In 2008, the Women’s Initiative published a report called “Closing The Wealth Gap Through Self-Employment: Women of Color Achieving the American Dream,” noting: “There is a positive relationship between a client’s business development and their household’s financial well-being. For every dollar of business equity owned, Women’s Initiative clients have nearly two dollars of overall household wealth.”
This also supports the conclusions drawn by the Insight Center, which calls on the federal Small Business Administration to provide more assistance to “micro-enterprises”–small business and side endeavors that contribute to wealth building. Timmons concurs, saying “If you are only trading your time for money, you will never be wealthy.” Self-employment–even if it is a side business run after work hours–is a much-needed step toward independence from a paycheck, and can help fund other investments like property or assets that can provide a passive stream of income.
Acquire and Manage Appreciating Assets
One of the most shocking numbers in the Insight Center’s report was the racial difference in wealth by household type. The household median wealth for single black women was $100, a figure calculated by removing vehicle assets. With cars included, black women’s median household wealth jumps to $5,000. However, the center notes that counting vehicles as an asset is misleading since cars depreciate in value, so they cannot be leveraged in the way that other assets (like cash reserves, investments and home equity) can be in times of need. Thus, it is imperative that black women funnel their money into assets that will appreciate, not consumer goods.
Ultimately, it will take a lot of effort to rectify the inequalities that have led to this catastrophic financial state. Timmons, when summarizing her overall financial philosophy, explains that financial planning can be “reactive by default, or pro-active by design.”
Black women have been at the whim of others for most of our history in this country. It is time to begin to seize control of our financial lives–and by doing so, to chart a new path for the future.
Latoya Peterson is the editor of Racialicious.