GETTING STARTED.

Building wealth is not a sprint. It's a marathon. BLACK ENTERPRISE shows you how to win the race by applying strategies to build, keep and transfer wealth.

CUT PRELIMINARIES. IT'S TIME FOR YOU TO GET off the sidelines and into the race. Building lasting, multigenerational wealth does not come from a sprintlike effort. It requires the focus, discipline, tenacity and conditioning of a marathon runner--a long-distance performer who sets goals, exceeds them and, once one set of objectives has been accomplished, sets his or her sights on new contests to win. Those individuals realize that wealth-building is a lifetime pursuit.

Achieving your financial goals means a rigorous regimen, skills development and coaching, But equally as important is your fuel -- passion, the burning desire to make it happen no matter what. You have to want it.

EMBRACE THE BLACK WEALTH INITIATIVE

Welcome to the year 2000. A new era has begun. Are you content to sit in the bleachers while others pass by you? Can you afford to sit back and moan and groan about living from paycheck to paycheck? Isn't it time for you to start your investment program? Is this the year you finally do something about your financial situation?

This year, BLACK ENTERPRISE turns 30. For the past three decades, we have informed you, our readers, about how to launch businesses, succeed in your careers and, yes, manage your money. But we, too, have redirected our mission to a degree. Our goal: to make you wealthy. Simply put, the agenda is to help you achieve that well-deserved slice of the American Dream by paying yourself first, making every dollar count and developing a systematic program of investing that will secure your family for generations to come.

We call our program The Black Wealth Initiative. Publisher Earl G. Graves first framed this concept in the June 1998 issue when he asserted that "our initiative must be to create wealth by building the cornerstones of economic empowerment: education, equity, enterprise and excellence. [It] requires that we be aggressive, even to the point of zealotry." The core component of this bold, new imperative: mastering your money.

Why is this thrust so important? Because the wealth gap between the rich and everyone else is so vast. The average net worth of the richest 1% of families was $9.7 million in 1997 while the bottom 40% averaged just $3,000. And the disparity between whites and blacks is Grand Canyon-wide. A typical black family possesses on average just 11% of the wealth of a white family. The most recent data from the U.S. Census Bureau showed that the median net worth of blacks was only $4,418 compared with $45,740 for whites. Among the middle class, the figure improves. Now a typical black family possesses on average 25% of what a white family does. The factors contributing to this phenomenon: government policies that make it easier for whites to acquire property and other assets; a history of obstacles that African Americans, unlike many immigrant populations, have faced to building wealth and starting businesses; and the cumulative effect of years of discrimination.

On the next few pages, we will reveal to you a series of steps that will enable you to get out of the starting blocks, engage in a point-by-point process to gain knowledge, make a binding commitment to your financial and business goals and establish a disciplined approach to wealth creation.

AN ENVIRONMENT FOR WEALTH CREATION

The '90s were marked by the longest economic expansion in peacetime America. Over the past several years, the economy has boomed, and although the go-go years show signs of slowing down, the most recent data reveal the economy growing at a robust 4.8% clip. Forecasts Andrew Brimmer, the former Federal Reserve governor and a member of the BE Board of Economists: "On balance, I see the overall economy expanding somewhat more slowly, but still operating at a rate well beyond the long run, sustainable level."

The economic engine has been lubricated, for the most part, by the stock market. Despite its peripatetic nature, it has tripled in value over the past three years. So many Americans are invested in the market and glued to CNBC these days that some economists have dubbed the nation "the stockholder society." A new study conducted jointly by the trade groups Securities Industry Association and Investment Company Institute reveals that a record 48% of American households own stocks, and that stocks comprise 35% of all household financial assets. The median stock holding for those under 35 is $11,900 and, for those age 64 and older, $62,500. In employer retirement accounts, 61% of the typical account is invested in stocks. In fact, from 1990 to 1998, mutual fund retirement assets grew from $206 billion to $1.86 trillion, and retirement holdings, as a share of total fund assets, grew from 19% in 1990 to 34% in 1998. As you may have guessed, nearly 50% of stockholders are baby boomers, the oldest of whom are just 11 years from retirement. Because of these demographics, experts predict that after factoring in occasional corrections, the bull market can very well thrive until at least 2008.

The major storm cloud on the horizon of this otherwise optimistic scene is that although Americans are investing in historic proportions, they are not saving enough. Since 1997, households have sold $1.3 trillion in stocks, including exercised stock options. After reinvesting nearly half in mutual funds, $700 billion was used to splurge. And SMR Research Corp. reported that mortgage refinancing and home equity loans were used primarily to pay off $34 billion in credit card debt.

Consumer debt has gotten so out of hand that civil rights leader Jesse Jackson teamed up with superinvestor Warren Buffett (the third wealthiest American, with a net worth of $31 billion) to save the next generation. Speaking to a group of high school students, Jackson warned them to "break the cycle of the debt culture. Don't be lured to use credit cards instead of money."

THE CASE FOR INVESTING

So how have African Americans fared in this invest-and-spend economy? At no other time in history have blacks been as heavily invested in the stock market. How, ever, they still lag behind their white counterparts. For every Oseola McCarty, the late retired laundress who scrimped and saved enough earnings over 75 years to donate $150,000 to the University of Southern Mississippi, or Mat Dawson Jr., the autoworker whose savvy investment practices enabled him to give about $1 million in scholarships, there are scores of African Americans drowning in debt or who have yet to pony up a single cent for investments of any kind. In fact, some have put their house on the block in order to get out of hock. "Too many of us are still enamored by spending with credit card debt," says Iris D. Atkinson-Kirkland, who has worked in financial services for more than 20 years. "We have to learn how to rip up those unsolicited credit card offers as soon as we get them in the mail. There is no reason why we have to have more than one credit card. It is especially important for the young to start getting in the practice of sound credit management or they will learn the hard way that it will keep them from getting everything from a home to a job."

African Americans also need to embrace the practice of investing in the stock market. It's true that legions of blacks--especially African American women--are attending wealth-building seminars led by organizations ranging from nonprofits to sororities and fraternities. But judging by the recent blackenterprise.com survey of financial health, African Americans have missed much of the greatest bull market in history (see selected survey results). While 88.2% of the respondents save and invest money in addition to the funds they set aside for their retirement, 21% of that group saved and invested less than 5% of their funds. Factor in 11.8% who did not bother to put a dollar in a savings or investment program, and you find that a whopping 32.9% of all those surveyed did not or were unable to set aside 5% of their discretionary income.

In terms of priorities, fully 74.3% of the respondents who invested their money maintained that their goals were to build personal wealth, 69.5% sought to amass funds for retirement and 42.5% wanted to pay for Junior's education. But, for the most part, the respondents haven't used the stock market to maximum benefit. Although 77.7% have placed some dollars in stocks, 25.4% have been invested in equities for one to three years while 11.5% have been invested for less than a year. (On average, our respondents have been active investors in the stock market for 5.6 years.) Because they have been participants in the market for seven to 15 years, an aggregate 18.3% of the respondents have been the full beneficiaries of the current bull market. Another 6.6% have been in stocks for 16 to 20 years or more.

Says Mellody Hobson, senior vice president of Ariel Mutual Funds, the black-owned investment firm that manages the Ariel Fund, Ariel Premier Bond and Ariel Appreciation Fund (all listed on the BE Black Fund Watch, "Off to the Races," Moneywise, October 1999), "Over time, the stock market is the best venue for you to accumulate wealth. Even with the periodic dips, the market has shown an uptrend for more than 70 years."

The data bear her out. In the Stocks, Bonds, Bills and Inflation 1999 Yearbook, compiled by Ibbotson Associates, the Chicago-based investment research firm, the compounded annual returns for small cap stocks were 12.4%; large cap stocks were 11.2%; long-term corporate bonds were 5.8%; and U.S. Treasuries were 3.8%, between 1926 and 1998. During this same period, inflation was 3.1% per annum. Expressed in dollar terms, Hobson found that a hypothetical investment of $1,000 would have generated $5.08 million if you invested it in small caps; $2.32 million in large caps; $61,299 in long-term corporates; and $15,220 in U.S. Treasuries. The total cost of inflation: $9,287.

STEPS YOU CAN TAKE

So have African Americans missed the boat? Not by a long shot. It's just time for you to get started. One way is by letting the Black Wealth Initiative serve as your guide:

Step 1: Follow the BE Circle of Wealth. The diagram shows the steps that you need to take to get started. First, acquire knowledge about wealth and how to build it. Second, make a commitment to pursue a program of wealth-building. Third, once you have made the commitment, begin to save and invest now. Your practice of steady investment should evolve into a program of portfolio management. Sound portfolio management will beget wealth. And wealth will enable you to make direct investments in our children, businesses and communities.

Step 2: Assess your financial position. As you undertake this process, you. must have a clear definition of wealth. Do not mistake it for your take-home pay or owner's draw. Wealth, simply put, is your current assets minus your current liabilities. It's what you own minus what you owe.

If you followed the everyman's tome of wealth-building, The Millionaire Next Door (Pocket Books, $14), the authors Thomas J. Stanley and William D. Danko advise a formula in which you multiply your age by your realized pretax annual income from all sources except inheritances. Divide by 10. This figure, minus any inherited wealth, is what your true net worth should be. Using an example from the book, if you are 41 and earn $143,000 a year, and have investments that return another $12,000, you would multiply $155,000 by 41. The amount--$6.335 million--would be divided by 10, giving you a net worth of $635,000.

The best way, however, to figure out where you stand is to complete the BE Wealth Calculator and BE Cash Flow Monitor in this article. These are similar to the documents that a financial planner would give you to determine your holdings and spending pattern before he or she crafted a financial plan for you. Using this snapshot, you can determine where you are and how far you have to go to achieve your goals.

Step 3: Adopt the BE Declaration of Financial Empowerment, or DOFE, as your self-empowerment tool. The circle will be broken if you don't make a hard-and-fast commitment. By reading, embracing and signing the DOFE, you will take the important step of changing your behavior, from pledging to save and invest at least 10% to 15% of your after-tax income and engaging in sound budget, credit and tax management practices, to teaching business and financial principles to your children and passing on wealth to the next generation.

But making the commitment is only the first step. Use DOFE to help you shape yearlong goals and develop a monitoring process for your finances. For example, you and your spouse should devote at least three hours a month to determining the state of your finances or agree to see your financial planner at least once a quarter. You can sign the document at the front of this article or download it from the blackenterprise.com Website. Additionally, BE will provide a Wealth-Building Kit that will help you convert these principles into a series of comprehensive action plans. To get the kit, call the toll-free number, 877-WEALTHY.

Step 4: Create a financial fitness program. Stick to your strategy to achieve your goals and develop a team of advisors --coaches, if you will--to help you get there. Make sure that you keep a record of your accomplishments and refine your objectives on a quarterly, semiannual and annual basis. In fact, at the end of the year, BE will provide you with a financial checklist so that you can evaluate how well you have met your goals.

As you gain more knowledge, a stronger commitment and a diversified investment program, you will build the endurance to meet the challenges that are ahead of you in this race. Keep in mind that this is a solitary run. But by using the Black Wealth Initiative, you will be able to cross the finish line and pick up your trophy--a place among the ranks of the independently wealthy.

Enter Contest To Get Your Finances In Shape

If you want to kick-start wealth-building program, you can sign up for our Financial Fitness Contest. We give you the opportunity to win $2,000 toward an investment account, one introductory session from a financial planner and the chance to be featured in one of our monthly Financial Fitness features. BE'S editors will select a total of ten such individuals. This month, we feature our first Financial Fitness Contest winner--an employee of Earl G. Graves Ltd., the parent of BE magazine--a sign that we take wealth-building just as seriously at home. To obtain an application, see the Financial Fitness ad in this issue or download it from the black enterprise.com Website.

BLACKENTERPRISES.COM FINANCIAL HEALTH SURVEY

1: How much of your total income do you save and invest in addition to your retirement funds?

SAVE & INVEST (88.2%)

30% or more                                  5.1%
21%-29%                                      6.4
11%-20%                                     22.9
5%-10%                                      32.9
Less than 5%                                21.0

DO NOT SAVE & INVEST (11.8%)

2: What am your investing goals?

To build personal wealth                     74.3%
To retire                                    69.5
To pay for my children's education           42.5
To generate supplemental income              38.6
To start a business                          32.8
Other                                         6.1

3: How long have you invested in the stock market?

ANY STOCK MARKET INVESTMENT (77.7%)

20 years or more                             3.0%
16-20 years                                  3.6
11-15 years                                  6.5
7-10 years                                  11.8
4- 6 years                                  15.9
1- 3 years                                  25.4
Less than 1 year                            11.5
HAVE NOT INVESTED (22.3%)
Average (years)                              5.6
Median (years)                               4.1

Below are selected responses from our exclusive Financial
Health Survey. For complete results, log on to
www.blackenterprise.com

4: If you have not invested in the stock market,
what has kept you from doing so?(*)

Feeling that you do not have
adequate funds to invest                     55.0%
Lack of information                          36.5
Fear of losing money                         22.6
Lack of access to advisors                   14.6
Distrust of brokers & financial
service firms                                 8.5
Other                                        16.7

5: Which of the following criteria do you
use to determine wealth?(*)

Net worth                                    84.2%
Income                                       57.0
Education                                    29.9
Profession                                   23.3
Social position                              10.0
Neighborhood                                  9.7
Family background                             7.7
Other                                         7.8

6: Would you say that you represent a first-generation
stock investor in your family?

Yes                                          66.2%
No                                           27.3%
Don't know                                    6.5%

7: Which best describes how you started
investing your money?

Through work(401k, 403b,
company savings plan, etc.)                  56.8%
On your own                                  27.0
With the help of a broker, financial
  planner/investment advisor                  8.8
Through an investment club                    2.1
Other                                         5.3

8: If you have not invested in the stock
market, what has kept you from doing so?(*)

Feeling that you do not have
adequate funds tn invest                     55.0%
Lack of information                          36.5
Fear of losing money                         22.6
Lack of access to advisors                   14.6
Mistrust of brokers & financial
service firms                                 8.5
Other                                        16.7

9: At what age did you start investing.?

12 or younger                                2.4%
13-19                                        5.1
20-29                                       54.9
30-39                                       29.1
40-49                                        7.4
50-59                                        0.9
60 or over                                   0.1

Average age                                 28.4
Median age                                  27.4

10: How did you first learn about investing?

By reading financial magazines
  & publications                            40.1%
From friends/associates                     26.2
From your parents                           14.0
By taking courses                            8.1
Internet                                     1.6
Other                                        9.9

11: I would prefer to work with a financial
planner of the same race.

AGREE                                        52.2%
Strongly agree                               25.2
Agree                                        27.0

DISAGREE                                      3.1
Disagree                                      2.8
Strongly disagree                             0.3

The race of the financial
planner does not matter                      44.7

12: What percentage of your financial
transactions do you conduct through
a black-owned financial institution?

100%                                         1.0%
75-99%                                       1.1
50-74%                                       2.5
25-49%                                       3.3
15-24%                                       3.0
10-14%                                       3.7
5-9%                                         4.5
Less than 5%                                14.0
None                                        66.9

(*) Respondents selected multiple answers

Source: blackenterprise.com; B.E. Research