Financial Strategies for Latinas to Build Generational Wealth
Story written by Kara Perez
Kara Perez, founder of Bravely, helps women take control of their financial lives
Money is power, but neither come easily to people who don’t fit into certain categories. Women earn less money than men. Black people earn less money than white people. And Latinx women? They earn the least out of anyone.
In 2015, a white family had 16x the wealth of a Black family. Latinx women earn 54% of what white men earn. (White men are the barometer against which all other peoples are measured. They are normal- we are other.) And you know what? That is not ok.
The system we’re currently all in is screwing some of us over. While I personally yearn for the end of capitalism, we need to find ways to work within the system until that day comes. Growing personal wealth in communities of color is a way to fight back against the system that holds us down.
The Generational Wealth Gap
Creating personal and community wealth means we create power. Part of the reason there is such a huge racial wage gap is because since the formation of the US, people of color have been denied access to institutions that help create and maintain personal wealth.
Let’s take a basic need: housing. We all gotta live somewhere right? There’s a huge economic difference in renting or owning a home. Home owners are not subjected to rent hikes, and as they pay off the mortgage, the chance that their home will ever be taken from them diminishes. The house itself can be sold to generate more cash if a family needs. Renters don’t have the same security- if the landlord sells a building, or increases the rent, there’s little that a renter can do but go with the decision.
People of color were and are still routinely denied mortgages, making it hard to purchase a home. The statistics show that only 41.3% of Black families and 47% of Hispanic families own their homes, compared to 71. 9% of white families.
Houses are usually the single biggest asset a family ever has, and a house can be passed down from generation to generation.
How does home ownership translate into generational wealth? If your parents will you their house when they pass, you don’t have to set aside money to dave for a house. That frees up your money to be invested, which in turn grows your personal wealth. Someone who has to save for a home on their own misses the opportunity to invest that cash in the stock market.
The Game is Rigged; But You Can Access Cheat Codes
So the game is rigged in favor of white families. Still, we’re all living in this world, and it’s time (honestly, it’s past time), for people of color to stand in our own financial power. Here are three financial cheat codes to help you get your money right and to start to grow wealth.
Avoid high interest debt- Debt is a useful tool sometimes, when it comes with low interest. Mortgages are generally low interest debt.
But high interest debt, like credit cards have, with drown you. It is a life ruiner. With interest rates that run into 30%, you lose huge chunks of money to interest payments when you carry a monthly credit card debt.
Avoid this debt by limiting the number of credit cards you open (one is seriously just fine), by keeping your credit score high to qualify for good interest rates, and by paying off your credit card bill in full each month.
Invest in long term assets- That super cute dress that costs $200 is not an asset. I’m glad you look good in it, but it’s got no return. If you shell out $200, it should be for something that is going to bring back wealth to you in some way.
The single best long term asset out there is the stock market. Investing over the course of years will bring you the highest rate of return, and it’s the only thing that beats inflation. Leaving money under your mattress, or spending it on cars and clothes, will not grow your wealth. Invest in things that will make you money, like learning a new skill to get a raise at work, or in the stock market.
Abstain where needed- I’m not asking you to move into a tiny home and throw out all your clothes. The extreme minimalist movement is it’s own weird thing, and not for everyone. However, abstaining in certain areas of your life will help you save more money.
You can abstain in so many different ways. Try giving up eating out for one week, and pocketing the money you would have spent instead. Carpool to work if you can, to save on gas. You can put yourself on a shopping ban for a month, and wear only things you already own. Mow your own lawn this month and save on the yard work fee.
You have free license to pull back in areas that make the most sense to you. Just because you’ve done something for awhile doesn’t mean you can’t switch at any time. Changing our routines to better help our wallets is something everyone has the power to do.
Creating personal wealth benefits us and benefits our communities. It’s time that some of the power that comes with money is in the hands of people of color.