Sunday, June 27, 2010

The "Why Save? Spend!" Mentality

The other day while listening to one of the local Black radio stations in NYC I heard something that pissed me off so bad that I actually called into the radio station to give everybody involved a piece of my mind.  The topic of the day, whether to spend or save one's money, was played out vicariously through a young soon-to-be-married Black couple whom the radio host and crew had invited onto their morning show in order to determine who was right and who was wrong within the relationship.  A morning show equivalent of a Judge Judy, if you will.  The man made the case for saving their money in hopes of one day having something for their wedding and for their unborn children.  The female, however, made a rather impassioned case that, since they didn't have any children yet, she should be able to shop and spend as much money as she wants.  From where she sat, so long as she paid the minimum balance on her credit cards each month, it was of no consequence that they were maxed out or that she and her fiance were living from check to check.  She argued that once kids come into the equation, then they should worry about saving.  Until that day comes, however, she was going to stay in the fliest Gucci, Prada, and [insert label here] gear that she could get her hands on. At the conclusion of these two arguments, the radio show opened up the phone lines for comments as to who was right, and who was wrong.  I thought to myself, surely this is a no-brainer - especially in this economy where folks are losing jobs left and right.  Surely the deepest recession since the Great Depression, not to mention an unemployment rate in the Black Community nearly double that of the national average, has seized the attention of Black people everywhere and awakened us from our financially illiterate slumber like Laurence Fishburne screaming "Wake Up!" all over campus at the end of School Daze. What I heard next left my jaw open.

Caller after caller dialed in to express not only their full support of the female's "shop 'till you drop" argument, but some even went as far as to chastise the man for wanting to save their money.  It was unbelievable.  Even in the face of a national economic crisis, my fellow Brothers and Sisters still don't seem to get it. (it is notable to observe that the majority of the "spend now" supporters were female - I don't know if this was because of the solidarity of sisters wanting to stick together irrespective of the issue or whether women in general tend to shop more, but it was interesting all the same)

Consider this - your typical White family today has, on average, twenty (20) times the assets, or net worth, of your average Black family.  Even when families in the same income bracket are compared to each other, White families have more than twice the wealth of Black families.  Please note that the key word is "wealth," not "bank account" or "credit card limit."  We seem to only care about the latter when we should be focused more on the former.

So where does "wealth" come from, exactly?  Well, for the most part, wealth comes from our family.  Namely, our parents.  In fact, much of the wealth disparity between Blacks and Whites that I just mentioned up above can be attributed to how much one has inherited from their parents - such as real estate, stocks, trusts, etc. that are passed down from parent to child.   How important is it to kick something down to the next generation?  According to many economists, such as William G. Gale and John Karl Scholz, as much as 80% of the wealth that one accumulates over their entire lifetime comes from their family.  80% son!  So how wealthy can we expect our kids to be when we spend their "80%" on spinning rims, Prada bags, and Gucci sneakers?

Now don't get me wrong, I'm not trying to pull a Suze Orman sermon here.  It's ok to spend your money. You earned it!  Just make sure you have some tucked away first and then spend second.  If you have several month's rent/mortgage saved in an account that you don't touch, a respectable stock portfolio, a decent sized 401k, etc. then by all means, treat yourself to something nice every now and again.  The problem within the Black Community, however, is that we don't think about any of that stuff first. We spend now, ask questions later, and accept that living "check to check" is the way it's supposed to be.  In our book of the month last month, Tom Burrell cited that "Black collective buying power is almost $800 billion annually...[but] [b]ecause of our undisciplined, indiscriminate buying habits, African Americans are still America's poorest group."  If the radio show I heard the other day is any indication of our economic mentality in 2010, then folks we have a lot of work to do.

Where did these problems come from and why do they continue?
Why don't we "get it" when it comes to saving money for future generations?
What will it take to break these spending habits in the Black Community?
Do these spending problems exist only in the lower socioeconomic bracket of the Black Community, or do the middle and upper-class have these problems too?
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