E78: Why Black Entrepreneurs Especially Need to Build Wealth

00:00:30 Welcome back to another episode of transcend the podcast. I am happy that you are here because today I’m going to be talking about the importance of building black wealth in particular. Now, that’s not to say that other people of color and first generation immigrants don’t need to build wealth, because it’s true they do. But I really want to break down for you the importance of building wealth in the black community in particular, because there is a specific and unique history that came before us to help us get to where we are today. And it’s important that we understand that.

00:01:02 So we understand really, truly, deeply why it’s important to build wealth in the black community. Now, one of the questions I get all the time and I hear I think it’s asked with some genuineness, but also asked with a lot of judgment is, well, if I just came or my family just came to this country and we can make a financial and economic change. How come black people are still at the bottom or towards the bottom in terms of economic status in this country? And I get it. It’s a question that people ask all the time.

00:01:30 But people ask it because most of us don’t actually understand the history of what has happened to keep black folks in the economic position that we’re in today. So let me break it down for you. In 1619, the United States started slavery. And then for about a little over 200 years, about 250 years, slavery continued in the United States. And literally, this country was built on the backs and by the hands of black people who had been transported from Africa.

00:01:59 Now, everybody gets that, and then they go, well, okay, but that was so long ago. How come we’re not just over it? First of all, it wasn’t that long ago. It was only about 400 years ago, right? So not that long ago.

00:02:11 But also, it wasn’t just slavery. It was all of the laws that came after to continue to hold black folks back economically. So slavery ended in about 1865, and black folks had all of the skill because, again, built this country. And for between 1865 to about 1877 was this era called the Reconstruction era. And that was when black people began to open up their own businesses, build their own homes, they acquired rights, land, right?

00:02:45 Had the skills and were able to make money because they had the talent to open up their own businesses. And what happened once some black folks began to make some money is that they started running for political office, started winning seats in the House and in the Senate. And that threatened a lot of white folks, because historically, for the past 200 years, that black folks had been second class citizens. And now just in a period of about twelve years, black people were making huge economic gains and infiltrating the political system to really make some changes that did not sit well with white folks. And then they enacted the Jim Crow laws.

00:03:24 Those are the segregation laws that you probably have heard a lot about. Those laws were created in direct response to black people’s rapid growth economically and politically post slavery. What are Jim Crow laws? Jim Crow laws are segregation laws that said white people over here and specifically black people over there, and people of color who came to the country later weren’t quite in the white category, but weren’t quite in the black category either, somewhere in between. But these laws were specifically made to hold black people back, descendants of African slaves back.

00:04:00 Now, what did that look like? And that looked like banks refusing to insure black borrowers for home loans and for business loans. That looked like schools being separated for white folks. And they said colored folks, right? Which included the black folks that were unequally funded, that included preventing black folks and white folks from living in the same neighborhood.

00:04:24 And in order to maintain the white economic status, the homes in the black communities were devalued the states and the governments would not put money into the roads, into the parks, into the infrastructure in black communities. And this was not that long ago, because segregation only ended in 1965. Now, I want to bring this home for you. I’m 39 years old. My mom, I won’t tell her age, but my mom, my mother was the first African American woman to enroll and graduate in the University of Mississippi.

00:04:56 My mom was the first African American to enroll and graduate at the University of Mississippi, and she enrolled in 1965. That’s my mother. That’s one generation back. For most of you all that are listening, that’s not that long ago. Another thing that my mom told me anecdotally because we were looking at baseball and how in the even 70s there were a number of African American baseball players.

00:05:23 And I was asking what happened? How come black folks aren’t as highly represented anymore in baseball? And she said that when she was growing up, the parks used to be funded. And then once desegregation happened, once Jim Crow was lifted, white people did not want to share the parks with black people and they just took them out of the black neighborhoods. Now, I know that doesn’t have direct impact economically, but if you can start to see what the government has done to specifically withhold resources from black people and to hold black people back from economic advancement, then you can understand why it’s so important for black people to build wealth in this country in particular.

00:06:08 So what have been the effects of segregation? And not just segregation, but the laws that in particular held black people back economically? That means that our schools have been underfunded. How do our schools get underfunded in this country? Our local taxes go to fund schools.

00:06:26 Well, let’s back up. Remember that I said that black people could not get home loans because the federal government would not insure the mortgage that black people would take out. So local banks refused to give mortgages to black borrowers because the government wouldn’t back that loan the same way that it would back a white borrower’s loan. That means that either they couldn’t get money or they couldn’t get enough money to purchase a house. Well, your property taxes from your home go to fund schools.

00:06:55 And on top of that, black people were told what part that they could live in and what part they couldn’t live in. So now you have a mass amount of people living in an area where people don’t own their homes because they can’t get the land to buy the property. And then you have property taxes that are low because the government and people have said, well, this area is not valuable because black people live here. So the property taxes are lower, and so now the funding for the schools are lower. You all know that education is extremely important.

00:07:26 Yet if you don’t have good books to read, if you don’t have enough school supplies, it makes it really hard to learn. That also helped to create the disparities in education that we see today. What does that lead to? That leads to a difference in the pay gap. There’s a huge pay gap between men and women.

00:07:41 There’s a huge pay gap between black and white and also Latino and Asian as well. It’s even greater if you are a black woman or a Latino woman or an Asian woman. So you can see how the government, with one or two policies in the beginning to prevent people, black people specifically, from buying a home, has had the trickle down effect that has helped to lead to where we are now in terms of the economic and wealth disparity between black folks and white folks. I was doing some research for a presentation a couple of weeks ago. I’ve done this presentation repeatedly over the last four or five years, and every year I look for updated information.

00:08:20 And tragically, the data is still the same, that white families have ten times more wealth than black families and seven times more wealth than Latino families. And that trend has stayed consistent over time, over a large number of 2030, 40, 50, 60 years. It has not changed and the gap has not decreased. So we are still seeing the effects of not having wealth within the black community, within the brown community, within the asian community. So it is really, really important that we as black folks learn how to use our businesses to build wealth.

00:08:59 Now, you may be asking me, why is it necessary? That data sounds intriguing. It’s interesting. But look, I’m okay, well, here’s a couple of the reasons why it’s really important for us as our communities to build wealth. One, a lot of us end up taking care of our parents because our parents didn’t have the opportunity to put enough money into retirement.

00:09:22 So in our communities, oftentimes the wealth passes back up. Any extra money you have might be going to your parents or your grandparents to help take care of them instead of putting it away to be able to take care of yourself for your own retirement or to take care of your children to set them up so they don’t have to worry about saving up $50,000. Put that out there because housing is so expensive nowadays for a house. In addition, the more money you have, the more money you can donate to political campaigns. And you may be like me and not super interested in politics, although my interest in politics has increased a lot over the last few years.

00:09:57 But the local things that we complain about, the potholes in the street, the parks not being kept up enough, and local politics that affect us on a daily basis, politicians need money to run a campaign. And if we can donate to the political campaigns that we want to support, then we have a better chance, a much better chance of electing someone into local office than even on a national scale, the federal scale, that’s going to have our best interests in mind. But when our communities don’t have enough money to support the candidates who would serve us best, our candidates have a really, really hard time getting into office to even make the changes that they want to make for our community. So creating wealth, having extra money, will allow us to support ourselves and to choose people who are going to represent us well in this political sphere. In addition to funding your children’s education, whether it’s public school or private school, you will also just have enough money to take a vacation, to create some cushions.

00:11:00 We are not living paycheck to paycheck and to put some away so that, you know, if a rainy day happens that you’ve got it and you don’t have to stress about it. Having wealth in our communities will absolutely add to the quality of life because it eliminates the stressor of money. Now, don’t get me wrong, building wealth won’t take away all of your problems, but there is absolutely no doubt that having money eliminates a number of problems. And I want us as a community to go from surviving to thriving. I want us all to experience that black joy.

00:11:34 That joy where we get to laugh and sing and have a good time and be around our friends and family, not thinking about the struggles of life, but thinking about the things that love us and bring us joy so we can really get the most out of life, the things that we deserve. So now I’ve told you historically why building black wealth has been near impossible in the United States. And I’ve told you the legacy that segregation laws and specific laws that were created to target black folks has had that we can actually see today. So now I’m going to tell you about how do you start to bridge that gap from where we have been to where we are now, to where we’re going in the future. I’m going to tell you now how you can start to build wealth using your business.

00:12:24 Just by virtue of you being a business owner, you are in a unique position to use your business as an asset. And instead of looking at your business as a job like you’re working it like a job, I want you to really think about all the benefits that your business can give you. Again, using it as an asset that gets put into your wealth portfolio. And even if this is the first thing in your wealth portfolio, you’re doing great so far. And I’m going to continue to tell you how you can keep building to get to where you want to go.

00:12:55 Now, I’m not putting any pressure on you to be a millionaire, but I do want you to see the opportunity that you have in your business. I want you to see it as a tool to help you get to where you’re trying to go. You can absolutely set yourself up financially so that nobody has to take care of you. That’s step one. And after that, if you can set yourself up to be able to take care of your children so that they don’t have to enter the rat race right away and can make some good decisions to help themselves build wealth, then you’re doing great.

00:13:25 But I’m going to tell you how to do it. It might seem a little far fetched for you right now, thinking about this grand scale of building wealth, but I promise you, I’m going to break it down for you step by step. Just stick with me and I’ll make sure that you feel confident and secure and know what your next steps are. So how do we get to build wealth? The first step is really understanding how much money you need to live the lifestyle that you desire.

00:13:48 Think about all of the things that you are doing right now in life and what you want in the next few years. Then you have to put some numbers to it. A lot of people talk about having a million dollars, $2 million. But most of us, I hope, aren’t going to be spending a million dollars in a year on stuff unless you’re buying a house or something. Like that.

00:14:06 So take a look at what it actually requires financially for you to live the life that you want to live. That’s step one. Step two is understanding your obligations. Who do you need to take care of? How much money do you want to put in your retirement account?

00:14:22 Are you planning on buying a house? How much is that going to cost and what is the down payment? Because you don’t have to pay for the whole house at one time, but you do need to put down a down payment in order to get into that house. Are you making any other big purchase, just maybe a car in the next few years? You want to take a big trip?

00:14:38 Add those to the list of your expenses as well so you can get a whole picture of what it takes to live your lifestyle or your desired lifestyle and what your obligations are that are coming up next. And it’s important to think about what all of your obligations are so that you can build a vision for your wealth so that fits you in what you want to do and not just follow somebody else’s vision. Now, this may seem a little bit strange. You may feel like, I don’t even know where to start. But this is exactly why I created a course called The Money Making Roadmap, which specifically helps you figure out what your vision is.

00:15:14 What is it that you want to do, how do you want to be, how do you want to feel, what do you want to experience? And then we go through and actually put numbers to that. I’ve created some Google sheets Excel spreadsheets that are in the Google sheets section that will allow you to put down all of the expenses, all of the desires, and it will run some calculations so you know exactly what you need per month to live off of, which filters in or factors in the obligations that you have as well, that you put on. Now, once you’ve figured out what your numbers are, there’s going to be some mindset stuff that might come up, whether it’s I’ll tell you from my personal experience what I felt when I have created my vision and my dreams. Sometimes I feel like I’m not deserving.

00:15:59 Sometimes I feel like I haven’t worked hard enough. Sometimes I feel like I’m too lucky and I haven’t done anything to be lucky. Sometimes I get overwhelmed. Sometimes I get really excited. Sometimes I’m motivated to get out there and do a little bit more.

00:16:12 But all of that is mindset stuff. All of that are the thoughts that we’re thinking, and in particular in communities of color. We’re not just running businesses, but we’re also carrying the weight and the trauma and the expectation that comes with our experience of being a person of color in the United States, of being a child of somebody who had to fight harder than we could even imagine having to fight. Sometimes just to get food, sometimes to cross a border. Sometimes to get equal access to education.

00:16:44 Whatever it is, there are some thoughts that will come up that may make it feel like you’re not deserving of your vision or of your goal, or it may make you feel like your vision or your goal is too far fetched, too far ahead of you. But I have created some worksheets and some meditations and some trainings to help you get control of the thoughts in your mind. What is the greatest determining factor of whether or not you will reach your goals is what you think about your goals, what you tell yourself on a daily basis about your goals and your belief in yourself to be able to figure it out. So I’ve included all of that in the money making roadmap course. And if you are ready to get started on creating your vision, putting some numbers to your vision, and working on your mindset to get to where you need to go, please follow the link in the show notes and download the course today.

00:17:36 The fourth step is to set your business up as an asset. I want you to get your business out of survival mode. Stop shoestring it together. And this doesn’t mean that you’re at the very beginning of business. You could be seven or eight years into business, but you never took the time to go back and set up a proper and strong foundation.

00:17:55 So what does that mean? I need you to have legal protection. You should be in an LLC or a corporation. I want you to have a bookkeeper that you work with on a regular basis so that you can know and understand your numbers. I can’t tell you how many businesses I’ve worked with that were making less money than they thought because they weren’t doing the bookkeeping, and how many businesses on the flip side, were making more money than they thought because they weren’t staying up to date on the bookkeeping.

00:18:23 Staying up to date on the bookkeeping also helps you to understand how much your business is worth. Have you ever thought about selling your business one day? That is a way that you can use your business as an asset. And even if you don’t decide that you want to sell it and you don’t have to make that decision now, it could be something later on down the road for retirement. But you can also leverage your business to get access to money.

00:18:46 But you can only do that if your business is set up properly and you have the right foundation from legal to accounting to business advising to help you make those decisions and get the most out of your business as an asset. And also, you don’t have to lose your mind about taxes. Tax season just passed in the United States. By the time this come out, taxes will have already been filed in every single year. Myself, I’m like, Oof, I should have paid more on quarterly taxes.

00:19:16 And a number of people that I work with have either not paid quarterly taxes or weren’t prepared for the total tax bill at the end. But when you get your business out of survival mode and stay on top of the financial piece of it, you will no longer be surprised by the taxes that come to you. There are also a number of tax write offs and tax breaks that you get for having a business and running it properly. But if you’re not setting yourself up to run properly with a strong foundation, you’re going to miss all the opportunity that is there for you. Your business will no longer be an asset for you, but instead will become a liability.

00:19:53 So please, as you’re thinking about your vision and your dream about the money that you want to have, I want you to really take your business seriously. You’re excellent at your craft, and now you need to be really good as a business owner as well and find the support that you need so you can use your business as a wealth building tool. And the fifth thing that I need you to do on a basic level is to set up a retirement account through your business. Whether that’s a regular IRA or a Sep IRA or a 401, you, again, as the business owner, have a unique opportunity to set up a retirement account for your business that benefits you the most. Now, if you have a 401K, just like if you went to go work for somebody else, you can match.

00:20:40 Your employer can match. And if you are on payroll of your business, you can contribute as an employee and then match as an employer. These are some of the basic things that you can do with a business. Even if you’re not yet making over $100,000, you can do that right away to set yourself up for the future so you can start to build wealth. I am by no means a financial planner, but I am a dreamer.

00:21:04 And I know how to put steps, action steps, and a plan to that dream. And I want the same thing for you. I want us as black people, as brown people, as first generation people, to set ourselves up using our businesses to build wealth. Now, this started years ago because one of my clients asked me, he said, Asha, you helped me form my LLC, but how do I keep my money like rich white folks do? And this was probably six or seven years ago, and I had no idea how to answer that question.

00:21:34 I knew how to set up the legal structure. I knew how to create bylaws and an operating agreement. I knew how to write contracts and hire employees. But I didn’t understand how to use a business as an asset. And that is what sparked me on this trail of research, of reading, of talking to other business owners, and on learning how rich white folks get to keep wealth in their family.

00:21:56 And one of the biggest tools that they use is real estate. And the second one is business ownership. Because you can pass that entity down or that money down from generation to generation, you can do the same thing. I know this information isn’t readily accessible in our communities, but I promise you, I will bring you as much of it as I can. So let’s go back to the basics.

00:22:18 Let’s get our businesses set up to run in a way that it can build wealth for us. And if you’re feeling overwhelmed, inspired, but maybe overwhelmed not understanding where to start again, I’ve created the wealth building roadmap for you to get started. It all starts with your vision. What is that dream life that you want to live? What is it going to cost to get there?

00:22:41 Let’s put those numbers on a spreadsheet and then take a look at your business so you can understand how much you need to sell, what contracts you need to get in order to fund your lifestyle and to fund your dreams. Set yourself up to be self sufficient. Set yourself up to be able to support your kids. Set yourself up and your family up for generational wealth. You know that phrase, I am my ancestors wildest dreams?

00:23:10 You absolutely are. And as a business owner, you have the unique opportunity to take the dreams and run with them. Go to the link in my bio to download the course. I will see you here next week. Thank you so much for listening.

00:23:26 If you want to hear more on how you can align your business and your life with me as a coach, head to the show notes and sign up for the email list. See you next week.