Aurelia Flores is the Fox News Latino 'Wealth Coach.'
Let's start off with a scary statistic.
A 2009 report published by the Pew Hispanic Center shows that the median net worth of Latinos in this country was just over $6,000. That means half of us have more than that in ‘wealth’ and half of us have less. That’s not a lot of safety net, cushion or ability to leave a legacy for us as a Latino community.
But in order to begin understanding how to accumulate wealth – it's imperative to understand what wealth is.
A good place to start understanding what wealth is with what wealth isn't. Namely, it isn't about how much money you make; wealth is about how much money you keep.
Often, we think about the wealthy as those who have high incomes, but this is not necessarily the case.
Wealth is flexibility, possibility and options. Wealth is opportunity and choice.
The wealth we have is at different times a safety net, a cushion and a legacy.
Our wealth is a buffer for when bad times come: we have unexpected medical bills, someone loses a job, or we want to help a loved one out of a tough situation – such as paying for a funeral.
Our wealth is a possibility: As in when we want to buy a home, send a child to college and invest in or start a business.
Our wealth is a legacy: The ability to leave an inheritance to our children or grandchildren or to allow them to do the same types of things – buy a house, send a child to college, or invest in a business.
To the extent we have some level of wealth, we can take advantage of opportunities. To the extent we don’t, we cannot.
This is why it’s important to understand what wealth truly is, and how it is calculated.
When we talk about the level of wealth someone has, we are generally talking about their "net worth." Net worth is the number you arrive at when you add up all the assets you own and subtract everything you owe.
If all those assets (such as homes, cars, savings and investments, businesses, etc.) add up to $300,000, but the same person owes $350,000 (in mortgages, credit card debts or some form of debt), then he or she has a negative net worth.
On the other hand, if someone owns $100,000 of assets, but only owes $30,000, then she has $70,000 of net worth.
It’s important not to equate someone’s income with their wealth. Someone who earns a lot of money but has a lot of debt may actually be less wealthy than someone who earns much less but has accumulated assets.
Compare that $6,000 median net worth for Hispanics to that of non-Hispanic whites in the same year, who had a median net worth of more than $113,000 – about 18 times as much. There are many reasons for this, which we’ll explore in future articles.
But perhaps an even more sobering fact is that almost a third of all Hispanic households (31%) had zero or negative net worth in 2009, compared with only 15% of non-Hispanic white households.
Admittedly, the recession took a heavy toll on us as a nation, but it did not hit all communities equally.
As a group, Hispanics need to start saving, begin putting their money into assets that accumulate value and increase net worth. It’s important for our community as a whole.
In future articles, I’ll give some examples of household wealth, how we can learn to accumulate it, and why it’s dangerous to keep all one’s wealth in one basket.
I’ll also discuss in greater detail why focusing on wealth is so important for us as Latinos.
Aurelia Flores is Senior Counsel at a Fortune 500 company and former Fulbright Fellow who graduated from Stanford Law School. Her website, PowerfulLatinas.com, offers stories of success, along with resources and programs focused on Latino empowerment.