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.

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  • C in Cleveland

    Here’s another thought on shaping opportunities. Young people need to learn leadership, negotiation skills, and self advocacy. Without having these qualities developed, many will be too intimidated to step out on faith. We need examples and exposure early and often. I know for sure, that success is not achieved in a vacuum. Opportunity, connections, talent, and external factors all contribute to the end result.

    • Reggie

      Add timing to that as well. Had you brought real estate at the cusp of the housing boom and sold them, your story would be different. Look at that guy from Bravo’s Flipping Out. I don’t think they can rightfully call the show by that same name. Who’s flipping a house now.

  • Kim

    The key to the future of Black wealth…? One word. Africa.

    If we’re interested in the success of Black people as a whole, the key is to do like every other group has done for centuries, keep Black wealth and resources in Black hands. And if you’re talking about wealth nowadays you have to think globally.

  • On the comments credit and saving habits, not leading to wealth, here are some things to consider.

    As someone who has applied for business loans, rented store fronts, see just how far you get without those assets and skills….I will bet you hard earn money , not very far at all.

    There seems to be a notion in our community to downgrade this, it is like building a fast engine and putting in a regular transmission, once you gun it, the tranny is garbage and you are going no where fast.

    Starting a business, that serves the right markets and becomes sustainable, with long term profitability is one of the quickest ways to wealth, better than investing, better than a job, few will dispute this.

    To start a business, you needs some tools, the market, the big ideal, strategy, drive, cash or access to credit.

    Unless you are creating your products and have no or very cheap delivery costs ( digital products) there is no way around this and if any one of those elements is deficient your business will fail before it starts.

    When you become a entrepreneur, you effectively, are truly riding on your reputation and credit is one huge part of that equation.

    Most businesses in existence today would have not happened if the founder did not have access to credit or the capital markets ( for the record before you do an IPO they check the owners credit report and funky things can stop it or hold it up!!!)

    When you apply for a merchant account, they check the principle’s credit report, ( back in the day you could not get a merchant account with bad credit, that has changed now with paypal) your score determines your process rate. You want a SBA loan once again back to your credit score. Construction loan, your credit report and 2-5 years financials to get a loan.

    When you lease property they check your credit report, unless you are a 10 year old corp with an outstanding paydex, this is going to be a part of your business life and in today economic climate it is still relevant. Your credit can actually make you money, if you know what you are doing.

    Many of the tech titans, organically funded their business from credit cards and savings, initially then the second round came from friends and family before moving to angels and venture capitalists. I do not care how good you ideal is, if you can’t get your hands on the capital to bring it market, it is no good to you.

    Inc magazine has conducted several studies and surveys, on average 60% of the entrants of the Inc 500 started their businesses that way and you know of many of these companies.

    There is a wonderful book call the The Illusions of Entrepreneurship: The Costly Myths That Entrepreneurs, Investors, and Policy Makers Live

    I strongly urge any person who is going to start a business to read this book!

    There is a section on why black people do not start businesses as frequently as other groups, I have started 9 business in my life , I wish I had access to the information in this book, the first 5 business would have not been the spectacular failures they were.

    There is also a section on what motivates women to start businesses and it is 180 degrees from the reasons men initiate a business!

    If you cannot build a great score ( this has nothing to do with income) you are going to have trouble building a business,big trouble, they both are hinged on discipline. Proper money management skills and great credit can build you a fortune.

    Quick example- Factoring ( fancy word for credit) will allow you to buy $100,000.00 in goods take 6 months to pay, if you know your business, you can sell the good and pay back the loan with business proceeds, many fortune 500 corps do this every single day, the same group that had record corp profits while the average American struggles.

    Look at the scores of athlete and entertainers that made millions to tens of millions during their careers who are FLAT BROKE now, if these people had someone to teach them how to manage money, they would be better off, versus people saying it is a damn shame….

    • C in Cleveland

      Your statements are so true. You can’t get from point A to B without the basic building blocks, budgeting, financial savvy, negotiation, and drive. I agree with Reggie that timing is crucial as well. Although our economy is still in a rut, there are emerging industries that can yield huge payouts to those who jump in fast and know what they’re doing. Demand simply shifts rather than completely evaporating.

      Entrepreneurship is not for the faint of heart or latecomers. I’ve seen people enter oversatuated markets without the means to compete. Owning a business is no guarantee of success. I think these conversations need to be balanced with the pitfalls of self employment and the all too often story of failure and bankruptcy. Otherwise, folks are only hearing the a skewed reality.

    • You are right, only a certain segment of society is cut out for entrepreneurship ( the discipline aspect not intellect) it is a very rough road! Folks see the trappings with little regard to the hard work it took to arrive at that point in life.

      I have worked 80-90 hour weeks for years, no hanging out, working on holidays. I cannot tell you what is the current hot tv show, because I really don’t watch tv. If it was not Facebook, many pop culture events would be lost to me.

      That is why I am strongly urging people to get their personal financial houses in order first before trying to build wealth, to do otherwise it like walking with no feet….stumble, stumble,stumble….

  • Dolce Diva

    I will definitely take advantage of all the info provided by everyone who commented on this post. And they say black people don’t help each other out. Thanks guys. I’m tired of living check to check.

  • TinaP

    @Glendon Cameron

    You have a lot of great and wise comments. Enjoyed them.