In class we talked about the importance of building wealth. We learned to focus on increasing our wealth rather than focusing on becoming rich. A number of factors can affect the accumulation of wealth. Things such as the environment we are in and spending habits can have a drastic affect on our wealth.
I came across an article that spoke about the gap between black and white families. The contrast in the amount of wealth that black families and white families have is extraordinary. Studies have shown that on average white families have accumulated nine times as much wealth in comparison to blacks.
While education and inheritance does play a role in building wealth, the biggest reason for the huge gap lies in home ownership. A larger amount of whites own homes compared to black families, close to 30% more white families own homes. With owning a home, most of their wealth lies in their ownership. It is smarter to own a home instead of renting a home. Renting a home is almost like burning money, it goes toward that one month of living and that’s it.
While education and income can be used as an excuse for the gap in wealth, studies have shown that white families are smarter in their spending. Even with equal income between the two, whites are able to build toward their wealth because they already have cash saved up from smart spending. On the other hand blacks are using their income for emergencies.
Increase in education will help build income but even with high income, money management plays a big role. Black families need to make sure that they use their income wisely and work toward wealth rather than riches. Living within one’s means and being frugal so that money can be saved to purchase a home can help close this enormous gap.
