Watching Bravo’s The Real Housewives Of Atlanta provides an idea of what ultra luxury lifestyles among wealthy African Americans look like. Certainly those ladies love luxury items, products, and services. However, soon after only season one financial problems touched most of them.
A recent study might provide insight into why black spending may also be a cry for help. According to Money Coach Lynnette Khalfani-Cox the median net worth of Black households in 2009, was $2,200 compared with a median net worth of $97,900 for White households. Of the 36 million African Americans, less than .01 percent or 112,000 of Black households in the U.S. have a net worth of $1 million or more. Even at $500,000 in net worth only 333,000 Black household fall into this range.
According to a report published by Target Market News of the total earning power of $836 Billion that Blacks earn. In 2009, Black households spent an estimated $507 billion in 27 product and service categories. That is an increase of 16.6% over the $435 billion spent in 2008. Most of what African Americans are spending their money on has no appreciable value.
Could black buying power be a bubble for the luxury industry? Black households were evaluated among the patterns of spending on none appreciable value items.
Consider Michael, 44, he drives a brand new Range Rover, has a 5 bedroom house in the suburbs, and wears Hugo Boss suits to his job as a Purchasing Manager. Although he earns $87,000, Michael is just getting by. After he pays his $1,400 car payment, $1,700 mortgage and other expenses, Michael has no money left for savings or investments. From the outside looking in, Michael looks wealthy. The reality is that Michael has less than $2,000 in savings and a negative net worth that includes over $50,000 he had to borrow to earn his graduate degree. Not to mention the decrease in value of the home he purchased right before the real estate downturn.
John and Valerie Hall have been trying to keep up with “the Joneses” since they got married in 2008. With a combined income of $165,000 annually, they appear to be living the “good life”: they live in a prestigious golf and country club community in Atlanta; he drives a 2010 Porsche Cayenne, and; she drives a 2010 Lexus I250c. From all external indications the Halls are living well, but the truth is that over eighty percent of their take home pay is spent on mortgage, car payments, credit cards, etc. They don’t have an emergency fund and are starting to feel the strain of their lavish spending.
Will this prompt a warning label for luxury brands? In the future we could see warning labels to buy luxury goods, products, and services responsibly. This is a necessary move to continue the sustainability of the luxury industry.