According to a recent report in Ebony magazine (August 2011), black American wealth has taken a hard hit from the recession. As unemployment, pay check to pay check lifestyles, and the subprime mortgage crisis consume black communities, it’s clear that “struggling” and “black” remain synonymous in terms of finances.
Money Coach Lynnette Khalfani-Cox writes for Ebony, “…in 2009, the median net worth of Black households was $2,200, compared with a median net worth of $97,900 for White households. Just a decade ago, in 2001, the median net worth for a Black household was $12,500, $124,600 for a White one. Less than .01 percent, or about 112,000, of Black households in the United States have a net worth of $1 million or more. Even at $500,000 in net worth, only 333,000 Black households make the cut. So for every Black billionaire, such as Oprah Winfrey or Bob Johnson, or every well-paid athlete or celebrity, there are scores more African-Americans simply struggling to pay the bills.”
The above statistics are jarring but certainly a reality for many young black women’s financial portfolios. How many of you are saving for retirement through investing in IRAs or company-matched 401(k)s? Is paying off credit card debt a priority in your life? Or would you prefer to spend your hard earned salary elsewhere, allowing your balance to accumulate unnecessary interest? Do you plan to pay rent until you’re fifty? Or have you begun saving for a house, a great investment in this low buyer’s market? What about student loans? Have you considered picking up a side hustle to pay up sooner versus later?
I have a confession to make.
Since age sixteen, Suze Orman has guided my financial literacy. However, I still struggle with managing my personal finances to this day. I have credit card debt from 2009 on the backlog. I owe Citibank $25,000 in student loans for my New York University education, and that’s after my large scholarship. My stock portfolio is empty, as I sold everything to stay afloat when I lost my first job out of college. My savings account, yes, I have enough for a rainy month or two. However, it sure wouldn’t last three to six months of living expenses, as recommended by most financial advisors. Point blank, I know that I need to do better in the area of personal finances, particularly since the immediate future of black wealth is dependent on my generation.
Financial success boils down to good priorities. But truthfully, I’ve made a conscious decision to prioritize entrepreneurship over becoming debt free. Would a financial planner smack my knuckles? Probably. But I’m aware of the repercussions of my financial decisions. To pay down my debt, I’d have to work a 9-5 and lose focus on my business ventures. While it’s costing a grip in interest, I do plan to immediately pay down my debt once my business steadies. And if it fails, I’m prepared to walk back to the 9-5 world or full-time consulting to maintain and strengthen my above 650 credit score. I still pay all my bills on time, more than the minimum, and create budgets, so my entrepreneurial and personal spending don’t spiral out of control.
I’m privileged to know right from wrong in terms of finances, even when I choose to do the latter. While I’ve placed entrepreneurship at the helm of my financial priorities, I know that buying a luxury car before a house is unacceptable, living beneath your means versus above is better, and shopping for frivolous items isn’t part of my tight budget. Thankfully, I’m also childless and husband-less, so I don’t have a family to carry. But when I do get there, I hope to be one of many families to rebuild wealth in black communities. If debt is modern day American slavery, black Americans have a long way to go.
What are your financial priorities, Clutchettes? Are you focused on building personal wealth? Or have you become stuck in a bad financial rut? Speak on it.