The median household net worth for white households in the U.S. is $171,000. That's about 10 times greater than black households' $17,150. What accounts for these differences? Opinions vary. I agree with those who insist that 400 years of slavery, Jim Crow and discrimination - both institutional and otherwise - have played a role in racial disparities. I also agree with those who argue that - at the individual level - habits, behavior and choices affect economic outcomes. Fair-minded individuals can accept both premises. But let's look beyond politics and delve into some specifics. Wealth accumulation in this country has traditionally been tied to homeownership. Those who build equity each month - and see their houses appreciate in value over time - are likely to have a higher net worth than those who do not. Black homeownership is only 44%, down from a peak of 46.5% in 2004 and even 2% lower than three decades ago. Seventy-three percent of whites, by contrast, own their homes. Black men and women are also less likely to invest in equities. About 60% of white households hold stocks. That's approximately twice the percentage of black households, according to Federal Reserve data. (That's had a huge impact, especially given the generous stock market returns - and microscopic interest rates - of the past decade.) What's most surprising about the racial wealth gap is that it is essentially unchanged from the levels of 1962. I would love to argue that wise leadership and enlightened public policies will change all this. But history suggests otherwise. I have good news, however. I've spent the last 35 years studying, writing and speaking about how and why some Americans get rich... and others don't. And I'm happy to share what I've learned. (Last year longtime reader Bill O'Reilly and I even held a summit - The Great American Wealth Project - to explain how more everyday Americans can achieve the American Dream.) Space prevents me from providing more than a general outline here. But whether you're black, brown, white or purple, here's how to increase your net worth. First, maximize your income. Annual pay is generally determined by nine factors: - Your educational attainment
- Your chosen profession
- Your years of experience
- Your hours worked
- Your work ethic
- Your social skills
- Your competence and proficiency
- Your ability to cooperate with, inspire and lead your co-workers
- Your ambition to rise in the organization.
The data is clear. If you want to earn more, stay in school longer, learn a financially marketable skill and/or make yourself indispensable to someone. (If you can wrangle enough capital, you can also start your own business. But go in with your eyes wide open. Four out of five new businesses fail in the first five years.) For many readers, it is too late to go back to school, change careers or learn new marketable skills. However, you can still take smart steps to increase your net worth: - Own your home instead of renting.
- Live beneath your means and save regularly. (When your outgo exceeds your income, your upkeep becomes your downfall.)
- Invest those savings in the world's highest-returning asset: a diversified portfolio of high-quality stocks.
- Take advantage of tax-advantaged vehicles like IRAs and 401(k)s.
- Minimize your investment costs with discount brokers and no-load funds.
- Let your money compound as long as possible.
- Try to stay married. (Not possible in some cases, but divorce is far more likely to halve your portfolio than a bear market.)
If you're doing these things and still not on track to achieve your most important financial goals, you have three options: Earn more, save more, or earn a higher return on your investments. These fundamentals are just a starting point, of course. Yet all my investment advice is based on proven principles. Principles that apply to everyone. Unfortunately, most people - even highly educated men and women - don't know or understand them. Or lack the confidence to act on them. That's where The Oxford Club can help, with award-winning recommendations and strategies - and a bit of reassurance and hand-holding during the tough times. You may not have the power to change society. But you do have the power to take charge of your financial destiny. It begins with understanding that investment success is not about following the right predictions. It's about following the right principles. And it ends with taking responsibility, at the intersection of what matters and what you can control. I'll have more to say on this important topic next week… Good investing, Alex | 
No comments:
Post a Comment