It was a pleasure to appear on the Barron’s Level Up program in honor of Black History Month, joined by my colleague, Kamila Elliott, who has done work chronicling the wealth gap. One of the things that I like about Kamila’s work is that she conducts an apples-to-apples comparison of a typical Black family compared to an average white family. The research shows how student loan debt, interest rates, lower salaries, and less income growth have a major impact on wealth accumulation. All of these factors align with the 2019 Survey of Consumer Finances, which shows that white families have $188,200 of net worth verses the average Black family with only $24,100.
The reason why this information is important is because it highlights the impeding factors that affect the growth of Black wealth in America. This is one of the reasons why I decided to become a financial advisor, and I believe many of us, African Americans, represented in this industry opted to pursue this profession to help our community — wanting to be the change we seek.
However, there are around 3% of us in the industry and only 1,765 Black CFPs trying to assist 13% of the U.S. population. According to research reports and books on Black wealth, it’s not only that African Americans were withheld financial opportunities and education, but there is a strong correlation to systemic and institutionalized factors that have played into whether wealth was created within our communities. Until these factors are completely addressed, individualized change will be slow. This is not to say that some will not achieve economic wealth, because I work directly with many who have, and they are not all representatives from entertainment and sports.
What Can African Americans Do Now?
Minimize student loan debt. Making wise choices about how to earn a higher education is crucial. It may mean obtaining college credit in high school by participating in dual enrollment programs or going to community college for two years and then transferring to a four-year university. Additionally, parents should not jeopardize their own financial futures to pay for their children’s college education. It can be hard to not make the sacrifice, if earning an advance degree is part of your family’s core values. Remember, you cannot take out a loan to fund your retirement.
Negotiate for higher salaries. One of the things that is often most important is having the skill set to always negotiate your salary. This is something all adults need to understand, especially African Americans and women, since there is often a hesitation to negotiate. Where you start with your earnings influences your ability to save for the future.
Increase savings. Now that you’re earning more income, increase your saving percentage. Then, continue this habit with each cost of living or a raise until you max out your contribution limit. This year it is $22,500 and $30,000 if over age 50.
That’s why I’m so excited about the Secure Act 2.0 and the opportunity for employers to assist their employees with funding retirement and building up their emergency savings while continuing to pay off student loan debt.
Minimize taxes. The easiest way to lower your taxes is by contributing to your 401(k) and health savings account, as it reduces your taxable income. See our previous blog post: Planning for Your Future: Retirement and the Roth Conversion.
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