Thursday, September 02, 2010

Why Black Folk Will Always be Broke

In these times of economic turmoil and instability, many are tightening their purse strings across the nation. However, a large segment of the population continues to spend and live above their means — African Americans.

The simple fact is that African Americans do not save money and tend to spend before even considering putting a few coins away. The average African American’s savings level is about 1 percent of annual income when compared to other ethnic groups. This represents the percentage of disposable personal income held in retirement plans and liquid financial assets.

This is strange given the massive spending power that we have as a collective. African Americans spent $645.9 billion in 2002, an increase of 104 percent from 1990, according to Target Market News, a consumer market research and information company. In 2004, blacks' spending power increased to $723 billion, according to U.S. consumer market data, and is currently estimated to be $913 billion.

If African American spending power were considered Gross Domestic Product (GDP) — the measure of a nation’s wealth, we would be ranked 13th, lower than Russia and higher than Mexico, Australia, Netherlands and South Korea. Given this accomplishment, why can't we save some of this money?

We comprise less than 13 percent of the U.S. population, yet account for 30 percent of the country’s Scotch whisky consumption. Detroit, which is 80 percent African American, is the No. 1 market in the world for cognac consumption. According to Target Market, African American consumers spend a significant amount of their income on depreciable products such as $30 billion on clothes and around $15 billion on furniture to put into homes that are mostly rented. The average African American household has also increased its annual spending on entertainment by nearly 30 percent over the past few years.

Regardless of age or income, African Americans contribute less often, and less money to 401(k)s than whites and Asian-Americans. African American employees who earn $120,000 or more have saved $154,902 in their 401(k)s on average compared to $223,408 for whites. Even when comparing households with roughly the same incomes, whites saved nearly 20 percent more each month for retirement.

From income to homeownership to household wealth, we continue to lag behind whites, according to a United for a Fair Economy study. This report observed that a typical white family had six times the wealth of a black family in 2001 and that the gap is growing continuously, particularly with respect to savings and investing.

If we truly desire economic empowerment, then the burden is on us to save. We cannot copy the attitudes of celebrities like Ciara, who in a recent issue of Pride magazine stated that she spends "about $11,000 a month" on shoes and that she owns "maybe a thousand pairs."


E.Payne of MakesMeWannaHoller said...

How timely, my man. How timely.

Nefertiti said...

Yes Keen Observation,And we should also teach our children how to save for a rainy day...Start them young

LafemmeIngie said...

My son has to save 20% of all money he receives and he is just 10. These are principles that have to be taught at a young age. Having things is nice, but they must come after you have saved and taken care of necessities. Also teach your children the value of insurance.No one should have to pony up money to bury someone, take care of a disability, or beg and borrow because you did not have renters insurance. Let's raise smart and responsible children.

Leiominala said...

So in all honesty I'm def a part of the problem I'm in my early twenties and well aware of this issue and my short commings so I am making quick moves to change but its hard when u were taught to budget foolishly for example thinking that just because u have a the exact dollar amount avaible that u can afford to spend it especially on depreciating items such as CLOTHES and other bs that basically gives the appearance that you are more well off than u actually are. Blk ppl do this becuz we r tryna fight the perception that we r poor but in the process we cementing the stereotype into reality. I realize it but there r soooooo many ppl my generation who get their paychecks and burn it it uhp on sneakers *literally*, hair weaves accessories, clothes, gadgets e.g. cell phones computer crap, car notes and even bachelor and bachlorette pads that they really can't afford all to keep up this super posh lifestyle that really is not necessary but a lot of ppl think they gotta be "fresh" 24 7 and have no concept of delayed gratification, it sounds like a simple enough thing to stop but when you get used to something and u see everyone around u doing the same stuff like buying on credit and not having any savings its hard not to do the same

seo said...

I'm glad to have visited your blog and good to know you! I find it interesting and informative.

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