Raise your hand if your familia ever told you that the best way to get rich was to “play the lottery” or find a job “que te paga bien (that pays well)”? To build wealth as a woman of color, it’s not enough to just focus on making money. It’s about building your NET WORTH. Let’s discuss what that means, and then talk about how we can start to build wealth as women of color.
What is Net Worth?
In a nutshell, your net worth is everything you own of significance (your assets) minus what you owe in debts (your liabilities). When your assets are greater than your liabilities, you have a positive net worth. If your liabilities outweigh your assets, you have a negative net worth.
What are Assets and Liabilities?
Examples of financial assets are land and permanent structures, such as homes, attached to the property, cash and investments. Liabilities are things like car loans, personal loans, credit card debt or student loans.
How Can I Start To Build Wealth As A Woman Of Color?
In order to build wealth, you have to reduce or eliminate your liabilities, so that you can increase your net worth. But if we only think about income as the main contributor of wealth, chicas, we are MISSING OUT on the systems that help the rich stay rich. We have to be aware of all the different ways people stay trying to keep us down. Remember, we want to DISRUPT! We cannot disrupt if we do not know what exactly we are trying to force our way into, ya feel me?!
Financial independence gives us the power to decide our futures and liberate our conception of what’s possible. – Stacy Abrams
Here Are 6 Ways to Build Wealth As A Woman Of Color
Income is what you earn, through your 9-5 job, business(es) and side hustles. To start building wealth, you have to strive to earn as much money as possible. You can do this by advocating for a raise at work, working overtime, building a side hustle, or getting a part time gig.
As woman of color, we are underpaid. Black women earn 63 cents to the dollar of a white man, while Latina women earn 55 cents. For this reason, let’s first focus on the job we already have. Chances are, they’re probably underpaying you! It’s time we know our worth and negotiate our salary.
- Taxable Investment Accounts
Taxable Investment Accounts are brokerage accounts where you buy and/or sell investment assets like stocks and bonds to generate passive income. Unlike retirement accounts, these accounts do not have tax benefits like tax-deferred or tax-free growth. But long term capital gains (earned by holding stocks for 1 year or more) are taxed at a lower rate than ordinary income tax. These accounts aren’t just for the Wolves of Wall Street, you can do this too. These accounts can supplement retirement accounts, which we’ll talk about next.
- Retirement Accounts
Retirement accounts are tax advantaged investment accounts such as a 401(K), 403(b), TSP or IRA (Individual Retirement Account). These are the accounts you can’t really touch until a certain age (usually age 59 1/2) without a penalty, in exchange for tax benefits. Just like taxable accounts, these accounts can be used to generate passive income through investing in the stock market.
- Real Estate
The value of any real estate property (both structures and land) is included in your net-worth! While you do have to factor in your mortgage as a liability, once your real estate is fully paid off, it’s estimated market value can be a big boost to your total net worth. Unlike cash and investments, real estate is considered an illiquid asset, because it has to be sold before you can cash in on it.
Building wealth through real estate can be daunting. The hesitation and perhaps fear is well-founded. Housing discrimination towards people of color is real. But we are poderosas, and when we want something, we get it. If this is something you want to learn more about, start with a few of our episode on the podcast: Episode 34 with the Make It Rain Podcast, Episode 44 with Loida Velasquez, Episode 53 with the REI Brothers, and Episode 57 with One Savvy Dollar.
Inheritances are assets that passed down to a beneficiary after the original owner passes away. An inheritance can be in the form of stocks & cash, or something more tangible like a house, land, car, or jewelry. In order to ensure that an inheritance goes to the intended recipient, it’s important for the asset owner to designate a beneficiary through the asset manager (investment accounts usually allow you to designate this when you set up your account. If that’s not an option, a living revocable trust or will can be used to assign beneficiaries.
Now, we know families of color typically don’t receive an inheritance. But as first generation wealth builders, it is our responsibility to know of all the different paths we can take to build this wealth. You’re the generation looking to pass something on.
- Collectibles & Antiques
Collectibles, like art, antiques and other valuables are an often overlooked asset category (cuz its bougie AF)! While you may think of the rich and famous as the only people who can afford collectibles, you may have some high value items in your family and not even know it. These can take many forms beyond collectibles, such as photography, costumes, sculptures, & archaeological items.
How many of these contribute to YOUR wealth and net worth?
Which has been the hardest to force your way into? Comment below!