For the first time in eight years, median income actually increased in America by a healthy 5.2% to $56,516 according to the Census Bureau’s annual income and poverty report. We’re just now getting back to 2001 levels, which means the middle class is falling behind the “investor class” given the real estate market in most major cities and the stock market are near record highs.
Your day job income should be only one source of income. You must build multiple income streams if you want to achieve financial independence sooner. Further, you should continuously invest due to inflation.
Why Is Asian Income The Highest?
The most interesting data from the Census Bureau’s survey is about income by race. Take a look at this chart compiled by The Wall Street Journal.
Asian median household income: $78,000
White median household income: $62,000
Hispanic median household income: $46,000
Black median household income: $37,000
It’s surprising how much quicker/steeper the income recovery is for Asians, followed by Hispanics, Whites, and Blacks. What’s also interesting is how the income gap between Asians and other races seems to be widening. What’s going on here?
Here’s the short version from an Asian American’s perspective.
1) Smaller population, less “weight.” Asians account for only ~5.5% of the American population. One stark example of the benefits of having a smaller population is to take a look at Singapore and Malaysia. The per capita GDP in Singapore is an impressive $56,000, partly because its easier to take care of and mobilize 5.4 million people than it is to take care of 30 million Malaysians, whose GDP per capita is only $11,000. They used to be one country until Singapore split on August 9, 1965.
2) Asian immigrants who can afford to come to America tend to be wealthier. It costs money to flee a country for better opportunity. My ~22 year old neighbor from China who bought a $2.25M house is an example. If you’re poor, you’re stuck. Because the US is viewed as having some of the best universities in the world, many wealthier Asian parents send their kids here, Australia, and the UK. If you can afford to pay US private school or out-of-state tuition, you are probably wealthier than the median person. There is much less financial aid for international students. In fact, many colleges purposefully try and court international students because they pay top dollar.
3) Tremendous focus on education. Education is emphasized more than anything else in the Asian household. Get good grades, go to college, or else be a disappointment. Ever wonder why there are so many Asian dentists, doctors, and lawyers? More education is correlated with higher income and wealth. A 2013 Nielsen Research Report found that Asian American households have a median net worth of $89,300 compared to $68,800 for overall US households, a 30% difference. Meanwhile, roughly 49% of Asian Americans have Bachelor’s degrees vs. 28% of the general US population, a 75% difference.
4) More working people in each household. How do people afford to live in expensive Hawaii where there are few high paying jobs? Multiple incomes under one roof. It’s not uncommon to see a father, a mother, an adult son and his wife all live together and work. It’s common to see multiple generations under one roof in the Hispanic community as well. Family versus independence from family is highly emphasized.
What Is Considered Asian?
The biggest pushback from academics and Asian people is the classification of the word “Asian.” Thai culture is very different from Chinese culture. Japanese culture is different from Filipino culture. Every Asian race has its own language that can’t be easily understood by another Asian race. Meanwhile, some Asian countries like India have 22 official languages and 150 languages spoken by a sizable population!
Academics are afraid of the “model minority,” which unfairly puts pressure on different Asian races who may not fit the mold. Can you imagine being an Asian who doesn’t do well in school and isn’t in a profession that requires a graduate degree? Expectations can hurt people’s happiness and pride.
Check out how many different Asian people there are from this Wikipedia chart.
Pew Research has also allowed us to see the breakdown of the various different types of Asian income. It’s interesting to see Indian income at $100,000, or about 35% higher than the median income for all Asians. This may be due to a higher proportion of Indian workers in the high tech and medical industries. But if you are Burmese, Nepalese, Bangladeshi, or Indonesian, you may resent the stereotype that Asians are the highest income earning race.
Now that we understand not all Asians are the same, I want to share my personal thoughts on race and income from a Chinese American person who came to the United States for 9th grade and never left. My father was born and raised in Hawaii, as were his parents. My mother was born in Taiwan, and met my father in college.
Growing Up As An Asian American
With language and cultural headwinds, why is the Asian American income so much higher than average? There’s no proof Asians are any smarter or harder working than other races. I quit math after junior year in high school because I hated math and didn’t see the practical use of taking Calculus in day-to-day life. I also like to lounge around as much as anyone.
I can’t speak for all Asian Americans, but I can provide some perspective as a Chinese American who grew up in four different Asian countries for 13 years before coming to America for high school and college. I was born in the Philippines and lived in Japan, Taiwan, and Malaysia. In college I studied abroad in China for six months. In the workplace, I took business trips to India, Thailand, Hong Kong, Japan, and Indonesia for 13 years in a row from 1999 – 2012. I’ve lived in the States for the past 25 years.
Experiences That Shaped The Soul
When I was in the 4th grade in Taiwan, a White kid tripped me on the pitch and proceeded to yell racial slurs after I fell to the ground. He kept on barking obscenities until I swept his legs and stomped on his solar plexus in retaliation. He began to cry and we were both sent to “face the wall” for the entire afternoon recess period.
While we were squishing ants climbing on the brick just inches away from our faces, my assailant surprisingly turned to me and apologized. I was touched and apologized right back. We never fought or played dirty on the pitch again.
The soccer game was between “Chinese” vs. “Americans” while I was attending Taipei American School in the early 1980s. I was placed on the Chinese team due to my ethnicity, instead of my nationality. I was too young to understand that I had just experienced my first racial conflict.
When I was a sophomore attending The College Of William & Mary in Williamsburg, Virginia, I had another very memorable racial encounter. My girlfriend (who was half-Asian and half-White) and I were eating some midnight waffles at Denny’s, of all places when a group of offensive linemen came barging in. They sat in the booth next to us and told us to “get the fuck out you chinks” or else they’d beat the crap out of us.
By this time, I was already used to racial conflict as a 20 year old Asian American living in Virginia for the past seven years of high school and college. I always spoke up when there was an injustice, but this time I was outnumbered four-to-one. Although I mentally strategized on how to debilitate my oppressors, my girlfriend and I decided to leave as we were just about finished with our food anyway.
I felt ashamed I couldn’t do anything to fight for my girlfriend’s honor. A week after the incident, I made myself a promise to be financially independent as soon as possible so I would never have to take abuse from anybody again. If my loved ones encountered racial hate, then I wanted to have financial means to solve the problem beyond my fists.
Why Asian Americans Save And Earn So Much
Building wealth starts with savings. There is no such thing as investing, buying a home, or building alternative income streams without savings. Let me share with you reasons why I think Asian Americans save and earn more than the median. Again, this is just one person’s point of view.
1) Asians are allergic to debt. Taking on debt to purchase a car, a piece of property, or stocks is a relatively new concept for many Asians. We’ve been taught the tenet, “If you can’t pay for something in cash, you can’t afford it.” This tenet runs counter to the heavy consumerism culture in America. If you go to any property developer in China, it is common for 80%+ of the units to be purchased with cash compared to less than 40% in America. The same trend continues in India. Debt is slavery. Cash is freedom. The US personal savings rate is roughly 4.8% according to the US Bureau Of Economic Analysis compared to 30%+ in places like China and India.
2) Lots of historical uncertainty and upheaval. When you have political instability and war, people tend to save more for their uncertain futures. Over the past 100 years or so, there have been a lot of tragedies in developing Asia. The Cultural Revolution and the Nanjing Massacre are two such tragedies in China. The ongoing heavy hand of the government may be another. The Taiwanese are perpetually paranoid the Chinese will invade. The Japanese have been aggressively saving since their bubble collapsed in the 1980s due to deflation. The 1997 Asian Investment Crisis destroyed the wealth of millions of Thais, Indonesians, Malaysians, and South Koreans. Meanwhile, America has enjoyed a much more stable path of growth thanks to our Democratic system. Having better expectations of the future gives you more confidence in spending more money.
3) Few Asians in leadership positions. When there are hardly any Asian American politicians, actors, and CEOs, it’s more difficult to visualize yourself in such positions as a kid. After all, the Asian population is small. When there are few examples to aspire to, there’s a tendency not to even bother. Instead, Asians may just decide to be their own boss through entrepreneurial endeavors e.g. restaurants, convenience stores, laundromats, landlording, online businesses, etc. Entrepreneurship tends to be much more lucrative than being a median income worker over the long term.
4) Family finances. It’s common to see post-college Asian adults still live at home with their parents. Why pay rent when you can live with the parents and save money for a downpayment, is a common way of thinking. There’s also the traditional aspect of living at home until one gets married, unlike US culture, which encourages independence as soon as possible. If you save $30,000 a year in rent for 8 years until age 30, you will likely be better off financially than average. Personally, I could never imagine living back home with my parents after college. Related: A Massive Generational Wealth Transfer Is Why Everything Will Be OK
5) Sports is not a realistic way out. Only a tiny percentage of the population ever become professional athletes. But the odds are even starker for Asian Americans in athletics, an area where meritocracy reigns supreme. There are hardly any Asian American basketball, football, or baseball players for example. And these three sports are a part of Americana where the best athletes are revered as heroes. Even for non-contact sports like tennis, there’s only been a handful of Asian athletes who have risen to the top of the ranks. You’re only making $100,000 – $150,000 a year before travel expenses as the 100th ranked tennis player in the world. Without the hope of athletics, the only way left is in the field of academics and the arts.
6) Academics is the main level playing field. If you study harder, you will likely get better grades. If you get better grades, you’ll likely get into a better university. If you get into a better university, you’ll likely get a better job and make more money. It doesn’t matter if you’re only 5 feet 1 inches tall, you’ve got the same opportunity as someone 6 feet 10 inches tall in academics. Even if you are poor, so long as you have a stable household you can still study as long a someone who is rich. There is nothing more important to the Asian American population than academics. Parents will do absolutely anything to help give their kids a chance to excel in school – from after-class tutors every day to Sunday school.
7) Lower divorce rates. Asian-American families divorce at roughly half the rate of other Americans. There is a stronger social stigma against divorce in the Asian community. Although most marriages occur due to love, practical reasons for marriage may be more common. For example, arranged marriages can be found in Indian and Chinese culture to a lesser extent. I have Asian friends who aren’t romantically in love with their husbands, but stay together due to social pressure and convenience. If you have a more stable household, finances tend to be stronger and children tend to have a better chance of going to college and finding a better paying job.
The Realization Nobody Will Save Us
Given Asian Americans account for only ~5.5% of the US population, many Asian Americans realize that nobody is going to save us – not the government, not our colleagues, not the NBA, not the majority. Even if every single Asian American was brilliant and physically intimidating, we’d still get crushed by everybody else as a minority.
The only people Asian Americans can count on are our immediate family and education. This is why you see such a concentration of Asian minority groups in various urban settings e.g. Chinatown, Koreatown, Japantown. It’s a similar concept to why schools of fish swim together in the great unknown ocean.
My father explained to me after my fight on the pitch that this sort of racial conflict would keep on happening as I grew older. He was absolutely right. He taught me that in order to stop getting picked on I would have to fight back with my mind because there’s always going to be someone physically bigger and more intimidating than me. And even if I was a hulk with a black-belt in martial arts, a pip-squeak with a gun could end everything in a hurry. With his advice in mind, I started taking school much more seriously.
When I graduated from college and got my first job in NYC I decided to save as much money as I could. After the first year, I maxed out my 401k and saved 20% of my after-tax income. Yes, it sucked sharing a studio with my high school buddy as a 23 year old, but these are the types of sacrifices I had to make in order to save. Getting in at 5:30am and lasting until 7:30pm in order to eat the free cafeteria food wasn’t so bad.
After my third year of work, I was regularly saving 50% of my after-tax income because all I could think about, when it was dark coming in to work and dark leaving work was how wonderful financial independence would be. My goal was to make the most money as soon as possible in order to break free.
Burn Your Boats
Perhaps it’s easier making and saving money as a minority in America because there’s so much urgency to get ahead thanks to a tiny safety net. Going through racial conflict and seeing so much poverty in developing countries really motivates one to aggressively work.
There’s a saying that if you want to succeed, you should burn your boat. Once you’ve got no way to leave, you’ll simply do your best to thrive. But it’s hard to burn your boat when you’re living on SS America, a luxury cruise liner with all you can eat buffet 24 hours a day!
Previous poll on household income you can still participate in.
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