We know by now the myriad ways the country’s most recent recession has negatively affected the Black community. African-Americans in the public sector have lost their jobs at far higher rates than whites, and those jobs aren’t coming back as quickly as private-sector work, if ever. Thousands and thousands of homeowners were stuck — and many still are — struggling to make mortgage payments they couldn’t afford, with many losing houses they’d worked for years to try and obtain.
Whether it be job losses, home foreclosures, or gutted retirement plans, what’s tying together all the disparate ways African-Americans have been disproportionately hit by the recession is one thing: wealth. That is, the total amount of money Black people have to their names has been gradually but surely taken away from them. Even before the start of the recession, Black Americans were in a bad spot when it came to their wealth versus, say, white people’s wealth. Today, things are even worse than they were before.
Between 2005 and 2010, Asians, Blacks and Latinos saw their household net worths fall by nearly 60 percent, according to new statistics from the U.S. Census Bureau. White households only saw their wealth drop by about 23 percent. The result of such a huge gap between the losses is the biggest gulf between white wealth and minority wealth we’ve seen in years: Whites, with more than $110,000 in median household net worth, now command 15 times the wealth of Latinos ($7,424), and 22 times the wealth of African-Americans ($4,955). Before the recession, whites had about eight times the wealth of Latinos and 12 times the wealth of Blacks, meaning the disparity has nearly doubled.
Tami Luhby, at CNN Money, explains how the divide got so huge:
The main reason blacks and Hispanics did not fare as well during the economic downturn is that home equity makes up more of their wealth than it does for whites. The housing bubble that preceded the collapse pushed up homeownership rates among blacks and Hispanics, who relied more heavily on high-cost subprime loans to finance their purchases. As a result, the implosion of the real estate market had a more devastating impact on black and Hispanic communities.
Though things seem grim, all is not lost. Part of the reason African-Americans seem to struggle so much with their finances is that many of them are ignorant of the financial tools that can help a person keep wealth. Resources to learn about those tools are available pretty prevalently — and for cheap — around the Internet. Blacks who are getting older should also try to do everything in their power to not dip into their retirement savings to pay for daily expenses, which can really hurt them in the long term. Also, if you have a bit of money, it can help to go see a financial planner who, occasionally for a nominal sum, can help you keep the money you’ve already earned.
One thing everyone who deals with money is going to tell you about how to maintain wealth is simple: Rarely if ever should you spend money on things you don’t need. If you’re able to do that, you’ll be able to save money and then invest it in the things that help you earn more money.
Of course, the trouble is that nobody of any race likes being told they should save money.
The opinions expressed here do not necessarily reflect those of BET Networks.
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(Photo: TIM SHAFFER/Landov)