Creating the Millionaire Mind

By Dennis Kimbro, Ph.D.

During his economics class at Atlanta University, now Clark Atlanta University, the scholar and educator, W. E. B. DuBois, was asked by an inquisitive student for the quickest and surest way to prosperity. "What I am about to share," Dr. DuBois replied, "you would do well to write on your heart and place in your purse. Many a ruined man dates his downfall from the day he began buying what he did not need. If you are in debt, part of you belongs to your creditors. To whom you give your money, you give your power." More than one half century later, DuBois' words still resonate. Money is, arguably, one of humanity's greatest tools. Regardless of what others may think, say or do, money is like any other resource or commodity – neither good nor bad, neither sinful or sacred. Unlike other resources, however, money evolves from the thought processes of those who possess it. Emanating from a flow of ideas, money is an instrument, a standard which can be used for both good and evil, by the rich and the notso-rich, by the haves as well as the haves not.

Unfortunately, so many black college students fail to realize the long-term impact of DuBois' words and, as a result, they are well on their way to financial ruin and, not to mention, relinquishing their power. As more than just a casual observer, specifically a business school professor who teaches at a HBCU (historically black college or university), after a quick stroll down the heart of our campus one would quickly surmise that Black students are doing well. Ironically, many students not only dress better than me but tool around campus in late model vehicles that put my SUV to shame. Spending money they don't possess on items they don't need. Many are walking billboards for an array of expensive designer labels. Closer to the norm than the exception, on any given day, coeds within the Atlanta University Center can routinely be found adorning high end brands such as Chanel and Burberry while sporting $400 Gucci, as well as the ever-sotasteful, Louis Vuitton handbags. Did I mention that $300 Coach pumps are a must? Georgio Armani shades and Tiffany bracelets can usually be found topping off any ensemble. And, if the weekend weather is cooperative, some students decide to "dress down." Take my word for it. There's nothing casual regarding the price of goods on "casual Friday." Both males and females have been known to break out the Polo, Tommy Hilfiger, Prada, and Versace. And their cars? Oh my, the cars. None other than an Infinity, Escalade, Hummer, Mercedes Benz or the ever so popular mid-size BMW or Lexus – replete with leather trim, sport wheels, and a state-of-the-art sound system, of course.

The Price of ‘Bling Bling'

But all that glitters is not gold. Like the clothes and accessories on their back, "bling-bling" comes with a price. If you were to examine the actual net worth – that is, the value of assets, or what a typical student owns, minus the value of his or her liabilities, what he or she owes – their bottom line would barely approach $5,000. Between annual student loan payments and monthly credit cards, upon graduation the average Black student who attends a public HBCU will carry more than $18,000 of debt (more than $30,000 for those attending a private institution), when he or she walks across the stage to receive his or her degree. According to the most recent data, during the past seven years, the average student loan burden has ballooned by 60 percent. Nearly two-thirds of all four-year college graduates (close to 90 percent for African Americans), carry some form of student loan.

On top of student loans, which can be subsidized by the Federal Government and demand no interest while students are pursuing their degree, more and more students bear credit card debt. According to Nellie Mae, a national provider of higher education loans, since December 2000, 78 percent of undergraduates own at least one credit card, up 11 percent since 1998. Among those who own credit cards, 32 percent carry four or more cards, an increase of 27 percent. And, if this were not enough, 95 percent of graduate students carry nearly $5,000 in credit card debt, while 6 percent of those students owe more than $15,000. And that does not include the balance of their car note regardless how resplendent.

Too many of us, like the ill-informed student mentioned above, fail to understand the importance of financial management. The issue of wealth building is more important to the Black community than ever. Of the 2.8 million African Americans who retired in the year 2000, that number will grow to 3.2 million by 2010. Many of these individuals lack the savings they'll need to sustain themselves in later years. Furthermore, the federal safety net has frayed. Consider how attacks on affirmative action have curtailed educational opportunities for some African Americans, especially those hoping to send their children to public institutions. As a result, what millions of educationally and economically disadvantaged Americans can manage to build will undoubtedly serve as a resource base to advance and bolster Black families in the challenging days ahead.

To nine-tenths of the world's population, the average Black American is wealthy. African Americans possess nearly everything the wealthy own – only in smaller amounts. They own homes, cars, clothing, televisions, savings accounts and debts – but in smaller amounts. Their food is just as tasty and as plentiful; their beds are just as comfortable, and their homes are nearly as cozy. They possess the exact amount of time and just as much freedom. With only a fraction of the world's population, Black Americans possess 10 percent of the world's total monetary income. Or, to draw a clearer picture, Black America's combined income is equal to or greater than several Western European countries and Canada as well.

There is a larger gap between the standard of living of most of the world's population and the average Black worker than between the standard enjoyed by America's average Black worker and the wealthiest member of our society. And, in case you've fallen for the myth that blacks are poor, consider this not so well known fact: Black Americans earned $679 billion annual income in 2004, and spend more than two-thirds of this figure on goods and services. This figure and per capita spend is equal to many first-tier countries in the western world. Black America's problem is not the lack of money; its problems stem from what it does with its money. Consider the following scenario:

If you were to approach 100 Black Americans at age 25 and ask "Would you like to be wealthy?" Blend in gender, as well as equal education, talent, skills, and abilities. Midway through their twenties, you'll notice a sparkle in their eyes, purpose in their manner, and an eagerness toward life. Why? Because these men and women truly wish to generate wealth. Now project these individuals 40 years into the future. Allow for time, growth, and development. At the close of four decades, you'll be astonished with the findings. Imagine 100 able-bodied men and women armed with the opportunity and latitude to financially stamp their mark in the field of their choice, within the most affluent nation on earth, the majority – 55 will rely on an array of government programs in order to survive their remaining years. Thirty-five, unfortunately, will be dead. Nine will reside within Black America's upper ten percentile, those wage earners who boast incomes of $55,000 per year. And, one – ONLY ONE – will have gained entry into one of the most elite groups in the nation–those African Americans who feature household incomes of $200,000 per year or more. In short, Black America's most affluent. Think for a moment, of those whom you pass on the street, within any city in the nation–large or small; rich or poor – only one out-of- 100 individuals will reach his or her financial goals. Only 1 Percent!

And what of the other 99 percent? Unfortunately, they just drift along, hoping and wishing for the best. These are educated, skilled men and women who've allowed the circumstantial winds of personal finance to blow them in any direction. Why, in this land of plenty, is there such a disheartening ending to so many lives? What has happened to the sparkle in their eyes and their eagerness toward life? What became of their hopes, their dreams, and their plans? So, as a people, Black America is rich. But how much do you want? How much money do you need to live the way you want to live? To accomplish the goals you've set for yourself? It's never too early to start.

In his book "Wealth and Power in America," Gabriel Kolko, an economic historian, presented considerable evidence that the reins of power are always held by the controllers of wealth. If this is true, not only does Black America hold the reins to its destiny, but it is not poor! According to the Joint Center for Political Studies, a Black-led Washington, D.C.-based think tank, Black Americans represent more than
$600 billion in household income – equal to the ninth largest country in the world. Black Americans are wealthier and better educated than 95 percent of whites, and all other people of color worldwide. And because we represent this vast source of economic muscle, there is both good and bad news.

First, the good news.

Research indicates that African Americans constitute 13 percent of the total U.S. population and are responsible for the following consumption patterns: Fifty percent of movie theater tickets; 36 percent of hair conditioners; 32 percent of malt liquors; 26 percent of Cadillac automobiles; 25-35 percent of barbecue sauce, baby formula, detergent, potato chips, salt, pasta, toothpaste, and household cleaners; 22 percent of rice sold in America; 20 percent of Scotch whiskey; 20 percent of portable television sets; 17 percent of coin operated washing machines (laundromats); 16 percent of orange juice; and 15 percent of tobacco products. Black Americans spend more than $6 billion per year on soft drinks and nearly $600 million a year on McDonald's fast foods.

Blacks spend 23 percent more on their shoes than the population at large; and Black females consume 26 percent more perfume than any other ethnic group of females. Finally, Black males age 13 to 24, who comprise less than 3 percent of U.S. population, purchase 10 percent of the $15 billion athletic shoe market, and more than 20 percent (one of every five pairs) of Nike shoes!

And now, the bad news.

$ In 2002, according to Census Bureau data, the median net worth of the average Black household was less than $6,000 – barely 7 percent of the $88,651 median wealth of their white counterpart. White Americans enjoy a 14-to-1 wealth advantage over Black Americans, a competitive springboard which buffers and may soften any economic downturns in the economy.

$ During this time frame, though, 42 percent of all U.S. households boasted a net worth of more than $100,000, only 18 percent of Black Americans held this much wealth. To magnify this point, the Consumer Federation of America calculated that 25 percent of U.S. households were "wealth poor"–holding net assets less than $10,000. This statistic is a far cry from the 45 percent of Black households who fall into this category.

$ Between 1999 and 2001, the net worth of Black households fell by 27 percent; one-third of all Black households reported either zero or negative net worth during this period. Conversely, the net worth of White households increased by 2 percent.

$ Twenty-four percent of African Americans spend more than their income compared to only 14 percent of all Americans; 32 percent of Black Americans don't save at all. Less than one-fourth of all Americans fail to do so.

$ Nearly one third of White households own 401K or thrift savings accounts, compared to less than 20 percent of African Americans. Moreover, White households are almost as likely to own stocks and mutual funds (31.9 percent) as IRA or Keough accounts (27.5 percent). Ten percent or less of African Americans own these assets, and their median value – $8,000 – is far below that of Whites ($20,000).

$ Within the context of wealth creation, home ownership and equity (the appraised value of the home minus the mortgage owed) proves to be the most valuable and widely held asset. Against this backdrop, nearly three-quarters (73 percent) of White households held home equity in 2000, boasting a median value of $64,000. In contrast, less than one-half of African Americans are home owners. To compound matters, Whites are three times more likely to own rental property than Black Americans, as well as own and operate a business – 12 percent compared to 3.4 percent. Black Americans spend more than $750 billion annually yet their businesses receive less than one-half of one percent of all sales receipts generated in the U.S.

$ And, if the future weren't bleak enough, according to the 2004 census, 34 percent of African American children–as compared to only eleven percent of whites–are raised in poverty. So what's the bottom line? Get a grip on your finances and here's a start.

Develop The Millionaire Mind

1. Mind your business and face up to your financial responsibility.

Develop a budget and stick to it. Track your expenses and begin to eliminate all unnecessary items such as eating out and Air Force One's and Timberland's in every
color and style. Learn to differentiate between a "want" and a "need." Just because you want something doesn't mean you should buy it.

2. Undergo plastic surgery

Begin to eliminate debt and rebuild your credit. Either consolidate your debt on your lowest-interest credit card, or the card with the lowest balance. And college students, here's a potentially scary thought: A growing percentage of corporate recruiters are requiring new hires to undergo a credit check. During the course of research on my fifth book, "Have vs Have Not: What Black Millionaires Know that Others Do Not," I discovered that the average Black millionaire – outside of a mortgage – is less than $3,500 in debt–period!

3. Save

Each of us would be wise to adhere to the words of wisdom shared with me more than twenty years ago by W. Clement Stone, one of the world's wealthiest. Stone stated, "If you can't save 10 percent of your earnings, the seeds of greatness aren't in you." If necessary, ease into a savings habit by tucking away a dollar or two. Each time your stash reaches $50, place it into a savings account or a moneymarket fund. But don't procrastinate, start now and save.

4. Become a good steward.

Trying to keep up with the Joneses is never a good idea. This habit often leads to increased debt and untold stress. Don't lose sight of DuBois' advice to his young charge - "Take control of your financial destiny." In short, begin to live by your own definition of wealth, not your neighbor's nor your classmate. Identify what you value most: Looking prosperous or being financially secure? If you fall short of this most simple task, your legacy will forever be analogous to the fool and his money.

Dennis Kimbro, Ph.D., is a faculty member at the Clark Atlanta University School of Business Administration. He is currently writing his fifth book, "Have vs Have Not: What Black Millionaires Know that Others Do Not."