The Wealth Gap Unpacked
The Wealth Gap Unpacked
Defining the spectrum and highlighting potential ways to move from one end to another.
What is the wealth gap?
The wealth gap, what does it even mean? I think the literal definition in regards to net-worth and the lived experience differ greatly, especially depending on which side of The-Haves vs Have-Nots Spectrum you more closely identify with. The proximity of how close you sit on the scale to either extreme will largely determine your lived experience of the wealth gap. My perception of the wealth gap is a scenario whereby structural forces of inequality result in a difference between the attained wealth of two or more groups of people.
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As a black person growing up in London, structural inequality pertaining to ethnicity played the main and most visible role in forming the barriers I had (and have) to overcome when embarking on my wealth attainment journey. This is one factor and there are undoubtedly many more. For instance, I share some barriers with non-black counterparts especially when it comes to classism. Back in the day, wealth was not to be compared to a bull which could be grabbed by the horns and bent towards one’s will. Instead it was depicted as an overwhelming mountain to climb with ice and the occasional avalanche. This was the reality, the lack of wealth was as a result of the skewed system which made it extremely difficult to position in such a way that allows enough income and expertise to be generated, underpinning wealth.
On the other hand, once in a position of perceived success i.e. well educated, decent paying job and all round good prospects, wealth attainment can quickly turn into something which is genuinely second nature, with little to no barriers. At this point, it is easy to assign all success to mindset and hard work, quietly dismissing the tumultuous task of transitioning across the spectrum and the programs/policies in place that helped support. Once firmly in the camp of The-Haves, the wealth gap is easily dismissed as something that owes to lack of the aforementioned characteristics of hard work and mindset, if its existence is even acknowledged in the first place! If we are being honest, the wealth gap definitely exists. The-Haves have more than The-Have-Nots, and structural inequality creates the driving force.
As someone who most definitely started out life skewed towards The Have-Nots, I have been humbled and also astonished by how quickly ones perception of the wealth gap changes as one progresses up the curve. It is quite easy to sometimes forget what it is like to not have the exposure, network and resources to meaningfully participate in the wealth building process. Personally, my environment is somewhat hybrid so whenever I forget what life is like to be less fortunate while ascending towards a position of more prosperity, life quickly finds a way of handing me a sharp reminder and is why I do my best to help build the ladder that helps people from a similar background progress. You will likely find that wealthy people have a warped perception of what wealth gaps or inequality looks and feels like in practice. The reality is, they lose touch.
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Even someone like Michelle Obama made it clear that she asks tons of questions when meeting ordinary people as a way to keep in touch with real issues, because it is easy to forget when life is good. Keeping in touch can be neglected when you are looking at wealth as numbers on a screen - I am guilty of the same thing sometimes, reducing lived experiences into numbers and that is not okay because things can go from 100 to zero very fast, and suddenly one can find oneself on the opposite end of the wealth spectrum.
Now you’ve have seen the way I view the wealth gap and in general its underlying drivers but in terms if the acute causes, that requires a somewhat academic approach and analysis of this nature is probably best left to people who are more versed on the topic and would do a better job of breaking it down than I would. However, here are some factors that come to mind.
• Information asymmetry
• Inequality of opportunity
• Discrimination of all forms including ethnic and gender
Wealth generating tools are also enabling factors that contribute to the widening of the wealth gap.
The reality is that opportunities for wealth participation at the most basic levels are largely democratised, especially now that the general agenda pushes for equal opportunities and rightly so. However, outcomes from such ‘levelled’ participation most definitely are anything but equal.
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Consider this. Two graduates from polar opposite socioeconomic backgrounds could both start the same job at the same time, earning good money. The one from the poorer background is more likely to be burdened with student debt, have family to support and therefore be less able to take advantage of wealth creation practices. Compare this to the graduate with the more well off upbringing, who is more likely to have been given a better head start with no student debt and receives contributions from parents to wealth pillars such as their first house. That juxtaposition shines light on the fact that although opportunities to land high paying jobs (and ability to contribute to wealth thereafter) can be ‘equal’, they can often perpetuate already highly skewed odds. Income after student debt and all family obligations is not the same for these two graduates.
Another example is the stock market.
Although, access to financial market participation is democratised to an extent, and treatment of every £ put into the machine is the same, the reality is the more you put in, the more you get out. If you have a higher disposable income due to the dynamics which I have described, you can undoubtedly put more cash to work and therefore grow your wealth at a faster rate - driving the wealth gap wider henceforth. There is a stark difference between gaining 10% on £100,000 and 10% on £100. Wealth begets wealth and we need to be in a strong position when using these tools to make the most of them. In order to generate wealth there needs to be a big enough excess beyond living costs and all of life’s other necessities. I think most people know that, but we tend to forget.
What can I personally do for myself?
The way I view the wealth journey is like this:
1) Getting to the starting line
2) Running the race
3) The race doesn’t ever end - see Chasing Wealth Without Going Nuts.
Education is probably the single most powerful tool which is readily available when it comes to simply getting to the starting line. Things are simple once you know.
Strategy: during the race, defining and deploying a strategy is extremely key. For me personally, this helps me systemise and automate repeatable actions thus, freeing up brain space to partake in more meaningful creative thought processes that can lead to increasing revenue streams - something I am focusing on deeply at the moment. I do not however, spend any time on making budgets, saving and investment decisions on a daily basis - unless my financial situation changes drastically, this is a one-off activity. I do the heavy lifting then automated the required monthly actions. All this movement of money is automated through direct debits and Monzo’s pot management system so month to month I don’t even think about it.
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This shows how my strategy is implemented, the strategy itself is simple. I adopted a long term mindset in regards to decision making. Therefore, the way I evaluate decisions is through those exact lenses - will this make sense in 5-10 years’ time? By doing so, I tend to invest in a broad based manner that diversifies risk. I take advantage of short term opportunities only when the risk/reward dynamics are compelling and don’t detract from the overall long term goal. Maybe I will explore this more deeply in a separate blog. But for now, the takeaway is that strategising is an important element underpinning the wealth journey.
Be Consistent and Persistent: the reality is that none of this wealth malarkey happens overnight. These days you could probably earn a lot of money overnight but wealth in of itself is a mindset which manifests through accumulation of assets and other things leading one to be described as rich. Personally, the significant steps I have made in my journey so far have taken time. As in, years. All results have been generated from consistent and persistent actions over time, no shortcuts. I have made and lost money overnight but overall accumulation has taken time. Implementing lessons and strategies pertaining to wealth needs to be embedded as a consistent behavioural trait - in other words, an entrenched mindset.
Be Inquisitive: I’ll keep this one short, if things aren’t handed to you on a plate and you aren’t inquisitive enough to explore how to get things for yourself, it’s hard to make progress. Sometimes we have to make things happen.
Identify Levers: This is about identifying things I can change about myself, my skill set and all else around me which I can control. Over the last 3 months I have dedicated nearly 400 hours in building new skills and honing existing ones, all geared towards increasing my earning potential which in turn will allow me to contribute more aggressively to building wealth.
Be Teachable and Advisable: I mean, no one likes a know-it-all right? There are some things I know quite well, have valid experience of and can articulate to beginners. In that same vein, there are some things in which I am a complete novice. When it comes to learning about these things - especially in public settings - I take heed, shut up and listen. I have found when listening well, knowledgeable people are happy to impart knowledge and teachings.
So there we have it, my take on the wealth gap. I welcome any additional pointers as to what we can do personally to move across the wealth gap spectrum as well as support those making the same journey. Hit me up as always.
Until next time ✌🏾
Josh