A millionaire is not considered a millionaire because he/she “made” a million dollars this year; he/she is called a millionaire because he is “worth” a million dollars. Net worth is the difference between what a person owns (assets) versus what a person owes (liabilities). So, if you won a million dollars, but splurged it all on things that depreciate and hold zero value, you would not be considered a millionaire; however, if you took that same million dollars and invested into things that appreciated over time (stock, mutual funds, businesses, real estate etc…), more than likely, you would be worth a million dollars.
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Take Oprah for example. According to a Forbes article, in 2015 Oprah purchased a 10% stake in Weight Watchers investing about $43 million. At the time, Weight Watchers’ stock was trading for about $6.79 a share. Fast forward to February 2018 and the stock is now trading at about $71. Her $43 million investment in 2015 is now worth over $450 million just three years later. And this is just one small piece of her very diverse financial portfolio. Oprah understands the power of appreciation and ownership because she realizes the power of investments; thereby, according to Forbes, Oprah is worth $3.1 billion (with a B).
So, my question is, what are you spending your money on? Name brand purses? Red bottom shoes? The latest iPhone? Things that do not appreciate? Or are you making smart decisions knowing money is a tool, a means to an end, and not just something we use to buy nice things so we can “look” good, but is something we use to “do” good. Not saying we should not want nice things and have nice things; we just have to ensure those nice things do not “have” us. It is called PRIORITIES!
So, what are our priorities? Well, according to the latest Multicultural Economy Report form the University of Georgia’s Terry College of Business, African-American buying power was estimated to be $1.6 trillion in 2016. Note: Buying power is dollar amount available to spend after taxes. By 2021, black buying power will grow to $1.5 trillion which will make African-Americans the largest racial minority consumer market. So where are we (African-Americans) spending the money? Top four expenditures:
- Natural gas
- Electricity
- Shoes
- Phone/Phone Services
Interesting, isn’t it? What about net worth? “In 2016, white families had a median net worth of $171,000, compared with $17,600 for blacks and $20,700 for Hispanics” (Washington Post). Meaning white families have nearly 10 times the net worth of black families? Astonishing! Now, I must admit there are many factors as to the reasons why minorities’ net worth is significantly less (i.e. not being able to own early on which is a direct link to inheritance, redlining and an assortment of inequalities that still exist in many communities today). It does, however, reveal how our spending habits directly affect our net worth. When shoes and phone services is on the list as top expenditures, but our median worth is only 17k, it proves it is not a money problem, but a priority problem.
So, what can we do to realign our priorities and increase our net worth. Three tips:
Tip #1: Spend less than you make.
Tip #2: Make good investments
Tip #3: Get Out of Debt
A simple concept, yet difficult for most to implement; however, if we get the small things right, we will be able to enjoy the fruit of our labor. Not just because we “want” to, but after implementing these tips, because we are “able” to. #babysteps
What are your priorities? Have you ever calculated your net worth (what you own versus what you owe)? Remember, wealth does not equate to a great income; wealth equates to net worth. It is not about what you make; it is about what you spend? Realign your priorities and know your worth!
