I was drinking some coffee and watching the Fox Business channel. They were talking about wealth and the wealth gap between African American families and White American families. When the statistics displayed on the television, I had to put my mug down and pause for a moment to make sure what I was seeing was true. According to what was displayed, the median wealth of an African American family was $24,000 and the median wealth in a White American family was over $188,000. Not to mention we have heard that the average net worth of American Americans is expected to be zero by 2050. Economist are predicting that the impending economic tidal wave coupled by automations will be what causes many in the Black community to get left behind. This is why establishing wealth and financial independence is important.
Collectively as a community we hold a 1 trillion-dollar spending power…That’s good…but the money is building the wealth of families that are not part of our community. We have heard the cries of Dr. Martin Luther King, Jr., Stokely Carmichael, Malcom X and other leaders in our communities to take our finances seriously individually and collectively, but for the most part their cries have fallen on deaf ears. In 2022 the spending power of African Americans continues to increase, but the wealth in the community continues to go down. It’s not too late for us to change this grim statistic. Taking our finances more seriously is something we must start doing now!
So how can we establish financial independence? Here are a few simple and effective ways below.
First, what does the term wealth mean?
Wealth is a term that is used to describe a person’s or family’s worth. It can be used to measure a person’s or family’s worth in terms of their assets, including property, savings, and investments. Wealth can also be measured in terms of a person’s or family’s income. Some people might consider wealth to be nothing more than having a lot of money, while others might think of wealth as being able to live comfortably without needing to work. In the Black community building wealth has become a common idea, but without execution, the idea remains just that…an idea and nothing more. With the current economic climate, economist have estimated that by the year 2050, the average wealth for black families will be $0. Let that sink in for a bit.
Why does the wealth gap keep widening?
In the United States, the wealth gap has been widening for decades. The richest 1 percent of Americans now hold nearly 40 percent of the country’s wealth, while the poorest 50 percent hold just 2.5 percent. What’s behind this growing inequality? One of the key reasons for this inequality is that wages have stagnated in recent years while corporate profits have soared. This has led to an increase in income inequality, as the wealthy have seen their earnings grow much faster than most.
Another reason is due to lack of resources and access to financial literacy. Also there has been a lack of opportunities for our people of color. Nevertheless, there is something that we can do about closing the wealth gap now and that is to become financially literate.
Why is financial literacy so important to the Black community?
Financial Literacy is important to the black community because financial literacy can help close the wealth gap. Financial literacy can help us to build business’s and create jobs in our own communities. When we learn financial literacy, it can help us to protect our families during turbulent economic times. With access to more resources the crimes in Black communities can potentially be reduced. Finally, financial literacy can help ensure that future generations have access to education and various opportunities.
What are some ways we can learn financial literacy?
There are many ways that we can learn about financial literacy. One way is to take a class or workshop on the subject. Another way is to read books or articles about financial planning and wealth management. We can also watch videos or listen to podcasts on financial topics. And, finally, we can talk to people who are experts in financial planning. By learning about financial literacy in different ways, we can gain a better understanding of how to manage our money and build wealth.
How Can Young Black Professionals Establish Financial Independence and Build Wealth?
- Invest in yourself and find your purpose
- Be disciplined and stop the urge to consume
- Keep our communities clean and stop tolerating crime and violence
- Create an emergency fund
- Learn how taxes in your state affect your income
- Stop racking up bad debt and create a plan to pay it off
- Invest and learn about compound interest
- Never stop learning about ways you can better your finances
- Understand your job controls your salary…Not your income
- Get Life Insurance and lock in the premium
- Consider Relationship Banking
- Understand the importance of Ownership
- Live below your means
- Understand that it’s okay to move back to your childhood home
Invest in yourself and find your purpose
Investing in ourselves and finding our purpose is a great first step to establish financial independence. There are many ways to invest, and it will vary from person to person. For example, we can invest in therapy to deal with childhood trauma that could be affecting us or attend workshops to learn about ways we can improve our finances. We can also practice meditation or even prayer. Remember, don’t just do something because someone else told you it was a good idea, find something that resonates with you. Most of us found our purpose by finding not just what makes us happy, but also learning that our purpose is to serve and help others.
Be disciplined and stop the urge to consume
When it comes to wanting to consume, it can be difficult to stay disciplined and stop the urge. But by taking some simple steps, we can work towards being more financially independent and less reliant on consuming. Firstly, we need to identify what’s motivating us to consume. Is it boredom? A lack of purpose or meaning in our lives? The need for social acceptance or approval? Once we know why we’re struggling with temptation, we can start working on ways to address that. Some ways that we can work on our urge to spend is being mindful of who we spend our time with. Also, we can stop letting culture influence us of what we need. We need to remember that most entertainers we may be following are rich and not wealthy and are most likely getting paid to promote products.
Keep our communities clean and stop tolerating crime
As young black professionals we should be more involved in our communities and hold our leaders accountable for making sure that there is enough funding for things like parks, street cleaning, and law enforcement. By working together, we can create the kind of communities we all want to live in. When crime is high, the surrounding areas become underdeveloped, and the property values stay low. High crime affects the schools and jobs that are around the community as well. If the crime is low in the community, we can pivot to prioritize rebuilding instead of tearing down the community and hurting each other. This allows more job creation which can create opportunities for the community also. When we create our own businesses in the community we can pass them down and that business can produce generational wealth.
Create an emergency fund
Having an emergency fund is important because it can help us maintain our financial independence. If something unexpected happens and we don’t have any money saved up, we could quickly find ourselves in a difficult situation. However, if we have a well-funded emergency account, we’ll be able to handle most unexpected emergencies without dipping into our savings or taking out a loan. Most of us have had the experience at the car dealership when we go for an oil change and learned that the car needs $500 worth of critical repair work. Having an emergency fund comes in handy so you don’t have to rack up the balance on your credit card.
Learn how taxes in your state affect your income
One of the most important steps in establishing financial independence as an African American is learning about taxes. By understanding how taxes work, we can make more informed financial decisions and keep more of our hard-earned money in our pocket. Having a solid financial foundation is key to achieving our goals and building wealth over time. Some of us may have seen the meme saying, “Create an LLC and write off your entire life”. I’m here to inform you that it’s not that simple and not as easy as people make it seem. If that were the case, we would all be taking the “Write my life off deduction”. There are certain qualifications that need to be met in order to take advantage of certain tax benefits. I highly suggest meeting with a tax professional to gain a better understanding of taxes and how they can work in your favor.
Stop racking up bad debt and create a plan to pay it off
As stated earlier we need to stop feeling the urge to consume. We must stop racking up bad debt and create a plan to pay it off. Some ways that we can pay down debt are making extra payments whenever we can, eliminate high-interest debt first, make a budget and be disciplined, seek financial counseling, or create a scalable side hustle and use part of the income to pay down debt. Debt is a huge financial burden that can keep us from achieving our financial goals. Eliminating bad debt can in the medium or long term play a huge role in establishing financial independence.
Invest and learn about compound interest to build your wealth
There are a few different ways that we can invest and learn about compound interest. One option is to open a brokerage account. A brokerage account allows us to invest in stocks, bonds, and other securities. This can be a great way to grow our money over time. We can also invest in mutual funds or exchange-traded funds, which are collections of stocks or bonds that represent a particular type of investment. Another option for learning about compound interest is to use a financial advisor. A financial advisor can help us create a financial plan and invest our money in the right places. They can also teach us about compound interest and how it can benefit us financially.
Never stop learning about ways you can better your finances
It’s very important to never stop learning about ways to improve our financial situation. This includes learning about new financial products and services, budgeting, and money management skills, and how to save for the future. By continuing to learn about financial matters, we can work towards achieving financial independence. This is an important goal, as it will allow us to control our own financial destiny and provide a better future for ourselves and our families.
Understand your job controls your salary…Not your income
One way we can become financially independent is to develop multiple streams of income. This means finding ways to make money outside of your regular job. For example, you could start a side hustle or invest in stocks or real estate. By diversifying your income sources, you can reduce your reliance on one source of income. This makes you less vulnerable if you lose your job or experience other financial setbacks. I remember when an entrepreneur told me “your job controls your salary, not your income! So, whatever you do after 5pm to improve your finances is on you.” From that moment on I have been working on creating multiple streams of income and not just rely on my 9-5 income.
Get Life Insurance and lock in the price
This is a common issue in the African American community. We all know someone who passed away and didn’t have life insurance, so the family of the deceased had to create a “go fund me” or ask the church for assistance. Having life insurance gives us peace of mind knowing that if we were to pass unexpectedly our family can have some financial relief. Before we purchase a life insurance policy, it’s important to do our research and find the policy that is right for us. There are a variety of factors that we will need to consider. One factor is the amount of coverage that we need. Another Factor is the length of time the policy will be in place. Finally, we need to consider how much premium we will be paying. Beware of insurance companies that will offer you a specific type of life insurance coverages for African Americans. The companies might offer low premiums but read the fine print. If you need help looking for a policy reach out to a life insurance agent.
Understand the importance of ownership to build wealth
Ownership is key to obtaining financial independence. When we own something, we have control over it and the ability to make decisions about it. This is especially important for African American businesses and individuals, who haven’t had too much access to opportunities and resources. Ownership provides financial stability, a voice in the community, and a foundation for success. Being an owner can help us make a positive impact on our neighborhood and contribute to the overall success of our community. We can provide jobs and training opportunities, sponsor community events, and support local organizations.
Live below your means to improve your wealth
When we learn to live on less than we earn, we’ll be in a much better position to save for the future and avoid debt. As a community we can benefit from living below our means. One reason is because we are more likely to face financial challenges. By learning to live frugally, we can improve your financial situation and build wealth over time. This decision will not help us to get rich quick, but it can help us to create a debt free lifestyle which can help us to establish financial independence.
Understand that it’s okay to move back to your childhood home.
One of the reasons some college graduates continue to rack up more debt is because they fear what others will think and say about them if they moved back home. Moving back home is a though decision but it can be a great way to pay down debt and start a side hustle 9assuming your parents won’t charge you rent). The hope is that if you move back home you can find a job and help your parents/guardians pay a bill or two so that most of your money can go towards paying down debt and creating some extra streams of income. Going back home can help us to establish financial independence, but if your parent/guardian is requiring rent and more this plan may not be able to work. If your parents aren’t an option reach out to other family members or a friends. I have heard stories of young professionals sleeping on a friends couch so that they can pay down student loan debt and invest.
Conclusion:
It’s time for us Black professionals to take our financial futures into our own hands. We must be proactive in establishing financial independence and building wealth. This starts with investing in ourselves by learning about finance, getting life insurance, and creating a solid emergency fund. Our communities also need us to be financially literate so that we can be an asset to the community. We hope that you found this article helpful and informative. Please feel free to share it with your friends, family, and followers. As always, if you have any questions or would like more information on a particular topic, please let us know in the comments section below. Until next time! Check out my Financial Strategies for Young Professionals!