No One Man Should Have All That Power: Wealth Inequality in the US. Five Things You Should Focus on to Avoid the Wealth Trap

“No one man should have all that power
The clock’s ticking, I just count the hours
Stop tripping, I’m tripping off the power
Till then, f*** that, the world’s ours” — Kanye West (Power)

The C.R.E.A.M.

The world holds $153.2 trillion in wealth. Out of that massive sum, the US holds $63.5 trillion of it, accounting for 41.6 percent of global wealth. However, the United States arguably serves as the nation with the most income inequality in all the land. Facts are facts.

According to research, the top one percent accounts for the same amount of wealth as the bottom 90 percent. The gap only widens over time. Redistribution is a huge issue in America. Some pockets just seem to have a bit more gravitational pull. And that “pull” is compound interest. The gift that keeps on giving.

White households profit the most from compound interest. In history, whites have been given favor that has left other races behind in the race to wealth. Government efforts such as the GI Bill, which excluded black veterans from the same favorable home financing that white veterans received, show that life flat out isn’t fair. Similar to things like “redlining”. A head start is a head start.

The typical black household owns 6 percent of the wealth that a typical white household owns, according to a recent study by Demos. The typical Latino household isn’t doing much better, accounting for roughly 8 percent. Flat out, the gap is shocking. The median white household holds a net worth of $111,146 in 2011, while the median black and latino household held $7,113 and $8,348 respectively.

Many of us grew up thinking that blacks were excluded from wealth because of poor spending habits. However, according to research, that’s not true. Research suggests a couple themes that are contrary to popular belief.

Themes

1. Blacks don’t actually spend more than whites
2. Wealth is more institutional than anything

When a young black adult goes to college, instead of dipping into a 529 account, they take on debt. Many are taking debt to be paid on average less than their white counterparts for the exact same work. And that’s not even taking into consideration the extra decrease in earnings just for being a woman. Already a step behind. Research shows that black students take out substantially more debt.

Homeownership is also a driver of disparity. 73 percent of whites own a home, compared to 45 percent of blacks and 47 percent of Latinos. Homes are known to be one of the most tried and true sources of wealth. Renting just doesn’t cut it. When your lease ends, you own nothing more than the day that you opened the door for the first time.

Policy is an issue. Tech automation will be a big issue for some. Heck, there are loads of other issues that hold back certain people from having a seat at the table. Minorities have some catching up to do, but advances are attainable. Millennials should be focusing on a few things right now.

Focus Points

1. Education — becoming world class as their profession
2. Income — getting paid as much as possible for your professional skill (inside and outside of your day job)
3. Investments — as you save more money from increased income, put your money into assets that can do the dirty work in your sleep (stocks, bonds, real estate, businesses, etc.)
4. Networking — creating healthy networks that can provide easier access for your counterparts
5. Giving back — creating more opportunities and access to others

Kanye’s song “Power” is said to have referenced the story of the “Sword of Damocles”, where Damocles (a courtier) switched places with his king to get a taste of fortune. As the story describes, wealth won’t vanish problems. However, in a capitalistic society, it helps avoid certain problems. What type of problems would you like to have? The choice is yours.

Fin