the Joneses can be overwhelming. Yet, attempting to do so is folly because, truth be told, Mr. and Mrs. Jones are probably up to their neck in debt. Learn to run your own race. Stop comparing your life and possessions to others. In the end you’ll be happier and wealthier.
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. The wealthy, on the other hand, don’t let material possessions define their self-worth. In fact, Dr. Thomas J. Stanley, author of The Millionaire Next Door, explains that you wouldn’t recognize most millionaires if they walked right past you. As Dr. Stanley discovered in his survey of the rich, most millionaires wear inexpensive suits, drive American made cars, and live in modest homes.
3. Understand that discipline is the path to financial freedom.
In the late sixties psychiatrists conducted a study to look at our ability to delay gratification. The so-called marshmallow test placed four-year-olds alone in front of a delicious marshmallow.
The instructions were clear. The child could eat the marshmallow if she pleased, or she could wait and receive an additional marshmallow when the researcher returned in fifteen minutes.
Many children ate their treat immediately, but others were able to hold out for the entire fifteen minutes, receiving an extra marshmallow as a reward. Follow-up decades later revealed that those children who successfully delayed gratification were also more successful later on in life.
Inevitably, this ability to delay gratification is crucial for our financial well-being. By forgoing small financial temptations in the present we are able to reap larger financial gains in the future.
4. Learn to truly recognize what makes you happy.
We are brought up in a society that says we can have it all – an expensive car, big house, designer clothes, and all the technological gadgets our hearts desire. But the truth is that in order to be financially secure we have to make choices.
The key to financial success is to spend money on what truly makes you happy while cutting back feverishly on those things that add little value to your life. Perhaps you love traveling. Engage in your passion but sacrifice in other areas. Settle for a smaller home or resist the urge to purchase a new car every four years.
5. Understand that debt is slavery.
“Every time you borrow money, you’re robbing your future self.” Nathan W. Morris
Debt is the demon that terrorizes our financial well-being. When we borrow money we make compound interest work against us instead of for us. Before you know it we find ourselves falling further and further behind. Tame the debt beast by following this one simple rule: Never spend your money before you have it.
BMWK, How do you go about creating a wealth mindset?