I became heir to my parent’s financial mismanagement and generational debt. By the time I was conceived, my father and mother had not only transformed molehills of bills into mountains of unpaid accounts, but they also had managed to pass the same distasteful money management habits to their younger generations.
Tragically, like a number of African-American families, my parents simply did not know how to transition from living paycheck to paycheck to a wealthy lifestyle. Uncomfortable with the idea of “just getting by,” I started working at 13. This was also the age at which I saw young boys in my neighborhood turn to the streets.
I spent most of my young adult life seeking knowledge on how to acquire riches. At that time, I had no clear plan on how to get rich, but I knew I couldn’t bare the idea of struggling my whole life.
Like many families, my parents were slaves to their jobs. Without formal education, both my mother and father worked manual labor positions in factories for decades. Although they lacked the know-how to get out of the financial storm they were in, they knew they wanted more for their children and grandchildren. My parents consistently encouraged the youth in our family to stay in school, go to college and get a “good” job.
Climbing out of poverty didn’t seem realistic to them; but what they did know was that they wanted their legacy to be something greater than financial struggles. Without knowing how to acquire wealth for themselves, they pushed us to gather a greater understanding of money and financial freedom.
In the Black community, there are several reasons why poverty and poor money habits are transferred through generations. The absence of healthy money management skills, inadequate access to wealth generating channels, an unbalanced debt-to-income ratio, unrealistic hurdles to self-sufficiency, racial inequality and a lack of financial literacy all serve to perpetuate the cycle of poverty in the Black community.
Painstaking labor, along with long and strenuous hours only to be surviving paycheck-to-paycheck, is a burdensome living condition. It can only be abolished with increased knowledge and a collective movement devoted to gathering wealth and distributing it within the Black community.
According to a recent study by the Nielsen Company, African-Americans will have $1.1 trillion in collective buying power by 2015 (increasing to about $1.3 trillion by 2017), making us “more relevant than ever” as consumers. Despite our buying power, our lack of or miseducation regarding financial freedom keeps us barricaded in debt. Here are some vital facts to help Blacks escaped decades of debt bondage:
1. Become financially literate.
Financial freedom is not solely based on one’s ability to generate more income; it is also understanding how money works. How well do you understand investment options? Are you familiar with your debt-to-income ratio? Do you have a working knowledge of credit and how to build your credit score? Black people have to dedicate time to understanding the many dimensions of money. Without a solid knowledge of financial basics, we are at a grave disadvantage when it comes to creating leverage in the marketplace. Money drives decisions. Without knowing how to generate and transfer wealth, we will continue to pass down habits and behaviors that promote destitution.
2. Have more than a single stream of income.
I coach African-Americans on their finances daily, and one common concern is the absence of income. It has been proved that millionaires have seven consistent streams of income; however, a significant number of Black households are attempting to sustain with just one source of income. This not only makes it nearly impossible to survive but also dismisses any chance a family may have at financial prosperity. It is crucial that Black families begin the process of creating additional streams of income, as well as residual income.
3. Invest in life insurance and a retirement plan.
Our financial portfolios are nonexistent. We need to teach our youth the importance of financially preparing for the future. What arrangements do you have to support your family in death? Many of us do not have adequate life insurance, and we have no plans for retirement outside of our 401(k) contributions. We must understand the importance of a versatile financial portfolio.
4. Think beyond your own prosperity.
In comparison to others, we are the most divided race. If we could wrap our minds around being self-sustaining and centered on group economics, we could begin to see our money work for us. Being self-sufficient will allow us to acquire land, own homes, plan for retirement properly, push for educated financial decisions and minimize debt.
5. From small businesses to enterprises …
Historically, Blacks have faced many obstacles in their pursuit of labor independence. At the turn of the 20th century, state and local policies placed unrealistic restraints on Black business owners, making it challenging for them to prevail; today, our challenges are different. Although we are seeing more Black businesses in circulation, many do not fully blossom into large-scale enterprises. When it comes to Black entrepreneurship, is it imperative we harvest the knowledge that will assist us in growing our businesses. Spending more of our dollars in our community and supporting our Black-owned businesses is one way to support the expansion of small Black-owned businesses.