1. Live within your means. Not just African Americans, but the nation as a whole has been living precariously on credit for far too long. Well, the bill has come due, leaving millions of families drowning in sky-high interest payments. Recovery starts with making an honest assessment of income versus debts and keeping spending strictly within the bounds of what you earn.
2. Maximize your income potential through education and training. Whatever your profession, the need to keep pace with technology and emerging economic trends is essential to staying competitive and enhancing your value in the marketplace. Set aside space in your schedule and your budget every year for skills building – and that includes increasing your financial literacy as well.
3. Effectively manage your budget, credit, debt and tax obligations. It’s estimated that Americans lose a significant portion of their dollars because they do not develop a budget, and the current credit crunch has made it even harder for families to access emergency capital. Only those with exemplary credit scores are able to secure home or business loans.
4. Save at least 10 percent of your income. If the idea of saving 10 percent seems impossible, then it’s time to rethink your lifestyle and strip away nonessentials. As long as your spending exceeds your income, you will never be able to accumulate wealth. Pay yourself first.
5. Use homeownership as a foundation for building wealth. Even in the current downturn in the housing market, homeownership remains the key to wealth accumulation because it allows you to build equity that can be leveraged to further your financial goals. In fact, most African Americans have their assets in their home. It’s essential, however, to approach homeownership responsibly. Never buy more house than you can afford and keep a sharp eye on trends that affect home value.
6. Devise an investment plan for retirement needs and children’s education. According to a recent study on black investing conducted by Ariel Investments and Charles Schwab, one area where African Americans are on equal footing with whites is enrollment in employer-sponsored defined contribution plans. About 90 percent of working blacks and whites participate in a 401(k) plan. Unfortunately, blacks on average contribute half as much, resulting in a far smaller nest egg than their white co-workers. At the same time, we are half as likely to identify retirement as an investment priority and lag behind when it comes to owning stocks and mutual funds. Clearly African Americans will have to adopt a more diverse, informed and disciplined approach to investing, especially if we expect to afford the ever-rising cost of higher education for our children.
7. Ensure that your entire family adheres to sensible money management principles. You’re never too young or too old to learn the value of a dollar and how to spend responsibly. View your child’s weekly allowance or that first savings account as an opportunity to impart valuable lessons in how to save, invest and build on the money they earn.
8. Support the creation and growth of minority-owned businesses. At a time when an African American of outstanding ability and character can be elected president, there are no more excuses when it comes to finding African-American ventures deserving of our patronage and investment. We are always stronger in partnership than when we stand alone.