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Building Black Wealth – 5 Lessons You Must Master To Achieve Financial Sovereignty

When it comes to building Black wealth, our community is in serious trouble. Here are some of the statistics according to Forbes:

  • According to the New York Times, for every $100 in white family wealth, Black families hold just $5.04.
  • The Economic Policy Institute found that more than one in four Black households have zero or negative net worth, compared to less than one in ten white families without wealth.
  • The Institute for Policy Studies recent report The Road to Zero Wealth: How the Racial Divide is Hollowing Out the America’s Middle Class (RZW) showed that between 1983 and 2013, the wealth of the median Black household declined 75 percent (from $6,800 to $1,700). At the same time, wealth for the median white household increased 14 percent from $102,000 to $116,800.

It is going to take more than laws, policies, and protests to fix the wealth gap and the racism that has led to our economic disenfranchisement.

In addition to the impact that white supremacy has had on building Black wealth, our lack of understanding has led to our downfall.

Specifically, we have fallen short because we don’t know the difference between money and fiat currency, we don’t know how to create wealth  (or where real wealth comes from), and while we are excellent consumers we are terrible at passing our money on to the next generation.

Building Black Wealth Then And Now

Before they were destroyed by colonialism and conquistadors, members of ancient African societies controlled the means of production. They were able to farm their land, mine, and raise livestock. They would then use their labor to turn their crops, precious metals, and livestock into fabric, tools, and food.

The right of every family to own a piece of land was protected by the crown. Land was divided up, distributed equally, and each member contributed a part of their surplus to the collective. They would then sell their extras to purchase items that they needed by either trading or by using currency that was controlled by the state.

Coins from Aksum that were used as an early form of Fiat

With their basic needs met and an abundance of surplus, your Ancestors were able to spend less time working and more time creating works of art out of the surplus.

The bronze sculptures of Benin, the elaborate woodworkings of the Congo, and the regalia of Kemet all came from societies that produced an abundance for the nation and the citizens.

And then…the Maafa began. The word Maafa is KiSwahili for ‘an age of great suffering’. The hordes of the North were unleashed on the indigenous people of the world. Iberian Conquistadors – having learned long distance navigation from the Moors – swept out across the globe with one purpose: to accumulate wealth. They would achieve this using physical, psychological, and even spiritual warfare.

When the missionaries came to Africa, they had the Bible and we had the land. They said “let us close our eyes and pray.” When we opened them, we had the Bible, and they had the land. – Desmond Tutu

In the process, the Black masses were cut off from their only two true sources of wealth –  the land and income created from their labor. All extra crop, livestock, and mined material that was produced by slaves in the Americas or subjects of Colonial rule in Africa was confiscated. And those slaves were almost never paid an income. In fact, they were given just enough to keep them alive and working, but never enough to save or fight back.

Once they gained control over Black lands and Black labor, white supremacists created a new scheme – rentier capitalism.

Rentier (property owner): someone whose income derives from rents, interest on investments, and the like. Rentier capitalism, economic practices of gaining profit by monopolizing access to property. Rentier state, a state which derives national revenues from the rent of indigenous resources.

Here is how rentier capitalism works: once a person gains control over assets – factories, housing, land, resources – the property owner makes an income by charging others to use that asset. And by blocking others from accessing those assets, the rentier holds a monopoly. They can now decide who can use their assets, and how much will be paid.

When slavery was abolished (but not really), plantation owners were forced to pay their newly ‘freed’ workers. Here is how this new system of ‘wage labor’ impacts Capitalists:

Workers are paid an income in the form of currency for their labor. That labor is ‘rented’ by the Capitalist to provide a service or to increase the value of raw materials. The difference between what the Capitalist pays her employees and what she sells her goods or services for becomes her income.

Thus, the less she can pay her employees and the more she can charge based on the willingness of the marketplace to buy, the more income she has. This is why slavery is first and foremost considered an economic weapon of white supremacy that we call fraud.

These two factors have combined to turn Capitalism into a tactic used against indigenous people by white supremacists. Specifically…

As you can see, your Ancestors used a form of Capitalism to build the most beautiful and powerful of African civilizations. How wealth is created, used, and distributed in any given society is determined by the values of that society. Thus, Capitalism, Socialism and other economic systems are not inherently good or bad. It is the values of a nation that determine how wealth is used for the well-being of every citizen – not just the 1%.

If we want to see a more equitable society, then our goal must be to create and acquire wealth and redistribute it amongst ourselves in ways that honor our values.

If we are serious about building Black wealth, here are 5 lessons that every member of the Black community must master.

1. Know the difference between money and fiat currency

All currency is money, but not all money is currency.

Money is any material that is valuable and can be traded for something that is needed. Currency, however, is something that is valuable because a government has said it is valuable. A fiat – or governmental order – is made declaring something can be used to make purchases or pay debts.

In other words, a government can declare a piece of paper be used in place of money.

There are two problems with using ‘fiat’ currency. First of all, governments usually decide how much a currency is worth. And in Capitalist systems, prices are always going up. This means that a dollar yesterday wont be able to buy the same amount of goods and services tomorrow.

Lets say the year is 1970 and you want to save money for your first born to buy their own home when they are 41 in the year 2011. The median price of a home sold in the United States in January 1970 is $23,600, so thats what you save up.

Fast forward to January 2011, and the median home price in the U.S. is now….$240,100. Thats a price increase of 917%. Your child doesn’t have enough to put a 10% down payment on a property, let alone buy it outright because you passed fiat currency on to them instead of real money.

The second problem with using fiat currency is that if too much or not enough currency is in the system – or people are not using the currency – it is no longer as valuable.

Understanding the difference between currency and money is critical for building Black wealth.
When the Zimbabwe fiat currency collapsed, it took this much of the devalued paper to buy a loaf of bread.

One of the reasons the American dollar is valuable as a currency is because other nations agree to use it alongside their own currencies. If these nations stopped doing so, dollars would become much less valuable.

Trade wars, government mismanagement, and inequality all threaten the value of currency.

Money is different. Money retains its value from generation after generation. A gold coin could buy you a nice suit of clothes in Mansa Musa’s kingdom, and a gold coin can buy you a nice suit today.*

*The current value of a 1 oz Gold American Eagle coin (which contains 31.104 grams of pure gold) is $1356 , while the value of one ounce of pure gold is currently around $1295.

The value of the Brazil Real, the American Dollar, and the Malawian Kwacha goes up and down. But real money holds its value.

The New Blueprint For Building Black Wealth: Convert your currency into real money as quickly as possible if you want to increase your wealth.

2. Learn how to convert income into wealth

Income and wealth are not even close to being the same thing. If you make $300,000 a year but spend $400,000 a year on clothes, shelter, and entertainment, are you wealthy? No – you are in trouble!

We all understand the importance of having enough income to pay bills and purchase the things we need. That is what we call living income. But what you do with the surplus income that you generate determines how much wealth you are able to accumulate.

Everyone talks about Black spending power. One of the definitions of the word ‘spend’ is to use or give out the whole of; exhaust.

The Black community does an excellent job of giving our income to others, but we are collectively unskilled when it comes to investing our income to turn it into wealth. 

The New Blueprint For Building Black Wealth: Stop shopping for cars, clothes, and shoes and start shopping for investments. 

Investing is the best way to turn income into real wealth. But here is another subject where our people fall short: understanding what makes a good investment.

If you know where real wealth comes from, then you know what makes a good investment. And that takes us to the next lesson…

3. Understand where real wealth comes from

An individual who is considered wealthy… is someone who has accumulated substantial wealth relative to others in their society or reference group. In economics, net worth refers to the value of assets owned minus the value of liabilities owed at a point in time. – Wikipedia

Real wealth comes from assets. An asset is money, anything that can be converted into money, or anything used to produce money (not currency – money).

A chart that gives us clues to building Black wealth

There are two types of assets as far as building Black wealth is concerned: physical assets and paper assets.

Physical assets include:

  • Fertile and productive Land
  • Building
  • Machinery
  • Equipment
  • Factories
  • Mines

Paper assets includes:

  • Patents
  • Trademarks
  • Stocks, bonds, mutual funds
  • Money others owe to you

We must collectively change what we imagine when we think about building Black wealth. Wealth is not BMWs, Louboutins, and Pateks. Wealth is having your money produce income that allows you to make more money.

The ultimate asset is, was, and likely always will be land. Land is the root of all wealth: no land means no food, no metals for machinery, and no timber for homes.

But all land is not created equally. Land can only be considered an asset if it is useful. That means your land must be connected to infrastructure and is located somewhere that others would want to live, and/or your land can grow food, sustain livestock, or is rich with resources that can be mined.

The New Blueprint For Building Black Wealth: Own fertile, desirable, and/or resource rich land.

The closer you are to the land the wealthier you become.

4. Produce more value than you consume

There are two ways to become wealthy: buy assets or take them by force.

Since we are not in the business of repeating the evils perpetuated against us, our community must learn to buy assets. But without income, you are not able to buy anything – let alone assets.

Thus, you must create or increase your streams of income. There are several ways to do this:

  • If you are an hourly employee, work more hours (thus, producing more) and use the surplus money that you make to buy assets. If you are on a salary, ask for a raise.
  • Start a side hustle that makes you a few extra hundred our thousand dollars a month and use the surplus money that you make to buy assets.
  • If you have a side hustle or business, increase the number of people you are serving. If you need to hire your first employee, do so. Cut hair by yourself and you receive a few hundred dollars a week. Hire barbers and open a multi-state barber shop that serves thousands, receive millions.

The greater the need met, the greater the wealth created.

The New Blueprint For Building Black Wealth: Move from being a buyer, consumer, and employee to being a seller, producer, and employer.

5. Invest in resources that transfer financial power from one generation to another

Have you ever heard the phrase ‘trust fund baby’? Its a phrase used to describe a young adult who is living off of money that is paid out to them from a fund their parents or past generations set up for them – usually an irrevocable trust.

Irrevocable trusts have long been an effective vehicle for passing on wealth to future generations because they are not taxed as part of one’s estate and the assets held in the trust are protected from creditors or divorce settlements (revocable trusts do not offer the same protections).

Trusts dont just pass on money – they pass on your values after you ascend by providing a high degree of specificity regarding how, when, and under what circumstances trust assets may be dispersed.

A trust fund is controlled by a person or group of people called trustees. Those trustees manage the fund for the beneficiaries – those who are getting money paid out from the trust on a regular basis. A beneficiary can be family members or non-profit organizations. Some even name public radio as a beneficiary.

For those members of our community who want to support a Black organization, HBCU, or a movement beyond their time on Earth, creating an Irrevocable trust and naming that organization as the beneficiary can keep that organization alive for centuries.

And when it comes to your family, look to Nipsey Hussle for inspiration.

Nipsey Hussle made sure his children were set for life by placing his assets in multiple trusts that would pay them for the rest of their lives. That is how we pass on the wealth we accumulate to the next generation.

The New Blueprint For Building Black Wealth: Buy insurance, maintain a will, and move your assets into an irrevocable trust. 

 

Mandatory Disclaimer: This article is for informational purposes only and is not intended as an offer or solicitation for the sale of any financial product or service. It is not designed or intended to provide financial, tax, legal, investment, accounting, or other professional advice since such advice always requires consideration of individual circumstances. If professional advice is needed, the services of a professional advisor should be sought.

If you remember nothing else, remember that this is the path to building Black wealth: Create a surplus of income, convert that income into wealth, and use that wealth to improve the quality of life for yourself, your family, and community. 

Once that’s done, then you can upgrade your car.

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Louis Gibson
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Louis Gibson

Can you please send me your printed copy to: Louis Gibson F75447, 1 Main Street, San Quentin, California 94974. This is my second request for printed versions of everything.