There are times where the world feels like it’s on fire. My heart has been so broken over the last year – George Floyd, the reaction to Black Lives Matter in the UK, the whitewashing report that “found” there is no racism in the UK. So much falling apart. This isn’t a political blog by any means, but it’s disingenuous to pretend that personal finance is apolitical. And it won’t matter how much money I save if society is unlivable for my children, and other people’s.

I’ve been thinking a lot about how race relates to FIRE. I am white, British woman, and have written before about coming to FIRE from a place of so many privileges. I am well aware that doesn’t give me a credible platform to discuss issues of race, so I come to this post from the position of someone living in a society which is visibly unfair, and reflecting on what that means. Where possible, this post links to the voices of people of colour to better hear what people have to say.

The thinking behind FIRE is that it’s accessible for everyone which is true, but it’s important to recognise that people have different starting points and different obstacles. In spite of what the British government report might say, as Amanda Parker writes in the FT, institutional racism is real. This doesn’t mean that people of colour can’t or won’t succeed of course – but it does mean that the hurdles in their pathway start at birth and impact on life and financial opportunities which impact across a life time, and across generations. Parker unpacks the report, noting that it “…cite[s] people from ethnically diverse backgrounds who “make it” as evidence that they didn’t face disproportionate disadvantage on their way to success… The report also cites educational outcomes — at GCSE level — as evidence that the UK is no longer racist. But it then ignores the disparity in earnings among ethnically diverse people [and] ignores the TUC report (based on the government’s own data) showing that ethnically diverse people have been disproportionately affected by redundancies during the pandemic.”

In the USA, there is more of a recognition (though not much in the way of attempts to institutionally remove it) of the Black Tax. As Lynnette Khalfani-Cox writes, “the median Black household has a net worth of just $24,100, a fraction of the $188,200 in net worth the median white household has, 2019 Federal Reserve data shows. And these numbers don’t always show the nuance of financial instability for many Black families. A quarter of Black households have zero or negative net worth, compared with a tenth of white families, according to the Economic Policy Institute.” So the results are stark, but they come from generational, structural causes: a myriad of ways in which people of colour are less likely to receive a good education, less likely to be supported with career development or receive stable contracts, less likely to inherit money but much more likely to need to provide a financial safety net for family members, and less likely to be offered loans or mortgages. For more on the Black Tax, check out this episode of the Journey to Launch podcast, and the work of Shawn D. Rochester who is featured.

Disparity in household income and net worth is just as stark in the UK. 2020 figures found that white household income is 63% higher than Black households. Whilst approaches to tax and the benefits system makes a difference to take-home pay, especially for lower income households, even once those are taken into account Black households still have 18% less in terms of ‘final income’. The impact of that is obvious: I save what I don’t need to spend. Being in a position where your income is more likely to only cover basic needs will clearly make it harder to save. Black and Bangladeshi households in the UK have 10p in assets or savings, to every £1 of white-owned assets. For more on how things look for women of colour in particular in the UK, and sage advice on personal finance, check out Selina Flavius’ Black Girl Finance.

So – this maybe doesn’t feel like a post full of hope. But part of any solution has to be the ability to honestly look at challenging issues, and talk about them. Then maybe together, we can start to make changes.