Smart Money Strategies to help Black Americans in Financial Distress
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Smart Money Moves to help Black Americans in Financial Distress
By Sean Pyles Senior Writer | Personal financial and debt Sean Pyles leads podcasting at NerdWallet as the host and producer of NerdWallet’s “Smart Money” podcast. The show “Smart Money,” Sean talks with Nerds across NerdWallet’s NerdWallet Content team to answer listeners’ personal finance questions. With a particular focus on sensible and actionable money advice, Sean provides real-world guidance that can help consumers better the financial situation of their lives. In addition to answering listeners’ financial concerns on “Smart Money” Sean also interviews guests outside of NerdWallet and also creates special segments that explore subjects like the racial wealth gap and how to begin investing, and the history of college loans.
Before Sean was the host of podcasting for NerdWallet, he covered topics related to consumer debt. His writing has been featured in USA Today, The New York Times and elsewhere. When Sean isn’t writing about personal finances, Sean can be found working in the garden, taking runs and taking his dog on long walks. He lives in Ocean Shores, Washington.
Updated Feb 5, 2018
Written by Hanah Cho. Cho is Vice President Personal financial Hanah Cho, Vice President for Content. She led multiple NerdWallet teams that focused on personal finance prior to being promoted to deputy director and then director. She originally began her career at NerdWallet as a writer covering small-scale businesses. In the past, she was a reporter covering startups and business for The Dallas Morning News, and previously was a journalist for business at The Baltimore Sun. She also served as treasurer for the Texas Chapter of the Asian American Journalists Association.
A majority of the products featured here come from our partners who pay us. This influences which products we feature and the location and manner in which the product is featured on a page. But, it doesn’t influence our evaluations. Our views are our own. Here is a list of and .
The record-breaking credit card debt and fluctuating incomes create financial problems to many American households, particularly those who earn less. The impact of this can be felt especially keenly in households of blacks in which the long-standing and systematic discrimination against blacks has created greater disparities in wealth and debt.
There are steps families facing such hardships can make to better their financial position, which includes increasing their credit score and seeking alternatives to risky products like .
Insidious disparities in debt and wealth
The disparities in wealth and debt are a result of one another according to Pamela Chan, project director of human insights at Prosperity Now, a non-profit located in Washington, D.C.
“If you are a person with a lack of wealth … then when crises strike, it often makes people rely on debt to make it through the times,” Chan says. “Then after someone has taken on credit, even if they do not have a lot of money, they’re more vulnerable should something happen while trying to pay back their debt.”
The discrimination imposed by institutions against generations of black Americans and its far-reaching consequences have contributed to black households having greater financial difficulties than white families, Chan says.
A wage differential is just one example. As of 2015, black men earned 22 percent less than whites who, for instance, had the same education, experience and residence region according to a report in 2016 from the Economic Policy Institute found.
In 2016 the average income of families with white parents was more than 10 times the median income of families with black parents$171,000, compared to $17.600 — according to the Federal Reserve’s 2017 Survey of Consumer Finances.
How can you improve your finances to build wealth
is the first step towards building wealth. Before you take action, Michigan-based accredited financial coach Weslia Echols recommends planning a long-term plan.
“The first thing I ask people to do is take an inhale. When you do that, and assess the situation fully and honestly, you’ll not be looking for an instant answer such as the typical payday loan,” Echols says. “Getting free of financial debt can be a lengthy process.”
Echols recommends establishing a clear budget and payoff strategy. Here are tips to improve your financial profile.
Build credit: Your credit report and score are among the most crucial factors in your financial health. If they’re in the best shape possible, you become more appealing to lenders, which increases your chances of getting credit at lower interest rates. NerdWallet provides both a and a credit score, regularly updated.
Start by checking your for incorrect information, for example, an account that’s not yours that could be lowering your score.
Start to improve your score by making punctual payments for all accounts, which includes loans and credit card loans; payment history is the most significant aspect that affects the score. Experian, the credit agency Experian suggests keeping your credit limit — or the amount of your credit limit you use — below 30%.
Be strategic about debt and debt management: In 2017, the Survey of Consumer Finances shows that black families are more likely to carry ratios of debt-to-income — how your debt compares to your income higher than 40%, which is a sign of financial stress according to the Federal Reserve. Nine percent of families from black households were carrying DTIs higher than 40%, while it was the white household’s 6.
Manage your debt as cost-efficiently as you can and pay it off faster by reducing your interest rate. Transferring the balance to a zero interest credit card could be an alternative for borrowers who have good credit.
If you’re not eligible for such a card, look into whether a will help you to pay down your credit card debt faster and cheaper. If your monthly installments exceed half your income You may need to consult with a lawyer about whether makes sense for you. Though it doesn’t erase all kinds of debt however, it could give you an opportunity to start over and aid in meeting other financial goals, like savings for retirement. Resources such as LawHelp.com can help you find local legal assistance.
Avoid products that are risky: Thirty-nine percent of black Americans tend to utilize high-interest loans, like payday loans as opposed to 21% of white Americans in an analysis from 2016 by the Financial Industry Regulatory Authority. These loans may have rates of interest upward of 300%, and can lead to repeat borrowing, trapping the borrower in a cycle of debt.
If you require money, you can find more favorable loan rates through a community credit union. Additionally, apps such as Earnin can give you the ability to advance your salary with no fees or interest. If you’re in a bad credit situation Also offered by numerous credit unions can help you get the money you need while you improve your credit.
For more help, tap the free guidance of a non-profit organization, such as for instance the National Foundation for Credit Counseling.
The post was written by NerdWallet and first released through The Associated Press.
About the author: Sean Pyles is the executive producer and host of NerdWallet’s Smart Money podcast. His writing has been featured in The New York Times, USA Today and elsewhere.
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