Last week I gave a virtual talk to a group of Black mid-career professionals. I titled the talk “Leading with Influence” and provided ten tips for navigating Corporate America as one of two Black male senior leaders globally at the company where I work. I provided the usual tips, like “Know your stuff,” “Take Ownership,” and “Be Authentic,” paired with war stories from my career to make them real. Interestingly, every time a participant pushed me on how to really put this advice into practice, I found myself saying: All these tips are easier to implement when you feel good about your wealth. Taken further, work is easier with wealth.

Work is hard enough already for Black professionals. Fifty-eight percent of us have reported encountering racial prejudice at work, and 65% of us agree we have to “work twice as hard” and actually be twice as good in order to advance. This (among many other factors) is why wealth creation is so important.

Work is easier with wealth because the wealth you create is akin to a competitive moat you’ve built around yourself as protection from the vagaries of any employer. I liken it to Porter’s Five Forces.

Porter’s Five Forces is a framework companies use to analyze their competitive position in the market. Michael Porter first offered this model in his classic Harvard Business Review article from 1979 called “How Competitive Forces Shape Strategy.”

The model utilizes five competitive forces (see image below) that affect every industry. In this post we’ll look briefly at each of these five forces but through the eyes of ourselves as companies in the business of wealth creation. We’ll ultimately distill all this information down into five ways work is easier with wealth.  

Work is easier with wealth because you become the buyer of work and strengthen your bargaining power

Porter’s first force is the BARGAINING POWER OF BUYERS. It holds that powerful customers (buyers) can use their clout to affect prices (either up or down) and capture more value for themselves. As professionals in the labor market, we receive conditioning to think of ourselves not as buyers of work but as sellers of labor (productivity) to an employer. The employer extracts our labor in exchange for money. We then use that money to consume. And the cycle goes on and on while we worry about getting fired.

We should instead think of ourselves as buyers of work from and employer. Wealth creation makes that possible. We can be more discerning about the work we purchase from whom and at what price. A strong wealth foundation helped me “buy” a new employer when I needed to. I also grew my overall compensation by 63% and can do the same for you.

You can supply your labor less, when you ultimately do, you can do so on your terms

Porter’s second force is the BARGAINING POWER OF SUPPLIERS. Here, companies focus on how easily suppliers in their industry can drive up the price of inputs. As professionals, I liken this force to how much strength you have on the other side of the buying equation. How much power do you have when you need work as a life input? Because of the many barriers Black professionals face in the workplace, I argue that our power is lower than it should be.

Wealth creation can help. It can help us more easily and boldly stand up for pay and level equity in our current work. It can help withstand potentially long bouts of unemployment. 73% of Black Americans who cannot go more than three months without a paycheck. Don’t be one of them! And it can help us be more discerning about the labor we ultimately decide to supply.

You worry less about the “threat of new entrants”

Companies spend a great deal of time and resources protecting against the third force: THE THREAT OF NEW ENTRANTS. In industry, new players can force incumbents to lower prices and/or spend more to retain customers, thereby threatening profitability and even long-term viability. As employed professionals, the threats we face are no different. And they are everywhere. Corporate restructurings, layoffs, politics, generational shifts, and the many barriers to Black advancement we discussed are all threats that we must navigate and neutralize.

You guessed it; wealth creation becomes vital here. Having wealth provides a sense of security that can improve your mental and your physical health. Health and wealth are inextricably linked.

You worry less about your employer getting rid of you

Porter’s fourth force is about the THREAT OF SUBSTITUTE PRODUCTS OR SERVICES. In business speak, profitability suffers when a new product or service can meet a customer’s basic needs in a differentiated way. In personal speak, you may suffer when your employer “makes you redundant” – if you’re not prepared.

Having wealth softens what can inevitably feel like a harsh blow and buys you time to recover.

Work is easier with wealth because you may find it easier to be authentic at work if that’s what you want

Porter’s final force covers RIVALRY AMONG EXISTING COMPETITORS. When there are many competitors in a space, it is hard to capture outsized profits because many firms are competing for the same customers. This drives down prices and raises costs. As employed professionals, I liken this to competing with co-workers.

I did a Google search for “competing with coworkers” and it only took half a second to return 75.8 million results on the topic! I assume we can all relate! Again, with wealth in the bank, coworkers simply matter less unless you decide otherwise. This is particularly important for Black professionals who know all too well the costs of code-switching at work. There’s a not insignificant part of self that we may forsake to get ahead. Wealth creation can help turn this on its head, allowing you more authenticity and sense of self at work.

And there you have it – the five ways work is easier with wealth.

What other ways could work be easier for you with wealth?

I struggled with what to write today, so I called my mom to talk about it. I call my mom a lot for advice, and in typical form, she delivered. We talked about the goal for this blog as a chronological blueprint for generating wealth that Black professionals could follow. We also talked about the best way to get back to the blueprint. Her advice for me will be the theme of this post: Just take the first step.

I love the Martin Luther King, Jr., quote this advice invokes: “Take the first step in faith. You don’t have to see the whole staircase, just take the first step.” In many ways, this is what I did in November 2016 when my spouse and I opened our first brokerage account. We had no real idea what we were doing. In hindsight, there were three real steps we took that might be helpful as you take your first step to generating wealth:

Eliminate ALL your consumer debt

America’s credit card balance totaled $357 billion as of September 30, 2021. While this number is significantly lower than pre-pandemic days, it is still quite high. The average American carries a balance of $5,525. Black Americans are faring better than average, carrying only $3,940 on average. This is still too high. Here’s why:

As of this writing, the average credit card interest rate is about 16.13%. This interest rate represents the additional balance a cardholder will accrue on any unpaid balances at the end of a billing cycle. Credit card companies typically express this interest rate as an average percentage rate, or APR. Here’s the rub, though. APR gets applied to a cardholder’s monthly balance although it represents an annual rate. Which means, the longer you carry a credit card balance, the bigger the hurdle you face in generating wealth.

Let’s illustrate through a quick example. Kevin carries the average balance for Black Americans ($3,940). He also has the average interest rate (APR) of 16.13%. Using some quick math…

• Divide the APR (16.13%) by the number of days in the year (365) = 0.000442 (the daily periodic rate)

• Multiply the daily periodic rate (0.000442) by Kevin’s average balance ($3,940) = 1.741156

• Multiply this number (1.741156) by the number of days in Kevin’s billing cycle (30) = 52.23468

As you can see, Kevin pays (rounded to the nearest cent) $52.23 each month – on top of his average balance – to his credit card company. And not to himself in the form of wealth.

Even worse is that this example is grossly oversimplified. I haven’t touched on the different types of APR a credit card holder may face on any number or type of credit card. The moral of the story here is – carrying a balance on your credit card (or any consumer credit instrument) carries you away from generating wealth. Eliminate it!

We were fortunate to not have any consumer debt when we started our wealth creation journey. If we had had this kind of debt, we would’ve worked to eliminate all of it first.

Build Emergency Savings

I know this advice is “long in the tooth,” but that’s because it works. Most personal finance pundits recommend keeping between three to six months’ worth of expenses in an emergency fund (usually a savings account).

Less than half of Americans have that. In fact, 1 in 4 of those Americans report having no emergency fund at all according to Bankrate. Of course, COVID-19 made financial health precarious for many Americans, but disproportionately affected Black Americans.

The Federal Reserve Board’s most recent Survey of Consumer Finances revealed that only 42% of Black households have a savings account, and “many with an account said they were not saving enough to meet emergency expenditures.”

An entire blog series could be devoted to the pitfalls of having no emergency savings, so suffice it to say that this would be my second priority after eliminating all consumer debt.

Open a Brokerage Account for Investing

As I mentioned in an earlier post, Black investing is a full 19% lower than White investing despite the stock market remaining one of the best tools we have in our wealth creation toolkit. After eliminating all consumer debt and building an emergency savings of 3-6 months’ worth of expenses, I urge all of you to take this important and truly life-changing step.

What first step would you take to generating wealth?

Let me start with an apology. I want to apologize to my readers for this blog’s false start in 2021 on the journey to building wealth. While there is no good excuse, here’s what happened:

• I quit my job after being told the company would not honor the title and compensation increase for an internal job I landed that was two levels higher than my then current position.

• I accepted a new job that increased my seniority, my base salary by 50%, and my overall compensation package by 63%. In this new job I am also one of only two Black male senior leaders globally out of an employee base of over 1,000.

• A second close family member passed away, within twelve months of my grandfather.

• My spouse and I moved half-way across the country.

• We got a dog.

According to Thrive Global, I experienced four of their “10 Most Stressful Life Events” all before the Fourth of July! The rest of 2021 then became more about surviving transition. Specifically, I struggled to navigate what Adam Grant calls “languishing,” a feeling of emptiness and stagnation – a general lack of joy – that zapped my motivation.

There were many challenges in 2021. You might ask – what did I learn from them? Were there any bright spots?

I learned one big lesson and have one even bigger bright spot from the year.

Building wealth requires knowing your worth, and being brave enough to embrace it

It is hard to quit a job, even one you might hate. It is all the harder, then, to leave a job you love. And that’s what I did. I quit to pursue the career and income growth for which I was qualified and earned.

I wish we talked more about the emotional challenges of quitting a job. For better or worse, jobs can be closely tied to our identity and our sense of self-efficacy. In fact, Pew Research Centers estimates that 51% of Americans “get a sense of identity from their job.” It is no surprise, then, that leaving a job – even for a better one – can generate loads of anxiety and self-doubt.

I’m not alone. Almost three percent of the American workforce quit their jobs in October 2021 alone, and 41% of workers considered leaving their jobs in 2021, with no signs of slowing down. The Great Resignation continues and could be a powerful moment to reflect on your worth and ensuring you’re taking the steps to embrace it.

Compounding is powerful for building wealth

There is no way around it – I took my eye off my financial ball in 2021. Our budget went out the window to accommodate moving, unexpected family expenses, and frankly a period of low financial discipline. However, our wealth grew, a lot.

The chart below is from our Personal Capital account. You’ll see that despite contributing less than half of our pre-tax and after-tax forecasts for the year, our wealth grew almost $350,000 to end the year just above $1.3 million.

I attribute most of this growth to massive gains the stock market delivered in 2021. The S&P500 gained 26.9% this year. Our wealth took care of itself in 2021, even delivering five figures in dividends. This happened thanks to our well-diversified, passive investment portfolio.

Where do we go from here?

With your support, I’d like to start anew. Let’s pick this journey back up where we left off.

What can you do to start your wealth journey anew in 2022?

We all know the saying: There’s no such thing as a free lunch. And while, in economic terms, Milton Friedman was right, when you choose to create wealth you open up doors with lunches behind them that over time feel very free – and very satisfying. Where are those doors? They’re among your workplace benefits. And what very free, very satisfying lunches am I excited to talk about? The 401(k) and the Employee Stock Purchase Plan (ESPP). They are two ways to get free money and accelerate wealth.

Free Money Move #1: Your 401(k)

Although as readers of this blog you may take a deep dive on the 401(k) as “table stakes,” but I’ve found that despite its seeming ubiquity, employees rarely list the 401(k) among their most desired or popular workplace benefits. It should be, though.

The 401(k) didn’t always exist

The 401(k) is a retirement savings and investing plan that some employers offer to employees. It, along with similar plans, are called defined contribution plans. Employers contribute a pre-determined amount to only those employees who choose to participate. Further, employers bear no long-term responsibility for those contributions, how they’re invested, or how those investments perform. It wasn’t always like this, though. Just a few decades ago, most employees relied on defined benefit plans – commonly known as pensions – to fund their retirement. Pensions are different because employers promised employees certain monetary benefits in retirement and bore all the responsibility for funding them, irrespective of market dynamics or investment performance.

An accident shifted the retirement burden onto YOU

The 401(k) dominated the pension almost by accident. The Economic Policy Institute reports that in 1980, a benefits consultant almost randomly suggested the 401(k) to revamp a bank’s cash bonus plan. The 401(k) was a huge hit among employers. Pensions are expensive and complex for employers to manage. They must use corporate earnings to fund them while constantly trying to predict how much money they’ll owe to their retirees. And corporations have been (in)famously bad at these predictions. General Electric, for example, recently froze its pension plan for 20,000 employees to save itself upwards of $8 billion. It should come as no surprise, then, that even though Congress never intended the for employers to ditch pensions for 401(k)’s, that’s exactly what they did. Now, only 15% of private sector workers have access to a pension.

Let’s take a minute to flip the script and see what this means for employees. With a pension, employees know how much retirement income to expect and when to expect it. They theoretically could worry not one bit about saving for retirement. Those days are over. Now, employees must manage their own financial destiny. They must use a tool economists, legislators, and even the 401(k) creator himself have called a scam for the average American worker.

Your retirement burden is therefore larger and more urgent

American employees face contribution and investment risks with the 401(k), but should still participate it in. However, only 47% of all private-sector employees did so as of March 2020. This number has declined since the beginning of the 21^st century, when approximately 60% of American employees participated.

The numbers for Black employees are far worse, by at least 10%. Black employees contribute to their 401(k), but they do so at rates between 22% and 50% lower than their White counterparts.

What does all this mean for Black professionals? It shows how critical it is to take charge of our wealth. Participating in the 401(k) plan is a great way to do that. If your employer is among the 28% percent of American businesses that match contributions, take advantage!. It is through employer matching that you can earn free money and accelerate your wealth.

While it is generally a sad statistic that so few employers offer a 401(k) match (and that the median match is, in my opinion, a paltry 3%), it is money worth getting.

Free Money Move #2: ESPP

Employee stock purchase plans let employees buy company stock (up to the yearly IRS-determined limit) at a discount. Each plan is company specific. The amount of your discount will vary between employers, but some plans let employees buy company stock at up to 15% lower than market price. Employees select what percentage of their pre-tax income they’d like to divert via payroll deductions to ESPP per offering period (typically twelve months). This money goes to the employee’s personal ESPP account. After each purchase period (typically three or six months) the personal ESPP account balance is used to purchase the discounted company shares. Data on the percentage of employers that offer ESPP are hard to come by. Some indicate that roughly 49% of S&P 500 companies and 38.5% of Russell 3000 companies offer this benefit to employees.

If you work for one of those employers, take advantage!

I’ll use an example to illustrate why:

Tiffany works for publicly traded company ABC as a global marketing manager. She earns $120,000 per year. The company offers an ESPP that lets Tiffany buy company stock at a 10% discount. Tiffany decides to divert 10% of her pre-tax income to ESPP, which means that each pay period $500 will be diverted to her personal ESPP account. There are four purchase periods in each offering period at ABC. So, from January 1 – March 31, Tiffany diverts $3,000 to her personal ESPP account. On the purchase date (March 31), ABC’s stock price is $200. Tiffany therefore gets to purchase ABC’s stock at $180, ten percent below market value.

Instead of receiving just 15 ABC shares in her account, Tiffany gets ~16.67 shares. Tiffany decides to sell them immediately. Assuming that ABC’s stock price is still $200, Tiffany earns $3,333.33 from the sale, booking $333.33 in profit.

There are several important tax and asset allocation considerations tied to when you sell ESPP shares based on the type of plan your employer offers. The example above simply shows how, in exchange for diverting cash to ESPP, you can earn free money and accelerate your wealth.

What are other ways you’ve earned free money to accelerate your wealth?

In my last post, we discussed the potential pitfalls of working with a financial advisor and how to successfully navigate them. Now, let’s turn our attention to the first of only a handful of conversations I’ve had with one. This first conversation was useful to me as a wealth creation beginner. The conversation helped me get past some willful ignorance. It also gave me a good advice to kickstart my wealth creation journey. Know your workplace benefits, and don’t leave money at work.

What am I talking about? One word – BENEFITS.

In fact, only half of employees understand their benefits. This is understandable, as benefits have only grown in complexity and diversity over the years. However, data from the International Foundation of Employee Benefits Plans reveals up to 80% of employees do not even open their benefit materials!

Benefits beyond core salary and even health insurance play increasingly critical roles in modern workers’ overall compensation – and even their loyalty to an employer. We’ve all heard about the cool and even unconventional benefits some employers (particularly those in tech) provide their employees. We hear less about the more mundane benefits that can put real money in employees’ pockets but get overlooked.

This is a huge, missed opportunity. You can turn benefits that are already part of your employment into value – money – that can jumpstart your wealth creation.

So what can you do to ensure you’re not leaving money at work?

Know your open enrollment period

Open enrollment is specific to health insurance. It’s the yearly period when people can enroll in the same or new health plan. The open enrollment window for private, individual health plans usually lasts from November 1 to December 15 each year. Employer-sponsored plans may follow a different enrollment window. It’s therefore important to know yours no matter the type of health insurance you have.

Invest the time to learn about all your available benefits

I recently re-read my workplace benefits, and it took me about 30 minutes to get through them. I even learned a new thing or two! Trust me on this one. The small investment in time and a bit of cognitive strain, even just once each year, are well worth it.

These two steps have helped several Black professionals uncover – and then bank – some pretty awesome benefits at work. Below are a few of my favorites:

Mark, 33, Financial Services

Mark started a new job as an associate at an investment firm. He has never utilized a 401(k) plan at work before, which is not uncommon. In fact, only 55% of U.S. workers participate in employer-sponsored plans. Mark does some digging and learns that the firm will match 50 percent of every pre-tax and/or Roth dollar he contributes to the employer-sponsored 401(k) Plan, up to the Internal Revenue Service (IRS) basic deferral limit. Mark decides to opt into and max out his 401(k) Plan. In 2020, Mark therefore saved $19,500 of his own pre-tax dollars via this plan and received another $9,750 in tax-deferred money from his job. After thirty-years, if Mark continues to max out his 401(k) based and receive this $9,750 in yearly match from his employer, the match portion of his 401(k) alone could be worth $1.1 million! *

Felicia, 46, General Management

Felicia is a General Manager at a Fortune 500 company, and to prepare for her oldest child going to college, reopens her workplace benefits to see if they can help. She sees that her company offers an Employee Stock Purchase Plan (ESPP). The company’s ESPP plan allows Felicia to contribute the Federally defined maximum of her pre-tax salary ($22,500) to purchase shares at a 10% discount. This potentially yields Felicia an extra $2,250 in unrealized gains each year. Even if she sells her ESPP shares each quarter upon receiving them, the after-tax realized gains help her make more money than if she had not participated in the ESPP program. And this is money that she now uses to help her child.

Alberto, 23, Technology

Alberto recently graduated from college and has started his first job as a software engineer at a large technology company. He finds out that his workplace benefits include a corporate discount program through Passport Unlimited. The program offers discounts at many local merchants, restaurants, online vendors, and even home and auto lenders. Alberto’s favorite is the “buy-1-get-1 free” restaurant discount at his favorite restaurant. It helps him and his fiancée cut their weekly dining out bill in half – so they can save for their upcoming wedding.

So, spend a few minutes with your workplace benefits and find out for yourself – what money are you leaving at work?

* This estimate was generated using the hyperlinked investment calculator assuming an initial investment of $100, annual contributions of $9,750 for 30 years earning 8% in annual returns. As with anything in the investment world, this is just a loose estimate, and past performance does not guarantee future results.

With my commitment to breaking the money cycles of my past, one would think a grand wealth creation plan would follow. It did not. Instead, I made an appointment to speak with a financial advisor. And what I learned is – Financial Advisors: Guilty until Proven Innocent.

We’ll get into the specifics of the conversation later. Right now, though, I want to spend some time discussing financial advisors and how I generally recommend approaching them:

THEY ARE ALL SUSPECTS!

I’m trained on the law, which holds as sacrosanct, thanks to Coffin v. United States, that a defendant is innocent until proven guilty. However, when it comes to financial advisors, I believe in the opposite. Guilty until proven innocent! Below I’ll explain why and offer three steps you can take to navigate how you approach financial advisors.

Many financial advisors are under no legal obligation to look out for you

It’s sad but true that many financial advisors, particularly broker-dealers, only have to adhere that what’s called a Suitability Obligation.

The Suitability Obligation, put forth by the Financial Industry Regulatory Authority (Rule 2111), requires broker-dealers to make recommendations that are “suitable” based on a client’s particular financial situation. This obligation, however, does not obligate the advisor to act in the client’s best interest.

What does this mean practically? It means that it is perfectly legal for this kind of financial advisor to sell you investments that are “good enough.” Broker-dealers often develop and sell these financial products to make themselves rich through commissions and fees – not you.

If financial advisors are to be approached as suspects first, then how can you ever find one that earns his or her innocence?

Only work with financial advisors held to The Fiduciary Standard

The fiduciary standard, promulgated by the U.S. Securities and Exchange Commission, requires advisors to put their client’s needs first. The advisor must provide advice that is in the best interest of the client and seek the best execution of that advice.

Advisors under the fiduciary standard are called Registered Investment Advisors (RIA). Requiring this standard of any advisor you engage should be non-negotiable.

Remember that not all advice is good advice

Even among the fiduciary standard-aligned RIAs, we need to be careful. There are wide disparities between the quality of advice advisors provide, and even between their view of themselves and reality. The Financial Planning Commission reported in a 2018 white paper that over 166,000 financial advisors referred to themselves as financial planners, but less than 65,000, or 38%, actually provided financial planning services to clients. If RIAs have this much trouble identifying the services they provide clients, it should be no surprise that their actual advice might be all over the place. This sets us all up for complexity and confusion – which are the enemies of wealth creation.

Additionally, low Black representation within the financial planning community exacerbates everything I’ve discussed. As of June 2020, there were just 1,35 Black Certified Financial Planners (CFPs) in the United States. That’s just 1.5% of all CFPs! We must therefore search high, low, backwards and forwards for advice, and be very discerning about who gets to give it to us.

Learn the basics and do it yourself

I firmly believe that knowledge is power, particularly when it comes to wealth creation. With a small investment of time (think a few hours each year), you can achieve outsized success in building wealth over the long term. Don’t let a lack of knowledge, time, or self-confidence keep you away from investing. This enables and even exacerbates the stubborn wealth gap that persists between Black and White Americans. Mellody Hobson said it best in a 2016 interview with Tom Joyner: Black investing is a full 19% lower than White investing. The stock market continues to be one of the best tools we have in our wealth generation toolkit. We owe it to ourselves and to our community to understand it and to leverage it to build wealth.

I struggled with where to start this blog, so I will start it at the beginning of my wealth creation journey, on September 14, 2016, when I opened my first brokerage account at Fidelity. I was 31, newly employed after years of graduate school, and brimming with excitement – about the job, sure, but mostly about receiving stock as part of my compensation for the first time.

Beyond the account being logistically necessary, it represented the first time in years that I was making money and, together with my spouse, more money than either one of us had ever made before. And I knew that I had to break the money cycle.

Breaking the money cycle

You might be wondering just what I mean by this exactly? Well, just in my 20s I had already experienced two cycles of having money and having no money:

Cycle #1

Having money: I worked on Wall Street immediately after undergrad, and despite being there during the worst of the Great Recession, by my standards at least, I was paid handsomely for basically being a kid. It was common, even then, to spend $195/each on an Hermès tie or $800+ on the quintessential banker loafers. Even with the expensive consumption habits that I considered the price of entry to “fit in” on the Street, I still found ways to save money here and there, either by having multiple roommates or trying to make a $5 footlong last over multiple days because I knew I wouldn’t be there forever.

Having no money: I wasn’t on Wall Street forever not because I was part of the massive layoffs of the time, but rather, I quit in late 2009 to pursue my first entrepreneurial venture. With over $50,000 in savings and still in my early 20s, I figured I had enough cash for two years of super-scrappy living in New York City hustling hard to get my business off the ground… how wrong I was! I was squarely out of money by mid-2010, paying my employees with credit cards, working at least two side jobs, and living on PB&J to float the venture that I ultimately shuttered in 2012.

Cycle #2

Having money: I went back into the work force as an employee to lick the many wounds and repay the many debts I picked up between 2010 and 2012. I was making money again, but I might as well not have been because every dollar I made either went to repaying credit card debt or to consumption (embarrassingly, also on my credit card – not a great strategy for wealth creation). I was living paycheck-to-paycheck not for the Gram (I was a late-adopter) but perhaps to hide from other people and from myself that deep down I felt like an abject failure.

Having no money: Soon after going back to work and realizing that job was not going to be a long-term fit either, I went to graduate school, to learn, I suppose, and to further hide those failure feelings. Despite working internships and side jobs to soften the blow of student loans, broke was the name of this game (again, not a great strategy for wealth creation!).

Now in my 30s, I was tired of the financial ping-pong. I was tired of:

• Spending money on status signals to assuage those failure feelings I still struggled to shake.
• Paying bills and wondering where in the world all my money had gone.
• Counting down the days until my next pay day because I needed the money.

I was tired of the cycles.

What money cycles in your life are you ready to break?