Hello, everyone.

It's Chelsea. And before we get into this week's video, I wanted to let you guys know about an exciting new thing we're doing at TFD.

It's called The Studio at TFD, and it is a series of digital workshops around all sorts of topics, from money management to mental health to organization to entrepreneurship and everything in between. We've got several amazing events coming up, and you can find out more about all of them at thefinancialdiet.com/studio. See you guys there!

Hey guys, it's Chelsea from The Financial Diet. And today, I wanted to talk to you about something kind of serious that is a topic we have wanted to cover for a while here on TFD because we think it's very important. Obviously, it's a bit more of a relevant topic in terms of the news lately, but it's one that deserves considering on an ongoing basis that shouldn't just be a trending hashtag or a flash in the pan.

And that is systemic racism, and how it intersects with personal finance and finance generally. One of the balances that we always try to strike here at TFD is the balance between where individual choices can help you live a life that is better and healthier and more the way you want it to be while still acknowledging that we don't all have the same choices, and we're not all making choices within the same framework. For example, we know that, in America, there is a big wealth inequality problem.

Most of us know that the top 5% of wealthiest Americans have more wealth than the bottom 2/3 of Americans combined. And three men, just three individual men, hold more wealth than the bottom 50% of Americans put together. But even when acknowledging the massive systemic issue of wealth inequality, those numbers do not paint the whole picture.

Because what it means to be wealthy changes drastically depending on race. Generalized numbers like median household wealth held by Americans actually miss a key point because that value, across all Americans, according to the Institute for Policy Studies is just over $84,000, which sounds good. But if you break it down racially, the picture is much more dire.

The median amount of wealth held by black families, for example, was a staggeringly low $3,557, just 2% of the wealth held by the median white family. And this is not a mistake. These massive disparities between the financial picture of black and white Americans have been existing for centuries.

And we can trace quite a lot of it back to laws, specific policies, and open discrimination. Now, a lot of white Americans may not even be aware of a lot of the systemic, entrenched factors that led to the racial wealth gap we have today. And honestly, why would they be?

It doesn't affect them. And whether they realize it or not, they've benefited from that. But I think it's time that we understand that, when we talk about things like systemic racism, we're not just talking about what is happening today at this very moment, although there are many elements there that need addressing.

We're also talking about, what are the cumulative effects of these centuries and decades of discriminatory practices? What situation have they created today? What is the playing field on which we're all operating?

What are the choices we're all presented with? And how can we get to a place where we're actively making this playing field more equal for all of us? We are very aware at TFD that the advice that we give is, in many ways, dependent on is the ability to make choices.

So our goal is to make sure that as many people as possible have as many choices as possible. And whether we realize it or not, systemic racism is a massive factor in how few choices some people have today. So let's get into it with these seven ways that racism has impacted personal finance.

Number one-- historic policies have intentionally made it harder for black people to thrive financially. Americans love to buy into the idea of America as a place where anyone can make their dreams come true. And we have an almost cultish worship of the, quote unquote, "self-made man," people like Jeff Bezos, Steve Jobs, et cetera.

Even if-- spoiler alert-- people like Bezos actually received a fair amount of money from their families in order to start their companies. But even outside of these extreme cases, like a Bezos or a Jobs, there is still a general belief that this is the country in which you are most able to experience upward social mobility through, primarily, efforts of hard work and good choices. But historically, black Americans have been intentionally denied many of those most common vehicles of upward social mobility and wealth accumulation.

Many people who want to deny the impacts of systemic racism will say things along the lines of, slavery has been gone for centuries now; why are we talking about it? And the truth is that, even if slavery had no impact on today's financial situations of black Americans, which is arguably very untrue, the end of slavery did not bring about the end of intentionally discriminating against black Americans. Post-Emancipation America intentionally regulated black Americans to second-class citizenship-- attending underfunded schools, being prohibited from certain jobs and neighborhoods, locked out of much of higher education, and forced into a generally segregated world.

And these laws were born out of white supremacy. These laws even extended all the way to voter disenfranchisement. Laws were passed to intentionally restrict the rights of black voters on everything from their reading comprehension, their property ownership, their ability to pay a poll tax, or even whether or not their grandfather had voted.

So in addition to these discriminatory laws and policies being passed, through very effective efforts to suppress the black vote, black Americans were not even able to have proper political representation to fight against a lot of these laws. Using politics as a means to enforce racially discriminatory policies and then intentionally keeping one race largely out of politics was a very effective way of oppressing black Americans for a long time after the, quote unquote, "end of slavery." Number two-- people of color have lower homeownership and asset accumulation rates. Now, racism in this country has always disproportionately targeted black Americans.

But when we look at it through a slightly wider lens, we see that favoring whites over people of color, generally, has also been a trend. For example, when we talk about wealth accumulation, wealth tied to home ownership represents a pretty large part of it for most Americans. But only 44% of black families in the United States own a home compared to 71.9% for white families and a national percentage of home ownership of 63.7%.

And a major reason for this disparity is the practice of redlining. Redlining was the practice of banks denying people, overwhelmingly black and Latino people, mortgages or loans to help them buy a home. Lenders would outline, in red ink, the neighborhoods deemed to be at risk of default and refuse to lend to people within those neighborhoods.

This practice was supported by the federal government, which helped create those maps. The real estate app Redfin has found that a direct result of these redlining practices has been a loss in about $212,000 in potential accumulated wealth for black and Latino families over the past 40 years. Number three-- interest rates for loans are higher for applicants of color.

Now, redlining was a very specific and pervasive issue that prevented primarily black and Latino families from accumulating the same homeownership, value, and wealth that white families were able to. But there is also a sort of reverse redlining happening in the kinds of loans that these same families are able to access. Essentially, this is when banks charge black and Latino applicants primarily higher rates as well as higher late fees for the same loans.

These predatory practices led to a disproportionate loss of wealth in black and Latino families during the 2008 housing crash. Today, according to the Pew Research Center, black borrowers still face the highest rejection rate, 27.4%, more than double the rejection rate for white and Asian borrowers and a little under 10% higher than for Latino borrowers. And the main reason given for rejecting black applicants is an insufficient credit history, which is, in and of itself, an issue of banks refusing to extend credit to black people.

A study conducted by researchers at Berkeley found that 1.3 million black and Latino borrowers were rejected unfairly. When stripped of racial identifiers, their applications were approved based on their incomes and their credit scores. And when black and Latino borrowers do get a mortgage, it still isn't quite an even playing field.

In 2013, 73% of white homeowners and 83% of Asian homeowners had mortgage rates under 5% compared to less than 33% of black and Latino households having rates under 5%. This sort of double whammy that primarily black and Latino families have faced when it comes to homeownership, of redlining on the one hand and predatory and discriminatory lending practices on the other, has largely locked these families out from the same pathways to wealth accumulation that white families have been benefiting from for generations. Number four-- black Americans have higher student loan debt.

On average, black college students have higher student loan debt than any other racial group. The national average student loan debt hovers around $21,000. But for black students, that debt averages out to be about $26,000 for black men and $30,000 for black women according to the American Association of University Women.

And more black families carry student loan debt than white ones according to the urban institute. 42% of black families carry student loan debt compared with 34% for white families. Probably the most compelling reason for this discrepancy is that lack of generational wealth in black families that we've talked about. On average, white families are about five times more likely to receive large financial gifts or inheritances from family members, which can then be put towards education to offset the need for student loans.

If you simply don't have access to this generational wealth in order to go to college-- which many Americans agree is a primary vehicle for class mobility and what smart hardworking people should be doing-- you are disproportionately going to have to put yourself in debt to do that. And even if you want to be as savvy as possible in offsetting the cost of college by finding creative ways to do it, black Americans have less opportunity for that as well. Many black students don't have access to college credit opportunities in high school, such as taking AP or IB classes.

According to the US Department of Education, 40% of white college students earn some type of college credit from these types of classes compared to only 23% of black students. And in most cases, this was an issue of access. Schools with large black populations don't have the same access to these types of credit-earning classes. 25% of schools that serve the highest number of black and Latino students don't offer a second year of algebra, let alone AP or IB classes for credit.

One of the most important frameworks through which to understand systemic racism and how racial discrimination can affect things like your financial standing in life, is to understand that it's never any one individual choice or instance. All of these factors influence and compound each other. We tell students that the best way to get ahead in life is to get an education.

And yet, for certain student groups, in this case black Americans, that choice is more expensive because of, in large part, the wealth disparities and school disparities that they're experiencing on the way into college. And those issues are themselves systemic in nature and have resulted from generations of differential treatment. So we see, when we look at the whole picture, that we can't just take any one individual personal choice and reduce outcomes to that.

We must look at where all of these choices come from. But let's say these students do go to college and get an education and get a job to work off that student loan debt. Well, bad news because number five is people of color typically earn less.

The median weekly income for white people is $976 compared to $756 for black people and $714 for Latinos according to the Bureau of Labor Statistics. And being in the top 10% of earners means something drastically different based on your race. For white people, you need to earn $117,986 annually to be in the top 10% of earners.

But for black people, the top 10% threshold is $60,502 according to the Pew Research Center. And even when looking at median income, white families fare better. The median income for a white family, according to the US Census Bureau is $71,000 compared to $41,000 for black families.

And unemployment rates for black people are also higher than those for whites. Currently, it's at 16.8% for black people compared to 12.4% for white people. Now, there are a massive number of factors at play here.

And again, we have to think about these things as a collective result of many, many different factors. But one common factor that impacts the earning potential of people of color, and specifically black and Latino people, is their ability to even get into certain jobs. Race has been demonstrated to play a major factor in terms of whether or not equally qualified candidates will receive a callback for a job.

And black people are disproportionately underrepresented in positions of hiring power, which, when you consider that people tend to hire people who are similar than them, is a dynamic that tends to repeat itself. This lack of representation easily adds to underlying biases when it comes to hiring practices as well as promotional practices within that very company. And even when black Americans ascend to executive-level roles within a company, for the same role, they are paid typically $0.79 on the dollar for what a white person is paid for that same role.

So even the people who have done everything right and ascended to the very top of the ladder are still facing discrimination. Number six-- health care costs also have racial discrepancies. Here's a fun and lighthearted fact. 66.5% of all bankruptcies in the United States are tied to medical bills.

And the uninsured rate among black Americans is 9.7% compared to 5.4% for white people, meaning that almost 10% of black people in the United States have no assistance in affording medical care. For black families, the out-of-pocket costs related to health care amounts to 20% of their annual income, double the percentage of the average American family. Black people also face higher instances of chronic illnesses, such as asthma and diabetes that require lifelong care and medication.

Nearly 15% of black people have diabetes. And asthma prevalence is highest among black children resulting in 260% higher emergency department visit rates and a 500% higher mortality rate due to asthma than their white counterparts. And it can be easy to think, well, what do medical issues have to do with wealth?

But when we look at these numbers in a broader context, it becomes clear that all of these other systemic factors can have a huge impact on health outcomes. First and foremost, being poor in this country is an almost direct correlation with having worse health outcomes. Living in food deserts, forgoing necessary preventative care in an effort to save money, living in more poorly built homes, attending more poorly built schools, having higher levels of stress, which has enormous physiological impacts-- all of these things compound to create a health environment that is, in short, not very desirable.

And because black Americans, on the whole, tend to experience poverty much more than their white counterparts, it's no surprise that so do all of these ill effects when it comes to their health. There are also pretty staggering differences in terms of the medical treatment that is received depending on your race. In fact, one of pervasive myth that still exists in medicine today is that black people have physically thicker skin than whites and that, as a result, they actually experience less pain.

This is a myth that has existed since the time of slavery and was used as justification for the brutal physical treatment and punishment that slaves experienced and also, quite simply, to reduce the guilt that whites would otherwise feel in treating an entire class of humans this way. And while, yes, technically, slavery ended close to 200 years ago, those myths are still seen in medicine today. These misguided perceptions that literally date from the time of slavery about how black people experience pain or how susceptible they are to otherwise seriously taken illnesses or injuries manifests in worse treatment and, unsurprisingly, a worse relationship with medicine as a whole.

Whether we're talking about the disproportionate rates of uninsurement, the historical legacy of black Americans being used as unwilling Guinea pigs in medical experiments, the pervasive perception that they experience pain in a different way than whites, or even that their skin is physically different when it comes to pain combines to create an experience where black people are simply not taken care of the way whites are when it comes to their health. Lastly, when it comes to systemic racism, it's important to remember that race alone is not a nuanced enough lens to look through. When we broaden our lens to include gender, we realize the unfortunate point, number seven, which is that women of color are the most impoverished.

As we mentioned before, black women, on average, experience higher student loan debt rates than their male counterparts. And they also experience more depressed wages. Black women earn 66% of what white men earn with a median annual salary of $36,700 per year compared to the median salary of $55,600 for white men, according to the US Census Bureau.

There are also much more likely to live in poverty, with 20% of black women living in poverty compared to only 9% of white women. Poverty is determined by house size and based on the US Census. But for a four-person household, that means that 20% of black women earn $26,370 or less.

For an individual, that would mean earning less than $13,300 per year. Now, it's important to consider why this might be. Yes, of course, sexism plays a role in this because we also see disparities between white men and white women.

But it's important to consider the way in which we value, as a society, the jobs that are disproportionately performed by women of color. For example, a lot of domestic work, home health aides, senior care, child care-- these jobs which are essential to the functioning of society are often paid poverty wages. And it's hard to argue that this isn't, in part, because we've always internalized that these are jobs to be done by a simply lower class of people.

Historically, these are jobs that were performed by people who existed in a different social caste, whether in times of actual slavery or throughout the heavy discrimination of the years that followed, the disproportionately black women who were performing these jobs were not considered valuable. We didn't feel that we needed to pay for these jobs in the way that we pay for other labor. And those perceptions have remained despite the incredible social necessity of something like, for example, a home health aide.

Domestic work is incredibly valuable and indispensable for society to function. And yet, we continue to undervalue it in comparison with its necessity. And it's worth considering that that's probably because of who has historically performed these jobs.

That dynamic can't explain the entire wealth disparity or earning potential disparity, but it starts to give us a broader framework of understanding why certain jobs are valued by society and certain jobs aren't. Ultimately, someone earning low or high wages for a certain type of work is entirely dependent on how we, as a society, perceive that work and perceive who does it. Ultimately, when we talk about financial literacy or financial best practices, a lot of those will come down to our individual choices.

Many of us do have the choice, day to day, whether we spend money on something that is short-term enjoyment or we redirect some of that money to more long-term goals. And all of us understanding the financial dynamics at play and the big decisions we make, whether it's signing onto a mortgage or planning our retirement, only empowers us to make better choices. But as we said at the beginning, we don't all have the same choices.

We don't all exist in the same framework. And we're not all coming from the same place. With the majority of wealth in this country being inherited, the history that we come from, the dynamics in which our parents and grandparents were able to live and work and flourish have a huge impact on the lives we're living today.

And even someone who makes all the, quote unquote, "right choices," if they are making them in a highly disadvantaged framework, both historically and currently, are going to have worse outcomes. The good news is, though, how we operate as a society is not fixed in stone. We can evolve past these dynamics if we choose to be honest about them, confront them, accept the role that they might have played in our own success or our own advantages, and commit to building a world in which we all can start from a more equal playing field.

I believe, personally, that there are many things we can do, from policy agendas to strengthening our labor movements that could help correct for some of these issues. But I also think, on an individual level, it's important for us to understand that, just because you might happen to benefit from a system that was disproportionately favoring you and favoring your ancestors to help build a better life for you today doesn't mean that you are not a hard worker, or that you haven't made good choices, or that you're a bad person. We can accept these realities without taking them personally or feeling that they somehow question who we are.

Because ultimately, acknowledging systemic racism and discrimination is about having empathy and having a commitment toward building a better world for everyone. It's not about flagellation yourself personally or apologizing for being white. No one cares.

And it is possible to find a balance between everyone being free to make choices to build the lives that work for them and being lucid and honest about the framework in which we're making those choices. I hope that, as a viewer of TFD, you understand that nuanced balance, and you don't feel that it costs you anything to admit where you might have had advantages or privileges because you want everyone to be playing from a better starting line. As always, thank you guys for watching, and don't forget to hit the Subscribe button.

And come back every Monday, Tuesday and Thursday for new and awesome videos. Bye, everyone.